Financial Analysis of Amazon Inc.

Running Head: FINANCIAL ANALYSIS 1
FINANCIAL ANALYSIS

Running Head: FINANCIAL ANALYSIS
Table of Contents
Introduction.................................................................................................................... 3
Trend Analysis................................................................................................................ 3
Liquidity Ratios........................................................................................................... 3
Profitability................................................................................................................. 4
Efficiency ratios........................................................................................................... 6
Common Size financial statement analysis.............................................................................. 7
Key Insights................................................................................................................ 7
Income statement....................................................................................................... 7
Balance sheet........................................................................................................... 7
Percentage change financial statements.................................................................................. 8
Key Insights................................................................................................................ 8
Conclusion..................................................................................................................... 9
References................................................................................................................... 10

Running Head: FINANCIAL ANALYSIS
Introduction
The financial analysis is the analysis which is conducted by the organizations using the
different techniques and the tools. The tools and the techniques can be bifurcated as the trend
analysis also known as the ratio analysis, the common size financial statement analysis as well as
percentage change financial statements. In this report a detailed analysis of these three
techniques have been undertaken keeping an alignment with the Amazon Inc. which is one of the
largest flagship based in the America having the headquarters at Seattle Washington, Arlignton,
Virginia and United States. This company was formerly known as Cadabra Inc (Amazon, Inc.
2017).
Trend Analysis
Trend analysis is the techniques which are used by the corporates to get an in-depth
understanding of the financial performance of the company alongside different parameters. The
parameters are liquidity, solvency, profitability, efficiency and the market trends of the company.
In this section, a detailed analysis of the ratios for the period of the two years have been
conducted in detail to analyze the performance from the point of view of the investors (Eckhaus,
2016).
Liquidity Ratios
Liquidity Ratios 2016 2017 2016 2017
Current Ratio Current Assets 45781 60197 1.04 1.04
Current Liabilities 43816 57883
Quick Ratio Quick Assets 25981 30986 0.59 0.54
Current Liabilities 43816 57883

Running Head: FINANCIAL ANALYSIS
The liquidity analysis of the company indicates the ability of the company to pay back
the contractual obligations with the help of the current assets easily. The current assets are
realized in the cash faster than the other assets. As it can be observed from the table above, the
current assets of Amazon has increased from $45781 to $60197 thereby indicating the positive
front of the company, yet the current ratio was similar in the previous as well as the current year
at 1.04 times. Ideally the ratio is 2:1 and the company needs to focus majorly on the current
liabilities, as the same shall not be increased to an unacceptably low level. The reason for the
current ratio to be 2:1 is the current assets are sufficient enough to cater the liabilities (Shi, Lim,
Weitz & France, 2018).
The quick ratio of the company on the other hand reduced from 0.59 to 0.54, due to the
slow realization of the cash from the other current assets and the liabilities tends to increase at
the parallel level.
From the overall scenario it can be considered that the liquidity position of the Amazon
can be improved, if the company gets rid of the obsolete assets, the company must focus on the
long term liabilities to avoid the payment of the current liabilities. Further the inventory shall not
be piled up and the concept of the just in time shall be utilized to keep the balance between the
quantity demanded and the quantity supplied (Kantor & Streitfeld, 2015).
Profitability
The second scenario that is crucial and one of the most important one in deciding the
investment of the funds in the potential areas is the profitability parameter. The parameter of the
profitability can be evaluated with the help of the operating margin, the return on equity and the
net profit of the Amazon (Santiago, 2017).