University Financial Analysis Report: Amazon Asset Ratios 2016-2018

This report presents a financial analysis of Amazon's asset utilization over three years (2016-2018). The analysis focuses on key financial ratios, including receivable turnover, inventory turnover, and asset turnover, to assess the company's efficiency in managing its assets. The report includes the calculation of these ratios, along with their formulas and interpretations, based on data from Amazon's financial statements. The analysis reveals trends in each ratio and their implications for Amazon's performance, such as the decrease in receivable turnover and the increase in inventory turnover. Based on the findings, the report provides recommendations for improving asset utilization, specifically focusing on property, plant, and equipment (PPE), to enhance revenue generation and profitability. The recommendations involve increasing the efficiency of PPE and selling underutilized assets to generate funds for new investments. The report concludes with references to relevant academic literature supporting the analysis and recommendations.

Running head: ACCOUNTING FINANCIAL ANALYSIS REPORT
Accounting Financial Analysis Report
Name of the Student
Name of the University
Author’s Note

1ACCOUNTING FINANCIAL ANALYSIS REPORT
MEMO
Ref:
To: The Chief Financial Officer
From: The Accounts Manager
Date: 26/06/2019
Subject: Analysis and Recommendation for Revenue Generation and Increasing Profitability
I have studied the assets of Amazon for the last three years of 2016, 2017 and 2018. I have also
analyzed the data available in the financial statements of the firm for these three years through
the analysis of the below five ratios. The calculation is show below along with the formulas for
the ratios. Based on this calculation, the evaluation on the current asset position of Amazon is
also provided.
Receivable Turnover is considered as a key efficiency ratio for the business organizations which
measures how many times a business is able in collecting its average accounts receivable during
the year (Akoto, Awunyo-Vitor & Angmor, 2013). As per the above table, the receivable

2ACCOUNTING FINANCIAL ANALYSIS REPORT
turnover of Amazon has decreased from 2016 to 2018 on a continuous basis. However, it cannot
be considered as an area of concern for the firm given the nature of products and services as
Amazon does most of their business on cash basis. The decrease may imply that the company is
not approving credit to their customers.
Inventory turnover ratio is considered as another key efficiency ratio that measures how many
times a firm has sold its total average inventory during a year (Baños-Caballero, García-Teruel &
Martínez-Solano, 2014). As per the above table, inventory turnover of Amazon has increased
from 2016 to 2018. In addition, the value of inventory of Amazon in the balance sheet has also
increased from 2016 to 2018. Since Amazon operates in consumer electronics, digital
distribution and e-commerce industry, it has to maintain a huge amount of inventories. Increase
in inventory turnover ratio and decrease in average days in inventory indicates towards the fact
that Amazon has been able in clearing their inventories in speedy manner which is an indicator
of the increase in sales of the company.
Asset Turnover ratio measures a company’s ability in generating sales through the effective use
of its assets. It can be seen from the above table that the asset turnover ratio of Amazon has
decreased from 2016 to 2018. Higher asset turnover ratio is favorable for the companies.
Decrease in this ratio implies the inefficient use of assets by the management of Amazon in the
presence of certain issues (Xu et al., 2014).
As per the above discussion, Amazon is needed to improve its asset turnover ratio and property,
plant and equipment (PPE) is a vital part of the company’s asset base. Thus, it is recommended
to Amazon to increase the efficiency of this particular class of asset through the measurement of
output of the plant and machinery and determine in case their efficiency can be enhanced without

3ACCOUNTING FINANCIAL ANALYSIS REPORT
increasing labor cost. After that, Amazon needs to increase sell the PPE that are not used since
they do not produce income for the firm. New assets can be purchased from the proceedings of
the sale of these assets. These steps will increase the efficiency of the PPE which will eventually
lead to increased revenue and profit.

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References and Bibliography
Akoto, R. K., Awunyo-Vitor, D., & Angmor, P. L. (2013). Working capital management and
profitability: Evidence from Ghanaian listed manufacturing firms.
Baños-Caballero, S., García-Teruel, P. J., & Martínez-Solano, P. (2014). Working capital
management, corporate performance, and financial constraints. Journal of Business
Research, 67(3), 332-338.
Ir.aboutamazon.com. (2019). ANNUAL REPORT 2016. Retrieved 26 June 2019, from
https://ir.aboutamazon.com/static-files/380785a4-779c-4252-897b-539d3ef70680
Ir.aboutamazon.com. (2019). ANNUAL REPORT 2017. Retrieved 26 June 2019, from
https://ir.aboutamazon.com/static-files/917130c5-e6bf-4790-a7bc-cc43ac7fb30a
Ir.aboutamazon.com. (2019). ANNUAL REPORT 2018. Retrieved 26 June 2019, from
https://ir.aboutamazon.com/static-files/0f9e36b1-7e1e-4b52-be17-145dc9d8b5ec
Xu, W., Xiao, Z., Dang, X., Yang, D., & Yang, X. (2014). Financial ratio selection for business
failure prediction using soft set theory. Knowledge-Based Systems, 63, 59-67.