Financial Performance Management Report: Amazon, Walmart, and eBay

This report provides a comprehensive financial performance analysis of Amazon, utilizing ratio analysis and a balanced scorecard framework. The analysis includes an examination of key financial ratios such as working capital, valuation, liquidity, leverage, and profitability ratios, calculated using Amazon's financial statements from 2015 to 2017. A comparative evaluation is conducted by contrasting Amazon's financial performance with that of Walmart and eBay, highlighting differences in areas such as payment collection, dividend policies, and profitability metrics. Furthermore, the report delves into the critical success factors within Amazon's balanced scorecard, encompassing pricing and loyalty programs, supporting decisions, platform-specific strategies, online marketing tactics, product pricing, and customer relationship management. The report also includes a discussion on the pros and cons of the balanced scorecard. The report is based on the assignment brief which requires to use ratio analysis technique to evaluate the financial performance of the selected organization, identify two closest competitors to draw a comparative evaluation and use the annual financial statements of the last three years and use graphs and tables to present the analysis.

Financial Performance Management

Table of Contents
Part 1................................................................................................................................................3
Financial analysis.........................................................................................................................3
Comparative evaluation...............................................................................................................4
Part 2............................................................................................................................................5
Critical success factors in BSC....................................................................................................5
Pricing and loyalty...................................................................................................................5
Supporting decisions................................................................................................................5
Convenient and fast.................................................................................................................6
Platform specific......................................................................................................................6
Advanced online marketing strategy.......................................................................................6
Fine products with fine price...................................................................................................7
Customer relationship management........................................................................................7
Part 3................................................................................................................................................8
Balanced Score Card....................................................................................................................8
Pros........................................................................................................................................10
Cons.......................................................................................................................................11
Reference List................................................................................................................................13

Part 1
Financial analysis
Financial analysis is undertaken for executing a quantitative analysis for the numbers and figures
found on the financial records of an organization. As such, a tool name ratio analysis has been
developed. Ratios are required linking the three financial records of companies which are the
income statement, the balance sheet and cash flow statement of the company (Fridson and
Alvarez, 2011). Ratios also help in the comparison of these figures and numbers with that of
other companies and competitors across all industries and sectors. In the following assessment,
ratio analysis has been undertaken for the company Amazon, where the important ratios like the
working capital ratio, valuation ratios, liquidity ratios, leverage ratios, and profitability ratios
have been calculated. The working capital ratio includes accounts receivable days, account
payable days and inventory days. These ratios help in determining the total number of days
within which the collection from debtors is done by a company, the payment to the creditors is
made and the number of days which is taken for the inventory to be sold.
The valuation ratios include, Earning per share, price to earnings ratio, book value per share, and
the percentage of dividend. The valuation ratio help in determining the financial value of an
organisation. The liquidity ratios include various important ratio such as the current ratio, the
quick ratio and the cash ratio. These ratios help in determining the capability of an organisation
to pay of its short-term obligations and liabilities by using its current assets. The leverage ratios
include various ratios like equity multiplier, interest coverage and the debt to equity ratio. These
ratios help in determining the level of indebtedness of a company. Finally, the profitability ratios
include various important ratios like the gross margin, operating profit margin, net profit margin,
earnings before interest and taxes, return on equity and return on assets. The profitability ratios
basically help in the determination of a firm's capability of earning revenues by the generation of
sales and earning profits thereof. It helps in determining the overall returns which are fetched by
the means of investing in the business.
For Amazon, it takes nearly 27 days on an average for the collection of the debtors. However, the
payment that is made to the creditors takes nearly 92 days (Amazon, 2017). The average period
within which the inventory of the company is sold off is almost 37 days. The payment collection

period has significantly increased in the past three years that the payment collection procedure of
the company has declined. The creditors are also paid very late in comparison with the previous
financial year records (Amazon, 2016). The Earning per share of the company increase can
become five times to that of the previous records. The price to earnings ratio of the company had
a down fall from the year 2015 to 2016 however was written in the year 2017. There has been an
increase in the book value of the company implying that the overall evaluation of the
organisation has increased. The current ratio of Amazon has been well maintained which means
the company is able to pay off its short term debts its current assets. The debt to equity ratio of
Amazon has increased significantly from 2015 to 2017 implying that the debt financing of the
company has increased. The gross profit margin of the organisation is significant and has been
consistent throughout the years. Operating margin has been fluctuating is it increase from 2015
to 2016 and was retained nearly to the same position in the year 2017 (Amazon, 2015). The
earnings before interest and taxes for Amazon have doubled after 2015 which shows that the
generated revenues have increased significantly. Consequently, the net profit has also increased
by a big margin as it can be seen that the ratio has increased by more than three times from 2015.
Some fluctuations in the return on equity all from 2015. The same effect has been seen in the
return on assets of the company.
Comparative evaluation
The major differences which can be seen in the business of Walmart and eBay, in comparison
with Amazon are, Walmart is able to collect payment from its debtors quite fast in comparison
with the other two companies (Walmart, 2017). The payment made to the creditors is also
quicker in the case of both Walmart and eBay than Amazon. The inventory of Walmart takes
more time to be sold off than Amazon. The Earning per share of eBay for the year 2017 has
become quite low, in fact in negative (eBay, 2017). One of the major differences which has been
seen is that the book value of eBay is the lowest of the three companies (eBay, 2016). Another
major difference is the fact that Walmart and eBay, both have been paying dividends to the
shareholders however, no statistics regarding payment of dividend to shareholders were found in
the financial statements of Amazon (Walmart, 2015). The liquidity ratios of eBay have been
found to be very high and in fact double to that of Amazon and Walmart implying that the
company possesses high amount of liquid assets and has a superior capability of paying of its

short-term liabilities quickly visit available current assets (eBay, 2015). High amount of liquidity
depicts high amount of cash and cash & cash equivalents available with the company. The debt
to equity ratio of Walmart is significantly lower than that of Amazon and eBay implying that the
company is less dependent upon debt and debt financing (Walmart, 2016). The gross profit
earned by eBay is nearly three times higher than that of Amazon and Walmart and same goes for
the operating margin as well. However, before interest and taxes are lower in the case of eBay. In
the recent year, the net profit, and the returns on equity and assets earned by eBay are not going
well.
Part 2
Critical success factors in BSC
The primary mission of the company Amazon, is becoming a customer focus organization,
which basically guides every decision that is made by the e-commerce leader. Amazon is guided
by four major principles, obsession with customers instead of competitor focus, long-term
thinking and perspective, commitment for excellence within operations and finall, passion for
innovation and invention. There are various critical factors of success that would be included
within the balanced scorecard of Amazon. The major critical success factors of the company
pricing and royalty, supporting decisions, platform specific, convenient and fast, content as
service, Omni channel, and specialty items.
Pricing and loyalty
a wide variety of benefits is provided by the prime membership program of Amazon, ranging
from music and video content to faster delivery of products. These benefits are quite important
for the sustainable growth of the company. The prime members are known for larger and more
frequent purchase. The price competitiveness of the company becomes stronger due to the
private label of the brand Amazon. The Amazon pantry helps to subscribe and save program of
the company that regarded as different innovations that offer customers with discount for
repeating bulk purchase. Various additional benefits are provided by the point system and the
payment cards. Different special events for the members are held such as the prime day and
digital day.

Supporting decisions
The electronic commerce business leader Amazon is known for being a pioneer when it comes
about customer reviews and has made several improvements in the question answers system and
personal recommendations. One of the various innovations that have been brought by the
company regarding its supporting decisions is the personal stylist application that helps the
customer and deciding between two different outfits and also provide them with a trial period of
7 days for apparels.
Convenient and fast
Since fast delivery is one of the biggest barriers in electronic commerce business, various tools
of algorithm are used by Amazon by the means of couriers and warehousing, for delivering
products in the quickest of time. The brand promises of delivering its products within 2 business
days and even one hour. Currently, the centre of attention for media around the world is the
patent development for drone based delivery. It has been stated that the organization has been
building and developing its own delivery service. According to various reports, an x-ray service
of Amazon would allow its customers for looking through a sealed and packed box by the means
of an application.
Platform specific
In order to understand the fact that different customers different motivations in prospectus for
each category, various lucrative categories expanded by Amazon in the form of micro sites.
These categories include aspects such as outdoor equipment. The company is seen to create
small businesses that seem to be operating as a separate entity in order to ensure the organization
is able to attain a focused competitive position. In terms of platform specific innovations, the
organisation has been able to create competitive and differentiation capabilities.
Advanced online marketing strategy
Amazon prominently invest upon Search Engine Optimisation, affiliate and social media
program and search engine marketing. Furthermore, the company has adapted to the marketing
languages in a very effective manner for each campaign and promotion. Such activities help in

attracting people towards the company and boosting its impression. The company also deals with
mobile platform applications. The objective is to grab the consumers who are tech savvy.
Fine products with fine price
The organization makes sure that all of its products and services are carefully selected in terms of
best prices, originality and quality. Low price products guarantee the best of quality and the high
quality products guarantee the best of price of the organization.
Customer relationship management
For the creation of Sustainable competitive advantage and market position, Amazon uses various
measures of retaining its customers in different ways such as emails and newsletters to
customers, offline activities like blogger gathering, affiliate activities, providing shopping
vouchers to the customers. The organization also actively posts information an article in their
blogs.
Apart from the above discuss factors, there are various other critical success factors of the
company which has helped in gaining a market position. The company has used the share bid
strategy of target outranking of Google for increasing its website traffic buy approximately 30%.
Such a strategy has also help the company in growing a market share for the various different
product categories. The primary objective of the organization is to gain new consumers while
competing in the market more efficiently in the important categories of products. The approaches
that the company has been using are flexible bid strategies of Google advertisements and target
outranking strategies for the automation of the cost per click bids. The ultimate goal of the
company is to outrank its competitors in the market it comes about strategic search terms. As a
result, the traffic of the company's website has increased by 30%, the outranking share target has
improved by 280% and the advertisements impression share of the company has grown by 50%.
The target outranking share strategy of the company has helped to deal with the competitors and
other market players. This strategy helps companies in decreasing or increasing their bids to a
specific highest cost per click. The primary objective is to outrank the same bids of the other
market players and competitors. In other words, the outranking bid strategy has helped the
company in showing the advertisement of their products and services above the advertisements

of other companies on the search result pages, when a user searches for a specific product sold
by the organisation and its competitors.
Part 3
Balanced Score Card
The balanced scorecard is one of the most efficient frameworks for performance management.
Major concepts are implied by the balanced scorecard which are collaborated how the
performance of an organization and the measurement's strategic significance. These two concepts
basically make the balance. The framework of the balanced scorecard is presently used by
multiple organizations across the globe and is consistently ranked amongst the best tools for
management used across firms. The managers are recommended by the balanced scorecard for
analyzing the performance of an organization from different perspectives. These perspectives are
the customer perspective, financial perspective, learning and growth perspective and the internal
business process perspective. The customer perspective mainly emphasizes upon how the
customers of an organization views it. The perspective of the internal business procedures
emphasizes upon what an organization should excel at. The perspective of learning and growth
focuses and makes an organization question the fact if it can continue the creation and
improvement of value. Finally, the financial perspective of the balanced scorecard framework
emphasizes upon the way an organization looks at its business shareholders.
One of the prominent aspects of the balanced scorecard is within its collaboration of the non
financial and financial measures. There lies a positive and significant relationship between the
performance and strategic choice of the management by the means of high usage of non financial
measures by the management for the evaluation of its performances. The primary drivers of the
perspectives of the balanced scorecard are the mission statement and the strategy of an
organization. A comprehensive Framework is presented by the balanced scorecard that helps in
the interpretation of the mission statement and strategy of an organization and is consistent with
the measurement model of consistent and continuous performance. According to Kaplan and
Norton, the balanced scorecard helps in capturing relevant information and data regarding how
well a company is positioned in the market for performing in the nearby future. It also helps to
monitor the current performance of the firm. Furthermore, the balanced scorecard is considered

as a very useful instrument of management because it helps in the strategic management of an
organization as well as helps managers of a company in communicating and clarifying the
strategy to every individual. The four perspectives of the model of performance measurement of
the balanced scorecard are linked to each other just like a chain on the basis of a cause and effect
relationship. A well-balanced combination of the performance drivers and results of the
strategies of a company form a significant balanced scorecard. The balanced scorecard can also
be considered as a strategic map. A strategic map helps in the description of the procedure for
transformation of the intangible assets into financial results intangible customers.
One of the prominent aspects of the balanced scorecard is the integration of the non financial and
financial objectives with their degree of access. The performance sources which derive from the
balanced scorecard mainly of three types. These are - a better transformation of the
organizational strategies into terms of operation; the bigger collaboration of various services,
procedures, organizational units and competencies; and the fact that strategizing turns into a
continuous procedure. Additionally, besides the primary aspects of the balanced scorecard, there
are various other aspects which make the framework different from that of the other systems of
performance measurement.
During the 1990s, the business strategy of Amazon was quite an balanced from the perspective
of a balanced scorecard. Particularly, the company had been over focusing upon the learning and
growth and customer perspective to the disadvantage of the process and financial perspectives.
The financial dimension demands looking at those measures which are significant for the
valuation of an organization by its shareholders. These include various aspects such as return on
assets, stock price and return on equity. For the company Amazon, the return on equity had been
deteriorating in the 1990s and was not considered to be a significant measure due to the fact that
both of the aspects of the return on equity, which were the net income and the shareholders
equity who recorded to be negative. Consequently, second major is provided by the
decomposition of the return on assets. Specifically, the primary drivers of the return on assets
which are ratio and the profit margin ratio, work white unstable under the strategy of customer
obsession irrespective of the type of cost strategy implementation for the company. However,
such ratios of Amazon what is seen to be stabilizing after the imposition of constraints of

traditional cost by the means of traditional economic techniques like implementation of a master
budget cycle within the organization.
The procedure perspective refers to the eternal activities undertaken within an organization. This
perspective includes the identification of those activities for which it is quite relevant for the
organisation for capturing and excelling in the business efficiency within the financial statement
analysis. In the perspective of the procedure for Amazon, the most significant item for the
company was the ratio related to the inventory. These inventory ratios include the day sales
inventory and inventory turnover of the company, provided the fact that the warehousing
expansion plans of the company word implemented in the late 1990s. During these times, the
days of selling inventory had significantly increased by approximately 260 percent. With the
amount of capital tied to the warehouses and inventory, there is no denying the fact that during
that particular period of time, the working capital ratios of Amazon were also misbalanced. The
number of days for paying the tables also had increased from 87 to 126 days, which means the
payable period to the creditors had become more than 4 months. The effect from the imposition
of the constraints of cost upon the strategy of business of Amazon was nearly immediate. In the
latter days, efficiency of the company increased and the number of days for selling the inventory
had become half and the number of days for paying off the payables reduced significantly.
The perspective of the learning and growth refers to the informational and employee activities
that demand consistent improvement and innovation. One of the most significant ratios of the
company, that is the sales growth had been declining constantly. The Asset turnover of the
organization had been increasing which was considered to be a positive trend in the context of
the organization undertaking an important expansion in warehousing. Consequently, the
employees of the organization went down the learning curve along this perspective. Evidence in
support of the perspective has been provided by the positive trend of the Asset turnover.
In the end, the dimension of the customer demands identifying the performance metrics which
help in the measurement of the success of a company towards meeting the expectations of its
customers viewed from the outsiders our customers perspective. Relevant information regarding
these are available within the notes to the financial records as well as parts of the 10K of the
company. For instance, it includes aspects such as measures of customer ratings, customer

service, customer retention or loyalty. For the organization Amazon, the word customer very
frequently used in its financial statements and 10K report.
Pros
Clear picture
The balanced scorecard of Amazon is considered to be a methodological and systematic tool of
management. Hence, visual means regarding the way of meeting organisational goals and actions
plans for achievement of these goals, are both provided by the balanced scorecard of the
company.
Company Performance
The managers of Amazon are capable of monitoring the performance of their employees and
creating an action plan for tracking the overall success of the organization in financial terms by
the help of the balanced scorecard. For sales team monitoring of Amazon, the balanced scorecard
shows the number of customers that are generated as well as lost. After the release of the
numbers and figures, the management of the organization comes to know about the positivity
and negativity of the results. As such, the implementation and planning of objectives of Amazon
gets an aid.
Achievable objectives
By the significant usage of the balanced scorecard, Amazon is able to solve various issues related
to aspects like skills and knowledge of employees, internal business procedure and customer
satisfaction.
Cons
Time consuming and expensive
In spite of the efficiency of the balanced scorecard as a tool of strategic planning and
performance measurement, one of the biggest drawbacks which carries for companies like
Amazon time and cost. The application of the tool in a significant manner demands for

understanding of the concepts and procedures. This requires high expertise results in very high
cost and the process is quite time consuming.
Data mining required
The managers of Amazon required to obtain various information and are also responsible for
logging and monitoring the team. They are also required for creating various action plans and
measures, which is a tedious task. Such aspects affect the managerial performance of the
organisation.
Poor employee support
It has been noticed that, just like in every organisation, various managers and employees of
Amazon did not welcome appreciate the management tool of the balanced scorecard. This was
primarily due to the fact that understanding and learning of the framework demanded high
amount of training and time. This in turn would demand extra effort and time from the
employees and managers for learning. As a result, the productivity of the organisation was
affected.

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