MBA 520 Final Project: Comprehensive Financial Report on Amazon

This report provides a detailed financial analysis of Amazon, examining its recent financial performance and current financial health. It analyzes key financial statements, including income statements, cash flow statements, and balance sheets, to assess the company's revenue, expenses, and overall financial position. The report identifies success factors, projects future performance, and explores potential business opportunities for Amazon. It also evaluates the company's capitalization, cash resources, and financial value, offering recommendations for improving financial performance. The analysis highlights areas where Amazon excels and areas needing improvement, such as managing expenses and strengthening its asset position. Access this and other solved assignments on Desklib, your go-to platform for study resources.

Running head: FINANCIAL PERFORMANCE OF AMAZON
Financial Performance of Amazon
Name of the Student:
Name of the University:
Author Note:

1
FINANCIAL PERFORMANCE OF AMAZON
Table of Contents
I. Executive Summary:....................................................................................................................2
Principal findings:........................................................................................................................2
Projections:..................................................................................................................................2
Recommendations:......................................................................................................................2
II. Financial performance and health:..............................................................................................2
A. Organisational context:...........................................................................................................3
1. Key products and services:......................................................................................................3
2. Management and organisation of Amazon:.............................................................................4
B. Recent financial performance:................................................................................................5
C. Current financial health:..............................................................................................................6
1. Capitalisation and financial health of Amazon:.......................................................................6
2. Amount of cash and resources:....................................................................................................6
3. Assessment of financial value:................................................................................................6
III. Success factors:..........................................................................................................................7
IV. Projections:..............................................................................................................................10
V. Business opportunities:.............................................................................................................10
Conclusion:....................................................................................................................................16
References:....................................................................................................................................17

2
FINANCIAL PERFORMANCE OF AMAZON
I. Executive Summary:
Principal findings:
The report uncovers several findings worthy of discussion. First, Amazon is an American
company which market IT products and artificial intelligence. The second finding is that
Amazon is listed on the NYSE but its capital base is weakening. Thirdly, the revenue base of the
company is expanding but its expenditure is also increasing.
Projections:
The first projection which can be made in the light of the present financial performance is that
the company shows signs of weakening in the capital market. The second projection is that the
company should seek to increase its current assets to support its current liabilities.
Recommendations:
It can be recommended in the light of the above discussion that the company should form
strategies to reduce its expenditure. Similarly, it can also be recommended that the company
should increase direct presence in more host countries to reduce its third party distribution costs.
Intended audience:
The intended audience for the business performance of Amazon would be stakeholders. The
stakeholders in this case would investors, both present and prospective. This is because the
financial performance parameters like revenue generation would enable the investors the returns
which they can expect to generate from their investments in Amazon shares. Similarly, the
prospective investors would be encouraged to invest in the shares of Amazon seeing the high

3
FINANCIAL PERFORMANCE OF AMAZON
dividends which the ecommerce giant gives back to the investors. The second stakeholder group
who would depend on the available financial figures reported in the financial statements to form
strategies.
II. Financial performance and health:
An analysis of the recent financial performances and present financial health of Amazon
shows that the American ecommerce company is performing highly in the global market. The
following sections would provide a strong evidence to testify the strong financial performance
based on the adduced statements namely, Annual Report of the company for the year ended
December 31, 2017.
A. Organisational context:
1. Key products and services:
The main products of Amazon.com consist of cloud computing, ecommerce services,
artificial intelligence and hardware items. The company has immense number of product line
under each of its product segments.
Amazon offers cloud computing services under the division Amazon Web Services. The
cloud computing platform is a platform which enables companies to acquire, share, manage and
apply a huge number of data which pertains to different business areas like procurement,
marketing and finance. Thus, Amazon using its cloud computing services serve multinational
companies from different industries to integrate the business functions to ensure high level of
interdepartmental works which in turn boosts the efficiency of the businesses (Aws.amazon.com.
2019). The main competitors of Amazon in its cloud computing segment are American IT giants
like Google and IBM. Thus, considering the net income of $ 3033 million in 2017 compared to $

4
FINANCIAL PERFORMANCE OF AMAZON
$2371 million and $ 591 million in 2015, it can be established the company is performing
strongly in the global market.
The second product which Amazon offers is ecommerce services which allow buying and
selling of goods using the digital platform of the company. The company offers both industrial
goods as well as consumer goods on the portal. The company in the ecommerce market serves as
third party digital marketing partners to global companies as well as local and regional
companies.
The third product which Amazon offers its customers is artificial intelligence and
decision making systems. The consumers of Amazon in this case are multinational companies
which use artificial intelligence to make business strategies.
The fourth segment of Amazon consist of hardware like Amazon Alexa and payment
gateways like Amazon pay.
It is evident from the discussion that Amazon provides these key products and services
for both its customer segments, namely end consumers and business companies. The company
markets these services throughout the world. The company uses third party ecommerce
companies to offer products to its consumers in markets where it as no direct presence in the
form of subsidiaries. Amazon provides these products to ensure that its customers, including
business firms and consumers are able to gain access to a large variety of products at affordable
prices. This enables the company to earn a huge profit from its businesses as shown in the
financial statements.
These features of Amazon which pertains to products, customers and locations help the
management of the company set boundaries of business decisions. The company forms its global

5
FINANCIAL PERFORMANCE OF AMAZON
strategies taking into account the macroeconomic conditions of the different host countries. For
example, the company before forming the product strategy of a particular country, takes into
account factors like customer preferences and purchase power. This ensures that the marketing
mixes of different countries are aligned with the market requirements of the countries. This
enable the company to generate immense revenue by ensuring high level of customer
satisfaction. Thus, it is evident that the products, customers and locations enable the apex
management of Amazon take market specific decisions.
B. Recent Financial Performance:
Part 1.
The consolidated income statement of Amazon shows that company is experiencing
increase in revenue. The graphs below shows that income of Amazon increased by 298 percent
in 2016 and by 28 percent in 2017. However, as shown in operations expenses graph, the same
increased by 26 percent in 2016 and 2017 it increased by a whopping 32 percent. Thus, it can
inferred that the company should try to minimise its expenses. The provision for taxation fell in
2016 by doubled in the year 2017 to $ 769. This means that company also requires to minimise
its taxation expenses.

6
FINANCIAL PERFORMANCE OF AMAZON
1 2 3
0
500
1,000
1,500
2,000
2,500
3,000
3,500
596
2,371
3,033
Chart Title
Years(2015, 2016, 2017)
Net income($m)
Figure 1. Graph showing increase in income
(Source: Ir.aboutamazon.com, 2019)
104,773
131,801
173,760
Operating expenses
Years(2015, 2016, 2017)
Operating expenses($m)
Figure 2. Comparison of operating expenses increase of Amazon
(Source: Ir.aboutamazon.com, 2019)

7
FINANCIAL PERFORMANCE OF AMAZON
Part 2.
The cash flow statement of Amazon shown below that the company is experiencing
healthy cash flow. The closing cash flow for the periods 2015, 2015 and 2017 shows steady.
However, the depreciation figure for the three years also show steady increase. The inventory
positions for the periods shows reduction which means that company is experiencing high level
of liquidity. Thus, it can be inferred that the cash positions of Amazon are satisfactory.

8
FINANCIAL PERFORMANCE OF AMAZON
Figure 3. Cash flow statement of Amazon for 2017
(Source: Ir.aboutamazon.com, 2019)
Part 3:
The analysis of the financial analysis shows that Amazon is not in a good financial
position. The net profit of the company shows an increase but the expenses are also growing at
steady. The balance sheet of the company for the three periods show the current ratio of the
company is way below 2, the required ratio. Thus, the company does not have sufficient current
assets to pay its current liabilities. The company should strengthen its asset positions by
acquiring new companies to get access to their current assets.
2. Management and organisation of Amazon:
Amazon is organised and managed by taking into account product groups, geographic
regions and functions. For example, the apex management of the company takes decisions and
functions regarding product groups by considering the geographical segmentation of the market.
The management takes into account factors like demand for particular goods and competition
before forming product decisions.
The market specific organisation and management of the key goods and services have
strong effect on the accounting and business decisions in the future of the company. The market
specific decisions enable Amazon cater to markets with more appropriate products. As shown in
the table below, the company was able to boost its profit by 298 percent in 2016 compared to
2015 as per the accounts of the company. Thus, market specific organisation enable the company
to serve markets and generate higher profits which effects in the books of accounts as shown
below.

9
FINANCIAL PERFORMANCE OF AMAZON
Year 2015 2016 2017
Net income($mn) 596 2,371 3,033
Increase from previous year 0 1,775 662
Increase (%) 0 298% 28%
B. Recent financial performance:
1. The consolidated income statement of Amazon shows that the company has not performed
well in spite of the fact that the income of the company has increased in comparison to the
previous year. The income statement (attached) shows that the profitability of the company has
increased by 28 percent in 2017 compared to 298 percent in 2016. This is evident from the fact
that the total operating expenses in 2016 was 131801 USD mn compared to 173760 USD mn in
2017. The operating expenses increased by 32 percent in 2017 compared to 26 percent in 2016.
This increasing operating expenses has eroded the net income in spite of lowering taxes in 2017
compared to 2016.
2. The consolidated cash flow statement of Amazon for the year 2017 shows that the company
has strengthened financially. It can however, be pointed out that the accounts receivable has
decreased. It can also be pointed out that the accounts payable has increased. Thus, in this light
can be pointed out that though the cash flow has increased, the falling number of debtors and
rising number of creditors shows that the company has less buyers(debtors) compared to
suppliers in term of money.
The above analysis shows that the underlying performances of the company is not
healthy. The company needs to acquire more companies using acquisitions and mergers. This
would boost the financial income of the company because this would enable Amazon to serve
more customers, thus generating higher revenue.

10
FINANCIAL PERFORMANCE OF AMAZON
C. Current financial health:
1. Capitalisation and financial health of Amazon:
The current financial health of Amazon is not satisfactory. This evident from the fact the
company does not have the required amount of current assets to pay off its current liabilities. The
current ratio calculated in 2016 and 2017 are 1.04 and 1.03. This means that company is not
financially strong to pay its debts.
2. Amount of cash and resources:
Amazon does not have the right amount of cash which is evident from the cash flow
statement and balance sheets. It can also be pointed out that the present business of Amazon is
sufficient to boost its future business. The company should enter into more markets to boost its
revenue generation.
3. Assessment of financial value:
The financial value of Amazon is not satisfactory and the same can be pointed out based
on two relevant indicators, goodwill and current ratio. First, the goodwill value has increased but
considering the lowering current ratio, it can be commented that the company is suffering for low
liquidity.
III. Success factors:
A. How do the company’s financial and strategic priorities affect accounting procedures
and business decisions?
The nature of the management of any organizations important to understand the growth
of a company. The main objective of any private organization is that of earning a higher profit
margin (Kantor & Streitfeld, 2015). For this purpose, there are a number of ways in which the

11
FINANCIAL PERFORMANCE OF AMAZON
company can achieve this desirable outcome. The first method is that of simply following the
profit motives of the organization without paying much heed to the quality of goods and services
produced. This might prove to be beneficial in the short run but it is not at all feasible in the long
run. In order to survive for a considerable period of time, there is a need on the part of any
private organization to appeal to its target consumers (Kristensen et al., 2017). For this purpose,
it is essential that the quality of the goods and services produced by any company is up to the
par. The organization of Amazon follows this method of increasing tis revenue. Once the
consumers start to have faith in the organization that the goods produced are of good quality,
they will purchase it in a higher volume.
The organization of Amazon is, as a result, efficiency oriented company. It believes in
the objective of providing quality goods and services to the consumers. This ensures that a loyal
consumer base is formed and maintained (Head, 2017). As a consequence of this, the consumers
buy the products in bulk, which in turn, increases the revenue earned by the organization. This
strategy of business decision is better than growth oriented strategy because in efficiency
strategy, the organizations are more concerned about the goodwill of the consumers. However,
growth oriented strategy is only concerned about the growth of the organization (Lincoln &
Andrew, 2018). This is not feasible for an e-commerce market like that of Amazon which wants
to stay in business for a long period of time. As a result, thinking about its long term objectives,
Amazon should try to invest more in the appeasement of its customers and in ensuring the well-
being of its employees (Smith, Rupp & Offodile, 2017).
B. How might the company better capitalize on nonfinancial factors?
The financial aspect of any private organization might be the most important factor as without
finances it is nigh impossible to run any business. However, besides the financial resources, the