Running head: ACCOUNTING ANALYSIS OF AMAZON COMPANY 1 ACCOUNTING ANALYSIS OF AMAZON COMPANY 2 Amazon Inc. Accounting Analysis Introduction This paper seeks to conduct an accounting analysis of Amazon’s financial statements as publicly provided in its 10K forms for the last three years. Financial accounting involves the analysis of a company’s financial statements for use by stakeholders, managements, state agencies, debt and shareholders, investment professionals and students alike. In this paper, the analysis involves analyzing Amazon Inc.’s balance sheet, statement of cash flow and the income statement. The balance sheet, in Table 1, shows the financial resources owned by the company and their sources i.e. shareholders and debt holders. Also, an analysis of Amazon’s consolidated income statements, in Table 2, shows the products the company sold and profits made, if any is analyzed. Finally, this paper concludes by an analysis of the company’s statements of cash flow, in Table 3. The net income earned by Amazon is distributed to its shareholders through payment of dividends or ploughed back for future investments, in Table 4. Accounting Analysis Liquidity Ratios Formula Year Ending 2015 Current Ratio = Current Assets/Current Liabilities 1.0759 609 Acid Test or Quick Ratio = (Current Assets - Inventories – Prepaid 1.0759 Year Year Ending Ending 2014 2013 1.1152 764 0.8198 Industry 5Yr. Avg. Percentile 1.62 0.56 0.83 Expenses) / Current Liabilities Assset Managenet Ratios The cash ratio = Available Cash + Marketable Security/Current Liabilities Accounts Receivable Collection = 360 Days / Accounts Receivable Turnover 0.5843 24 0.21 0.6200 29 0.35 0.43 Inventory Turnover = Cost Of Goods Sold/Average Inventory 5.45 5.74 3.88 9.12 ACCOUNTING ANALYSIS OF AMAZON COMPANY Leverage Ratios Profitabilit y Ratios 3 Days Held In Inventory = 360 Days/Inventory Turnover Fixed Asset Turnover = Sales/Average Net Fixed Assets Fixed Asset Turnover=Sales/Average Total Assets Sales to Working capital = sales/ (current assets – current liabilities) Debt Ratio=Total Debt/Total Assets 66 0.95 16.35 41.56 63 1.87 1.63 27.48 93 2.15 1.85 23.22 3.60 3.48 5.40 Debt To Equity Ratio=Total Debt/Total Equity Time Interest Earned=(Earnings Before Interest And Taxes)/Interest Gross Profit Or Margin= (Sales – Cost Of Goods Sold)/Sales 1.36 7.86 1.46 3.42 0.53 33.04 29.48 27.23 26.28 Operating Income Ratio=Operating Income/Sales Return On Sales=Earnings After Taxes/ Sales Return On Investments=Earnings After Taxes/Average Total Assets Return On Equity(ROE)=Earnings After Taxes/Average Owners Equity 3.16 1.78 0.99 2.09 1.88 -0.51 0.2 2.05 0.75 3.08 0.98 1.97 4.94 -2.35 3.06 15.72 0.56 Liquidity Ratio Ratio analysis is carried out to determine the performance of a company and to identify measures needed to improve performance in case of poor results. Liquidity ratio measures the relationship between the current assets and the current liabilities. It involves current ratio, acid test ratio and the cash ratio. The current ratio measures the value of current assets that can be able to pay for the company’s current liabilities (Schroeder, Clark & Cathey, 2011). For Amazon Company, its current ratio were 1.07 and 1.12 for the financial years ending 31st December, 2015 and 2016 respectively. In retrospect, the Quick ratio (acid test ratio), measures the ability of Amazon to meet its short term financial obligation without depending on inventory sales. Inventories being the least liquid of a company’s current assets represents the book value of a company’s asset, that, in case the company’s sells them, it gets less value in the process of liquidation in order to pay for upcoming bills (Schroeder et al., 2011).Thus, the acid test is more reliable in assessing the liquidity of a company then the current ration. For the case of Amazon, ACCOUNTING ANALYSIS OF AMAZON COMPANY 4 its quick ratios were 1.08 and 0.82 for 2015 and 2014 respectively. Further analysis of the company’s liquidity involved the cash ratio that measures the ability of Amazon Company to pay its short term obligations using the available cash as well as its marketable securities. The cash ratios for the two financial years ending 2015 and 2014 were 0.58 and 0.62 respectively. From the numbers, Amazon is moderately is liquid and thus able to meet its short term financial obligations. Further, the high liquidity of the company implies that it is less likely to encounter financial distress. However, the relatively high liquidity of the firm represents a big trade off as liquid assets generate less returns for investments. Asset Management Ratios Asset management ratios are essential tools in determining the efficiency in which a company utilizes its asset and how the managers are able to manage the accounts payable. From the ratios, stakeholders and managers can tell whether the firm is holding the right amount of each category of assets and whether the assets are being maximized in increasing the volumes of sales made (Schroeder et al., 2011). The fixed asset turnover ratio evaluates the amount of dollars of sales made per dollar of net fixed assets while the sales to working capital measures the sales made per net working capital. From the analysis, the high sales to working capital and the fixed asset turnover for amazon were conspicuously high for 2015 compared to 2014. Usually, a high the ratios the more the efficiency of the management of a company and are therefore a sign of improved management at Amazon going forward as compared to the previous year. However, the high fixed asset turn over that is at 16.35 for 2015 compared to 1.63 for 2014 indicates that the company is nearing its maximum capacity. In the event of full capacity, the company would be faced with problems of further growth through increasing the volumes of sales (Schroeder et al., ACCOUNTING ANALYSIS OF AMAZON COMPANY 5 2011). In fact, a high sale to working capital ratio and fixed asset turnover may indicate lack of good management in part by the firm in allowing it to near maximum sales capacity prematurely or otherwise prior to formulating measures to accommodate exponential growth. Debt Management Ratios Financial leverage ratios measures the level of use of debt relative to use of equity in financing a company’s assets and how well the firm is able to meet its debt repayments (Schroeder et al., 2011). The ratios evaluate if the company is financing its assets with the correct amount of debt in relation to equity and whether it is acquiring sufficient returns to pay for its debts in time. Profitability Ratios The analyzed asset management, debt management and liquidity management ratios evaluates the financial position of a company in an isolated manner. However, the profitability ratios evaluates the combined effects of debt, asset and liquidity aspects of the company’s performance (Schroeder et al., 2011). For the case of Amazon, its gross profit margin was 33.04, 29.48 and 27.23 against an industry average of 26.28. Thus, Amazon is slightly more profitable that the average company in the online retail business (Stone, 2014). Indeed, investors and stakeholders watch closely this ratios and changes in profitability ratios determines the company’s stock prices and valuation. In regard to stock prices, ROE is a measure of return to the shareholder in regard to investments made to the company. ROE is affected in part, by the amount of debt or leverage that a company uses as well as the net income. For the case of Amazon Inc., the ROE was 4.94, -2.35 and 3.06 for 2015, 2014 and 2013 against a 5 year ACCOUNTING ANALYSIS OF AMAZON COMPANY 6 industrial average of 15.78%. Indeed, Amazon has a very low ROE in comparison to the industry average. Therefore, it implies that the equity shareholders are not getting enough from their investments in the company. In summary, the methodology conducted above is based on the fact that companies with a strong and attractive financial strength are characterized by healthy financial ratios. Therefore, looking at the criteria used, the following inferences can be deduced in summary: Current Ratio: Poor A competitively strong company should have a current ratio that is either higher than or same as the industry average. Amazon scores poorly as it has a current ratio of 1.08 and 1.11 against an industry average of 1.62 (UBS Global Research, 2015). Return on Equity: Poor Amazon has very low Return on Equity ratios, way below the industry average of 15.72%. In any case, a high ROE ensures that a company is structurally flawless (Schroeder et al., 2011). Debt Equity Ratio: Poor A good company should have a low Debt/Equity ratio that demonstrates that the firm has a strong balance sheet (Schroeder et al., 2011). In essence, its Debt/Equity ratio should be less than the industry average in which case Amazon fails in the criterion with a ratio of 1.36, 1.46 for 2015 and 2014 respectively against an industry average of 0.56 (Insider, July 20, 2015). ACCOUNTING ANALYSIS OF AMAZON COMPANY 7 Conclusion From the analysis, Amazon Company will not deliver reasonable economic benefits to its shareholders anytime soon (Yahoo Finance, 2016). ACCOUNTING ANALYSIS OF AMAZON COMPANY References Amazon.Com, Inc. (2016) Form 10K [Internet]. Retrieved from: https://www.sec.gov/Archives/edgar/data/1018724/000101872416000172/amzn20151231x10k.htm#s1434763B09F480B7DDC8ABB24AC60644.Accessed > Insider, M. (July 20, 2015). Why Steven Romick Is Staying Away From Amazon.com Inc (AMZN), W Grainger Inc (GWW), and Fastenal Company (FAST). Insider Monkey, 2015-7. Schroeder, R. G., Clark, M., & Cathey, J. M. (2011). Financial accounting theory and analysis: Text and cases. Hoboken, NJ: Wiley. Stone, B. (2014). The Everything Store: Jeff Bezos and the Age of Amazon. MMR, (13). 69. UBS Global Research (2015) Amazon.com: Trading Profits for Revenues (August 4, 2016) [Internet], Zurich, UBS AG. Retrieved from :< https://www.thomsononeim.com/v-hom.asp> Yahoo Finance (2016) Yahoo Finance – Business Finance, Stock Market, Quotes, News [Internet], Sunnyvale, Yahoo! Inc. Available from: 8 ACCOUNTING ANALYSIS OF AMAZON COMPANY 9 Tables Table 1 AMAZON.COM, INC.CONSOLIDATED BALANCE SHEETS (In millions, except per share). December 31, 2015 ASSETS Current assets: Cash and cash equivalents Marketable securities Inventories Accounts receivable, net and other Total current assets Property and equipment, net Goodwill Other assets Total assets LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable Accrued expenses and other Unearned revenue Total current liabilities Long-term debt Other long-term liabilities Commitments and contingencies (Note 7) Stockholders’ equity: Preferred stock, $0.01 par value: Authorized shares — 500 Issued and outstanding shares — none Common stock, $0.01 par value: Authorized shares — 5,000 Issued shares — 494 and 488 Outstanding shares — 471 and 465 Treasury stock, at cost Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total stockholders’ equity Total liabilities and stockholders’ equity $ $ $ 2014 15,890 3,918 10,243 6,423 36,474 21,838 3,759 3,373 65,444 $ 20,397 10,384 3,118 33,899 8,235 9,926 $ $ — $ 5 (1,837) 13,394 (723) 2,545 13,384 65,444 16,459 9,807 1,823 28,089 8,265 7,410 — $ Source: https://www.sec.gov/Archives/edgar/data/1018724/000101872416000172/amzn20151231x10k.htm#s1434763B09F480B7DDC8ABB24AC60644 14,557 2,859 8,299 5,612 31,327 16,967 3,319 2,892 54,505 5 (1,837) 11,135 (511) 1,949 10,741 54,505 ACCOUNTING ANALYSIS OF AMAZON COMPANY Table 2 10 Consolidated Income statement. Year Ended December 31, 2015 2014 2013 2012 2011 (in millions, except per share data) Statements of Operations: Net sales Income from operations Net income (loss) Basic earnings per share (1) Diluted earnings per share (1) Weighted-average shares used in computation of earnings per share: Basic Diluted Statements of Cash Flows: Net cash provided by (used in) operating activities $107,006 $ 2,233 $ 596 $ 1.28 $ 1.25 467 477 $88,988 $ 178 $ (241) $ (0.52) $ (0.52) 462 462 $ 11,920 $ 6,842 $74,452 $ 745 $ 274 $ 0.60 $ 0.59 457 465 $61,093 $ 676 $ (39) $ (0.09) $ (0.09) $48,077 $ 862 $ 631 $ 1.39 $ 1.37 453 453 453 461 $ 5,475 $ 4,180 $ 3,903 December 31, 2015 2014 2013 2012 2011 (in millions) Balance Sheets: Total assets Total long-term obligations $ 65,444 $54,505 $ 18,161 $15,675 $40,159 $32,555 $ 7,433 $ 5,361 $25,278 $ 2,625 Source: https://www.sec.gov/Archives/edgar/data/1018724/000101872416000172/amzn20151231x10k.h tm#s1434763B09F480B7DDC8ABB24AC60644 ACCOUNTING ANALYSIS OF AMAZON COMPANY Table 3 11 Consolidated Statements of Cash flow Year Ended December 31, CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 2015 2014 2013 $14,557 $ 8,658 $8,084 OPERATING ACTIVITIES: Net income (loss) 596 (241) 274 Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation of property and equipment, including internal-use software and website development, and other amortization, including capitalized content costs Stock-based compensation Other operating expense (income), net Losses (gains) on sales of marketable securities, net 6,281 4,746 3,253 2,119 1,497 1,134 155 129 114 5 Other expense (income), net Deferred income taxes (3) 1 245 62 166 81 (316) (156) (119) (6) (78) Inventories (2,187) (1,193) (1,410) Accounts receivable, net and other (1,755) (1,039) (846) 4,294 1,759 1,888 913 706 736 7,401 4,433 2,691 (6,109) (3,692) (2,292) 11,920 6,842 5,475 (4,589) (4,893) (3,444) Excess tax benefits from stock-based compensation Changes in operating assets and liabilities: Accounts payable Accrued expenses and other Additions to unearned revenue Amortization of previously unearned revenue Net cash provided by (used in) operating activities INVESTING ACTIVITIES: Purchases of property and equipment, including internal-use software and website development, net Acquisitions, net of cash acquired, and other (795) Sales and maturities of marketable securities Purchases of marketable securities Net cash provided by (used in) investing activities (979) (312) 3,025 3,349 2,306 (4,091) (2,542) (2,826) (6,450) (5,065) (4,276) FINANCING ACTIVITIES: Excess tax benefits from stock-based compensation Proceeds from long-term debt and other 119 6 353 6,359 78 394 Repayments of long-term debt and other (1,652) (513) (231) Principal repayments of capital lease obligations (2,462) (1,285) (775) Principal repayments of finance lease obligations (121) Net cash provided by (used in) financing activities Foreign-currency effect on cash and cash equivalents (5) 4,432 (374) Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS, END OF PERIOD (135) (3,763) (539) (310) (86) 1,333 5,899 574 $15,890 $14,557 $8,658 $ $ $ SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest on long-term debt 325 91 97 Cash paid for interest on capital and finance lease obligations 153 86 41 Cash paid for income taxes (net of refunds) 273 177 169 ACCOUNTING ANALYSIS OF AMAZON COMPANY Property and equipment acquired under capital leases Property and equipment acquired under build-to-suit leases 12 4,717 4,008 1,867 544 920 877 Source: https://www.sec.gov/Archives/edgar/data/1018724/000101872416000172/amzn20151231x10k.h tm#s1434763B09F480B7DDC8ABB24AC60644 ACCOUNTING ANALYSIS OF AMAZON COMPANY Table 4 13 Statement of Shareholder Equity(in millions) Common Stock Shares Balance as of January 1, 2013 Net income Other comprehensive income (loss) Exercise of common stock options Excess tax benefits from stockbased compensation Stock-based compensation and issuance of employee benefit plan stock Balance as of December 31, 2013 Net loss Other comprehensive income (loss) Exercise of common stock options Excess tax benefits from stockbased compensation Stock-based compensation and issuance of employee benefit plan stock Issuance of common stock for acquisition activity Balance as of December 31, 2014 Net income Other comprehensive income (loss) Exercise of common stock options Excess tax benefits from stockbased compensation Stock-based compensation and issuance of employee benefit plan stock Issuance of common stock for acquisition activity Balance as of December 31, 2015 454 $ — — 5 Amount 5 — — — Treasury Stock Additional Paid-In Capital $ (1,837) $ 8,347 — — — — — 4 $ Retained Earnings (239) $ 1,916 — 274 54 — — — 8,192 274 54 4 — 459 — — 6 — 5 — — — — — — 6 — — 6 — — — 1,510 — — 1,510 — 465 — — 6 — 5 — — — 44 11,135 — — 4 — (511) — (212) — — — — 119 — — 119 — — — 2,131 — — 2,131 — — (723) $ 2,545 5 $ 13,384 — 5 — (1,837) — — — 73 — (185) — (326) — 1,149 9,573 — — 2 — 5 $ (1,837) $ 13,394 $ — $ — — (1,837) — — — — Total Stockholders’ Equity — — 471 $ — Accumulated Other Comprehensive Income (Loss) — 2,190 (241) — — — 1,949 596 — — 73 1,149 9,746 (241) (326) 2 44 10,741 596 (212) 4 Source: https://www.sec.gov/Archives/edgar/data/1018724/000101872416000172/amzn20151231x10k.h tm#s1434763B09F480B7DDC8ABB24AC60644 Amazon.com Inc. Ratio Analysis The health of any company is very important. A company is a profit-making organization and in that case, the financial health of the company is very important. To determine the current financial situation of a company it is important that after the financial statements are prepared, financial ratios are determined to assess and analyze the performance of the company. In this paper, we will be looking at the financial ratios of Amazon.com. Inc. Our focus will be on appropriate Solvency, Profitability, Activity, Capitalization, and Market Ratios. To begin with, some of the solvency ratios are debt to equity, debt to asset, and interest coverage ratio. These ratios are determined as follows; Debt to equity = Total debt/ Total equity Amazon’s debit to equity for the three years are: 2015: 8562/13384 = 0.6397 2014: 9881/10741 = 0.9199 2013: 9976/10176 = 0.9803 Debt to asset = Total Debt/ Total Assets Amazon’s debt to asset for the past three years are: 2015: 8562/65444 = 0.1308 2014: 9881/54505 = 0.1813 2013: 9976/40159 = 0.2484 Interest Coverage Ratio = Operating Income/ Interest Expense Amazon’s interest coverage ratio for the past three years are: 2015: 2027/459 = 4.4161 2014: 99/210 = 0.4714 2013: 547/141 = 3.8794 Another category of ratios that is important to take into consideration is the profitability ratios. Some of the ratios under this category are gross margin, operating margin, return on assets and return on equity. Gross Margin = Gross profit/ net sales * 100 Amazon gross margin for the past three years are: 2015: 1568/ 107006 *100 = 1.4653% 2014: 111/88988*100 = 0.1247% 2013: 506/74452*100 = 0.6796% Operating Margin = Operating Profit/ Net sales*100 Amazon operating margin for the past three years are: 2015: 65/107006*100 = 0.6215% 2014: 289/88988*100 = 0.3248% 2013: 239/74452*100 = 0.3210% Return on Assets = Net Income/ Assets*100 Amazon return on assets for the past three years are: 2015: 516/65444*100 = 0.7885% 2014: 241/54505*100 = 0.4422% 2013: 274/40159*100 = 0.6823% Return on Equity = Net income/ Shareholder investment*100 Amazon return on equity for the past three years are: 2015: 516/13384*100 =3.8553% 2014: 241/10741*100 =2.2437% 2013: 274/9746*100 = 2.8114% The operations of the company can be analyzed by considering the activity ratios. These ratios comprise of account receivable turnover ratio, inventory turnover and total assets turnover. These ratios are determined as follows; Account Receivable turnover ratio = Total Credit/ Average Account Receivable Balance Amazon account receivable turnover ratio for the past three years are: 2015: 20397/6018 = 3.3893 2014: 16459/5189 = 3.1719 2013: 15133/5021 = 3.0139 Inventory Turnover = Cost of goods Sold/ Average inventory Amazon inventory turnover for the past three years are: 2015: 71651/1690 = 42.397 2014: 62752/1302 = 48.1966 2013: 54181/ 1308 = 41.4228 Total Assets turnover = Total sales/ Total assets Amazon total assets turnover for the past three years are: 2015: 107006/65444 = 1.6351 2014: 88988/54505 =1.6327 2013: 74452/40159 = 1.8539 The next category of ratios we will look at is the capitalization ratios. The ratios under this category are debt equity ratio, long term debt to capitalization, total debt to capitalization. These ratios are calculated as follows; Debt equity ratio = Total debt/ shareholder equity Amazon debt equity ratio for the past three years are: 2015: 8562/13384 = 0.6397 2014: 9888/10741 = 0.9205 2013: 9976/9746 = 1.0236 Long term debt to capitalization = Long term debt/ (Long term debt + Shareholder Equity) Amazon long term debt to capitalization for the past three years are: 2015: 8235/21619 = 0.3809 2014: 8265/19006 = 0.4349 2013: 3191/12937 = 0.2467 Total debt to capitalization = Total debt/ (Total debt+ Shareholders’ Equity) Amazon total debt to capitalization for the past three years are: 2015: 8562/21946 = 0.3901 2014: 9888/20629 = 0.4793 2013: 9976/19722 = 0.5058 Last but not the least, we will consider the market ratios. This category comprises of ratios such as price to earnings and dividend yield. Under amazon Inc. however, we will be taking into consideration the price to earnings ratio since dividends is not applicable. The determination of price to earnings is; Price to earnings = Market value per share/annual earnings per share Amazon price to earnings for the past three years are: 2015: 0.01/ (0.12) = -0.0833 2014: 0.01/0.23 = 0.0435 2013: 0.01/ 0.20 = 0.05 (Kota, 2016) Amazon Ratios Category Ratio Industry Solvency Debt to equity 0.2 Debt to asset 0.1 Interest coverage ratio 7.6 Profitability Gross margin 53.8 Operating margin 6.4 Return on assets 3.4 Return on equity 5.6 Activity ratio Acc. Receivable turnover 9.9 Inventory Turnover 17.3 Total assets turnover 0.6 Market ratio EPS Growth N/A Dividends N/A ("Amazon.com, Inc. Common Stock (AMZN)", 2016) These financial ratios are an important tool in the analyzing and summarizing of the company’s strength and weaknesses of the company. When it comes to profitability ratios these are very important to the investors and the creditors alike. This is because they communicate the success of the company on their investment. Amazon has a return on capital which is on average 0.6. This is a low return on capital which indicates that the company’s income is low. The return is even lower than the industry average of 3.4. ("AMZN: Amazon.com Inc. Top Competitors and Peers", 2016) When we turn our attention to the solvency ratios the company has interest coverage ratio of 4.3, this ratio is below the industries 7.6. What this translates to is that the company is not able to generate enough income to service its interest expense. When it come to the activity ratios the company has a ratio of 3.1 in account receivable turnover ratio. This ratio is very low which means Amazon has difficulties in paying its bills on time. Still on the activity ratios, when we look at the turnover ratio we see that the company has a ratio of 1.6. This low ratio means that the company is not maximizing the use of the assets at their disposal. Amazon.com Inc. has two alternatives to correct this. It can either increase its sales or it can dispose some of the assets ("AMZN: Amazon.com Inc. Top Competitors and Peers", 2016). References Amazon.com, Inc. Common Stock (AMZN). (2016). NASDAQ.com. Retrieved 18 November 2016, from http://www.nasdaq.com/symbol/amzn AMZN: Amazon.com Inc Top Competitors and Peers. (2016). Financials.morningstar.com. Retrieved 18 November 2016, from http://financials.morningstar.com/competitors/industrypeer.action?t=AMZN®ion=usa&culture=en-US Kota, A. (2016). AMAZON COM INC Annual Report Fri Jan 29, 2016: Last10K.com. Last10k.com. Retrieved 18 November 2016, from https://www.last10k.com/secfilings/amzn/0001018724-16-000172.htm#toc-R7 1 Amazon Inc. Credit Analysis Key Facts on the recent reports on Amazon.com Inc. The industries that have been served by Consumer electronics: Fire HD and Amazon Amazon kindle Internet: Amazon video Retails market places Areas served Geographically internationally The CEO Jeff Bezos Current Revenue US$ 107 Billion Profit Over $590 million The major rivals eBay, Apple Inc. and Alibaba Group Number of Employees 230800 according to the New York Newspaper in August 2016 Credit analysis of Amazon has been useful in the risk determination about the company’s financial status. The organizations that fund the company are always interested in the business financial report as it shows clear information of fund management. The analysis is based on the character of Amazon, the capacity at which the cash is flowing in the company, the current conditions of the company as well as capital required by the company to effectively carry out its 2 activities. Additionally, collateral attribute of the company is very important as far as the credit analysis is considered. The current sales by Amazon show the credit worthiness of Amazon. Capacity of the Amazon Company for the last five years has been incredible. There has been an efficient flow of cash in the company. The management with the leadership of the CEO has done a great job of maintaining the capacity of the company. The expenses have been supported effectively and the company is observed to clear their debts in timely deadlines. Despite the complaints by the employees about the harsh working environment, the company ensures that the salary payment is done in time. At least no worker reported this in the New Yorker interview in August this year. The lenders of Amazon have a full understanding of the company making the process easier. For example, the Amazon options of lending include; Merchant Cashier Advances, the peer-to –peer financing, Factoring and Credit Cards. Finally, the company has really benefited from Kabbage Amazon Loans as well as Amazon Lending. All these organization have a better knowledge of Amazon financial status and therefore, they are Amazon’s preferred option to work with. The history of Amazon is an added advantage to the trust of the lenders. Amazon is known to clear its debts in good time and efficiency in meeting the expenses. It is for this reason that the organizations generously offer loans to the company to assist in developing the new projects by the company (Sheppard, 2016). Amazon Company has already built its character in the market and the ability to reach customers all over the world. The traits displayed by the Amazon Company are very important as they determine if the lenders will offer loans to the company. Both the guarantors and the borrowers should manifest their integrity as well as the honesty to gain the trust of one another. This has been easy to Amazon as the lenders are already familiar with the company. The 3 managerial team lead by the CEO Jeff has showed skilled experience in internal and external environments of the company. The recruitment of educated personnel has also aided in building the background information of the company. The credits of the company and the well-built history attributes to its character. The loaners therefore fund the company without doubts and regrets. The only delinquency that has been associated with Amazon is about pressurizing the workers, according to the latest reports. However, this does not really count as the character is based on the company’s external environment. The condition of Amazon is of great important to the lenders because it is through it that the progress of the loan is understood. The current condition of the Amazon has really improved and the lenders are sure that the loans are used and managed effectively. The lenders have information about the renovations and the project that have been put in place by Amazon. Capital that has continually been injected in the company’s budget has had great impacts on the company. The investments have been possible as a result. The company has contributed some of its assets to the improvement of the financial status. The chances of default have been reduced by the readiness of the company to take risks. Amazon is really dedicated to its project and therefore there is always a budget of the upcoming activities that require capital. This is contained in the company’s action plan. Collateral of Amazon is based on the lenders examination of the value of the company’s assets as the primary payment of the loans offered. The partners of the company who are often the guarantors also get their assets assessed. This evaluation is meant for future preparation of payment. In case the company fails to clear the debts, then the guarantor’s assets will be used as 4 the secondary payment of the loans. This is a determining factor of the credit worthiness of Amazon Company. Assessment of Strengths and Weaknesses Amazon is the biggest revenue contributor to the economy of the United States and is rated among the best companies worldwide. This has been achieved by the company’s reduced cost of structure. The company has a great number of retailers that act as sellers at third party level. The company earned approximately $90 Billion out of the sales made online last year. By 2018 the company will have defeated their close competitor Wal-Mart by far in terms of revenue(Karls, 2016). 5 The company has also developed synergies that link the market to online services. Amazon prime is also incorporated. There have been great benefits to the company’s output through combination of market place, Amazon Prime and Amazon Web Services. This has increased speed and capacity. The only threat that is bringing weakness to Amazon Company is the stiff competition from Wal-Mart. Wal-Mart has established a market in many regions internationally and offers as many services as Amazon and at a lower price. This trick is used by Wal-Mart to draw more customers to themselves hence defeating Amazon. 6 7 References Karls, J. (2016). Amazon SWOT Analysis 2016. Retrieved from Strategic Management Insight: http://ww.strategicmanagementinsight.com Sheppard, T. (2016). The 5 C's of Credit. Retrieved from Liveoak: http://www.liveoakbar.com
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