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Resources: Analyzing Amazon document.
Write a 700- to 1,050-word paper.
The incredible growth of Amazon.com has put fear into the hearts of traditional retailers. Amazon's stock price has soared to amazing levels. However, it is often pointed out in the financial press that it took the company several years to report its first profit.
Calculate free cash flow for Amazon for the current and prior years.
Evaluate its ability to finance expansion from internally generated cash.
Thus far, Amazon has avoided purchasing large warehouses. Instead, it has used those of others. It is possible, however, that in order to increase customer satisfaction, the company may have to build its own warehouses. If this happens:
- Describe how your impression of its ability to finance expansion change.
- Project any potential implications of the change in Amazon's cash provided by operations from the prior year to the current year.
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Running Head: ANALYZING AMAZON
1
Analyzing Amazon
Institutional Affiliation
Date
ANALYZING AMAZON
2
$ in Millions
Prior Year
Current assets
$31,327
$24, 625
Total assets
54,505
40,159
Current liabilities
28,089
22,980
Total liabilities
43,764
30,413
Cash provided by operations
6,842
5,475
Capital expenditures
4,893
3,444
Dividends paid
--
--
Net income (loss)
(241)
274
88,988
74,452
Sales
The purpose of free cash flow analysis is to determine the amount of discretionary cash flow a
company has for purchasing additional investments and more.
Cash Flow Statement provides additional information about the business' cash activities
Reports (summarizes) the changes in a business' cash during an accounting period
Shows cash inflows and outflows for an accounting period classified into operating, investing or
financing activities
It also shows users: Where the business got its cash from and what the business did with it
ANALYZING AMAZON
3
A business can make sales for cash or for credit, so its sales revenue account contains both cash
and credit sales for the period.
Accounts receivable account contains increases due to credit sales and decreases due to
collections of account receivable.
If the accounts receivable account decreases during a period, then the business has collected
more cash from customers than the amount of current credit sales made.
If the accounts receivable account rise during a period, then the business has collected less cash
from customers than the amount of current credit sales made.
It follows that we can calculate cash collections from customers for a period by taking the
balance of the sales revenue account and adjusting it for the change in accounts receivable.
ANALYZING AMAZON
Amazon
Divided paid
Free cash flow
Current year
Cash provided by Capital
operations
expenditures
6,842
4,893
--
1,949
Prior year
5,475
--
2,031
3,444
Describe how your impression of its ability to fund expansion change.
My impression about the power of above mentioned natural events is that the amount of capital
released is gigantic in proportion. Prior to this reading, I had an idea that these phenomenon
release huge amount of money however; this capital is so enormous was never known to me.
A...
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