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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
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Analyzing Amazon
Student Name
Name of Institution
Date
ANALYZING AMAZON
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Calculation of Free Cash Flow
Current Year
Cash provided by operations= 6,842M
Net working capital= current assets- current liabilities
Net working capital= 2,518M (31,327- 28,809)
Capital expenditure= 4,893M
Dividends=0
FCF= Cash provided by operations-Net working capital- capital expendituresdividends
FCF, current year= ($569M)
Amazon did not generate free cash flow in the current year but rather used an excess
of 569 million above the operating cash flows in investing activities.
Prior Year
Cash provided by operations= 5,475M
Net working Capital= Current assets- current liabilities
Net working capital= 1,645M (24,625-22,980)
Capital expenditure= 3,444M
Dividends=0
FCF, prior year= $386M
Amazon generated 386 million in cashflows in the prio...