Analyzing Amazon

timer Asked: Oct 16th, 2018
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Question Description

Resources: Analyzing Amazon document.

Write a 700- to 1,050-word paper.

The incredible growth of 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.

Tutor Answer

School: UC Berkeley


Running head: AMAZON


Analyzing Amazon







$ in Millions

Current Year

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 earned from the

$ 6,842

$ 5,475

$ 4,893

$ 3,444

Net income

$ (241)- loss

$ 274


$ 88,988

$ 74,452

Capital expenses
Paid dividends

Cash Flows = Cash earned from Operations - Capital Expenses – Paid Dividends
In the case of Amazon,
Cash flows for current year = 6, 842- 4,893
= $ 1,949
Cash flows for prior year = 5,475-3,444
= $ 2,031
In the online retail, Amazon is a dominant player (Ipeirotis, 2010). Even at the
expense of profits, it is best known for its persistent pursuit of market share and sales. The in-



progress capital expenditures investments to reinforce steady expansions of business can put
pressures on profits (earnings) after raising costs. The ever-increasing expenditures on the
research and development by the company to promote the Amazon brand and innovations
could make its earning scenarios more difficult (Rit...

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