Financial Analysis

Amazon.com, Inc.
Wendy Lujan & Shantell Cameron - Spring 2015

This financial analysis report will provide financial ratio information related to the profitability,
liquidity and financial stability of Amazon.com, Inc. and assist the investor in deciding whether
to invest in Amazons debt or equity. Financial data was obtained from the companys 2013 and
2014 10-K Sec filings. The financial statements include the Consolidated Balance Sheet,
Consolidated Income Statement and Consolidated Statements of Stockholders Equity.

Liquidity Ratios
Liquidity ratios describe the companys ability to settle its short term debt with current assets.
For this section, this analysis will focus on the current and quick ratios.
Current Ratio
The current ratio reflects the number of times short-term assets cover short term-liabilities. The
ratio was determined by dividing the total current assets by total current liabilities. Amazons
current ratio for 2012 is 1.12 which is a .04% decrease from 2011. With a current ration greater
the 1.00, Amazon has sufficient liquidity to meet its short-term obligation.
Quick Ratio
The quick ratio, also known as the acid test ratio, measures the number of times Cash, Accounts
Receivable and market securities cover short-term obligations. The 2012 and 2011 quick ratio of
0.78 and 0.82, respectively, shows that the companys ability to cover its short term obligation is
not improving.

Efficiency Ratios
Efficiency ratios describe how well the company is able to utilize its assets and liabilities to
increase the company value. For this section, the analysis will focus on the inventory turnover,
gross profit percentage and accounts receivable turnover ratios.
Inventory Turnover
The inventory turnover ratio is an indicator of how many times inventory is sold during a period.
This ratio is created by taking Cost of Goods Sold and dividing by average inventory. Amazons
2012 and 2011 Inventory turnover ratio was 9 and 10, respectively. Compared to its competitors
and the market median of 4.8 Amazons inventory takes less time to sell.
Gross Profit Percentage
Gross profit ratio shows the proportion of profit generated after deducting cost of goods sold
from revenues. Amazons gross profit percentage of 24% is below the market median of
33.55%.
Accounts Receivable Turnover Ratio
Amazons account receivable turnover ratio in 2012 was 11.73 times per year which means that
the average accounts receivable was collected every 31 days up slightly from 2011 at 8.32 times
or 43.8 days . With an industry average of 10.11, Amazons inventory turnover ratio of 11.73 is a
positive indication that the company is able to convert its Account Receivable into cash.

Solvency
Solvency ratios describe the companys ability to pay its short-term and long-term liabilities. For
this section, the analysis will focus on the debt ratio.
Debt Ratio

The debt ratio measure a company's ability to cover its liabilities with is assets. Amazons debt
ratio in 2012 and 2011 is 0.75 and 0.69, respectively. Amazons ability to pay its debt has
increased from 2012, it is also well above the industry average of .34.

Profitability
Profitability ratios are used to measure a companys performance. For this section, the analysis
will focus on the profit margin ratio and asset turnover ratio.

Profit Margin ratio

Profit Margin Ratio is how much net income is earned on net sales. Amazon.com in 2012 had a
profit margin of (.06%) down significantly compared to 2011 profit margin of 1.31%.

Asset Turnover Ratio

The asset turnover ratio shows how efficient a company uses its asset to earn income. The asset
turnover ratio for Amazon.com in 2012 of 1.87 shows only a slight decrease from 2011 at 1.90
and is also in-line with the industry average of 1.66.

Conclusion:
Amazon.com has several growth indications for the period 2011 to 2012. I would rate them as a
weak buy or a hold and try to deterime how long the losses will contine by doing a further
analysis of the consilidated reports.

Source: finance.yahoo.com

Amazon.com, Inc.

Detailed Ratio Analysis Two-Year Comparison

2012

2011 % Variance

Liquidity Ratios
Working capital
Current Ratio
Cash Ratio
Quick Ratio

$2,294
1.12
0.42
0.78

$2,594
1.17
0.35
0.82

-12%
-4%
20%
-5%

9
46
24%
11.73
31.1

10
37
22%
8.32
43.8

-10%
24%
9%
41%
-29%

75%
3.9
5.23

69%
3.26
15.18

9%
20%
-66%

0.06
4.53
1.87
-2854.7

1.31
19.57
1.90
15.18

-95%
-77%
-2%
-189.06

(2,854.70) 131.37
N/A
N/A
N/A
N/A

-2273%

Efficiency Ratios
Inventory Turnover
Days' sales in Inventory
Gross Profit percentage
Accounts Receivable turnover ratio
Days' sales in Inventory
Solvency Ratio
Debt Ratio
Debt to equity Ratio
Times-interest- earned ratio
Profitability Ratios
Profit margin ratio
Rate of return on total assets
Asset turnover ratio
Earnings per share
Investment Potential Ratios
Price/earnings ratio
Dividend yield
Dividend payout