2013 Amazon Financial Report Research Paper
Northern Arizona University
“2013 Amazon Financial Report Research Paper” First, I want to start with an overview of Amazon and what they offer to their clients. For consumers: we serve consumers through our retail websites and focus on selection, price, and convenience. We design our websites to enable millions of unique products to be sold by us and by third parties across dozens of product categories. Customers access our websites directly and through our mobile websites and apps. We also manufacture and sell electronic devices. We strive to offer our customers the lowest prices possible through low everyday product pricing and shipping offers, and to improve our operating efficiencies so that we can continue to lower prices for our customers (Amazon 3). As for the sellers on Amazon: We offer programs that enable sellers to sell their products on our websites and their own branded websites and to fulfill orders through us. We are not the seller of record in these transactions, but instead earn fixed fees, revenue share fees, per-unit activity fees, or some combination thereof (Amazon 3). Lastly, for the enterprises that utilize Amazon: We serve developers and enterprises of all sizes through Amazon Web Services (“AWS”), which provides technology infrastructure services that enable virtually any type of business (Amazon 3). Put simply in my own words, Amazon offers its clients a convenient, streamline, and hassle-free way to purchase, sell, and trade products for it’s consumers, sellers, and enterprises. As I looked into the liquidity measures of the Amazon Corporation, I found that they have had a good year for fiscal 2013. To start, their working capital was found as follows: working capital = current assets – current liabilities; working capital = $ 24,625 (millions) - $22,980 (millions) = $1,645 (millions). So, for their 2013 year, Amazon had a working capital of $1,645 (in millions). Amazon was able to meet their obligations as they came up regularly so that they may pay off short-term debt. Next up is the current ratio. The current ratio is calculated by dividing the current assets by the current liabilities (current ratio = current assets / current liabilities). So, current ratio = $ 24,625 (millions) / $22,980 (millions) = 1.07 (rounded). The current ratio is over 1, so that is a good thing.
Finally, I want to look into the acid-test ratio for Amazon, which will tell me how adept the company is at bill paying. The acid-test ratio formula is as follows: acid-test ratio = (cash + accounts receivable) / current liabilities; ($8,658 (millions)+ $4,767 (millions)) / $22,980 (millions) = $13,425 (millions) / $22,980 (millions) = .58 (rounded). As an investor, I would have liked to see a higher acid-test ratio score (All data found to calculate working capital, current ratio, and the acid-test ratio can be found on Amazon 49). In terms of debt-paying ability, the higher the current ratio, the better. Yet an overly high current ratio sometimes can be a sign that the company has not made the most productive use of its assets. In recent years many large, well-managed corporations have made efforts to streamline operations by reducing their current ratios to the 1.0–1.5 range or even lower, with corresponding reductions in their acid-test ratios. So what motivates this practice? It’s clear that investments in cash, accounts receivable, and inventories are being minimized because these current assets tend to be the least productive assets employed by the company
(Marshall 83). Next, I will give an overview of the activity measures for the 2013 year. First will be total asset turnover. Total asset turnover = sales / average total assets = $75,452 (millions) / $40,159 (millions) = 1.88 total asset turnover ratio. Asset turnover is usually about 1.0 to 1.5 but often ranges as high as 3.0,