Amazon.com Financial Statement and Financial Ratios Analysis

Amazon.com: Brief Summary

Amazon.com's headquarters is located in Seattle, Washington.  The company competes in the consumer cyclical sector—specifically, the internet retail segment.  At present, the organization employs approximately 1.2 million individuals.  Amazon.com, Inc. is a retail seller of products and subscriptions to consumers and commercial businesses throughout North America as well as on an international basis.  Amazon.com has three main business segments which would be North America, International, and Amazon Web Services (AWS).  The firm sells products and content purchased for resale as well as offers a product line of its own, which includes Kindle, Fire tablets, Fire TVs, Rings, Echo, and other devices.  

From a financial analysis perspective, Amazon.com stock is currently trading at $2799.72 as of January 26^th, 2022.  The organization’s market Is $1.4 trillion.  The organization’s beta currently sits at 1.1.  This indicates that the organization is slightly riskier as compared to the overall market.  The company’s current stock range is between $2,707 and $3,773.  Based on our research, Amazon.com has yet to pay out dividends to shareholders.  This may indicate that the firm is still in the growth phase of its business cycle (1/22).

Amazon.com Financial Report Sources

Amazon.com 2021 Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by Paul Borosky, MBA., and owner of Quality Business Plan.  In this summarized report, the author researched Amazon.com 10k, Amazon.com 2019 10k annual report, Amazon's 2016 10k annual report, Amazon's 2020 10k annual report, and Amazon's 2014 10k annual report as the basis for information gathering.  Once all Amazon.com's 10k annual statements were collected, the author then inserted Amazon.com's income statement information and Amazon.com's balance sheet information into a customized financial template. 

 

Section 1: Amazon.com Income Statement Analyzed

In this section, I walk through a broad definition of what an income statement is and why it is important.  From this, I then discuss and define income statement line items, such as revenues, gross profits, etc., in detail.  After each line item is defined and discussed, I finally offer a summary analysis of Amazon.com’s important income statement line item trends in most cases.

Revenue Growth:

In the last five years, Amazon’s revenues have grown on average about 27.7% annually.  Its largest growth year in the last five years was 2020, which had a growth rate of 37.6%.  Unfortunately, in the last year, the organization’s growth has declined to 21.7%.  Granted, a 21% growth rate is pretty astounding.  But it is not as good as its previous year or in 2018.  Overall, an exceptional job was done.

Analyst Grade: A+

Amazon.com Summary Income Statement 2021
Column1	2021	2020	2019	2018	2017
Revenues	469,822	386,064	280,522	232,887	177,866
COGS	272,344	233,307	165,536	139,156	111,934
Gross Profit	197,478	152,757	114,986	93,731	65,932
SG&A	8,823	6,668	5,203	4,336	3,674
Depreciation	34,296	25,251	21,789	15,341	11,478
R & D	56,052	42,740	35,931	28,837	22,620
Other	-	-	-	-	-
Total Operating Expenses	444,943	363,165	265,981	220,466	173,760
EBIT	24,879	22,899	14,541	12,421	4,106
Other Income	-	-	-	-	-
Interest Expense	1,809	1,647	1,600	1,417	848
EBT	38,151	24,178	13,976	11,261	3,806
Taxes	4,791	2,863	2,374	1,197	769
Net Income	33,364	21,331	11,588	10,073	3,033

 

Section 2: Amazon.com Balance Sheet Analyzed

For Amazon.com's balance sheet, I again go through each important line item from the balance sheet.  In reviewing each line item, I will define Amazon.com’s balance sheet line item, such as cash, property, plant and equipment, and liabilities.  Next, I then offer an analysis of Amazon.com’s balance sheet's important line items.

Amazon.com Cash: 

Amazon’s cash holdings have continually increased from 2017, which was at $20.5 billion, to $42.1 billion in 2020.  Fortunately, the organization’s cash holding would decrease slightly to $36.2 billion in 2021.  This decrease may indicate that the organization is shifting its cash to other, more profitable areas of its business, such as short-term investments.  An excellent trend, if it holds and my assumption is correct.

Analyst Grade: A

Amazon.com Summary Balance Sheet 2021
Column1	2021	2020	2019	2018	2017
Cash	36,220	42,122	36,092	31,750	20,522
Short Term Investment	59,829	42,274	18,929	9,500	10,464
Account Receivable	32,891	24,542	20,816	16,677	13,164
Inventory	32,640	23,795	20,497	17,174	16,047
Other	-	-	-	-	-
Current Assets	161,580	132,733	96,334	75,101	60,197
Net PPE	160,281	113,114	72,705	61,797	48,866
Goodwill	15,371	15,017	14,754	14,548	13,350
Other	-	-	-	-	-
Total Assets	420,549	321,195	225,248	162,648	131,310
Accounts Payable	78,664	72,539	47,183	38,192	34,616
Accrued Expense	51,775	44,138	32,439	23,663	18,170
Accrued Taxes	-	-	-	-	-
Notes Payable	-	-	-	-	-
LT Debt - Current	-	-	-	-	-
Other	-		-	-	-
Total Current Liabilities	142,266	126,385	87,812	68,391	57,883
LT Debt	48,744	31,816	23,414	23,495	27,743
Other	-	-	-	-	-
Total Liabilities	282,304	227,791	163,188	119,099	103,601
Common Stock	55,543	42,870	33,663	26,796	21,394
Treasury	1,837	1,837	1,837	1,837	1,837
Retained Earnings	85,915	52,551	31,220	19,625	8,636
Other	-	-	-	-	-
Total Equity	138,245	93,404	62,060	43,549	27,709
Total Equity & Liability	420,549	321,195	225,248	162,648	131,310

 

Section 3: Amazon.com Financial Ratios Analyzed

For this final section, I have chosen about 12 different financial ratios.  I also review some important Amazon.com financial ratios. I first start with defining the financial ratio.  Next, I supply the financial formulas for calculating the specific ratio.  Finally, I offer a brief analysis of important financial ratios.

Amazon.com's Current Ratio:

Amazon’s current ratio in 2021 was 1.14, which is slightly above 1.0, which is the gold standard in finance.  This indicates that the organization is slightly mismanaging its short-term assets.  A better scenario would be to reduce its current ratio to about 1.0, if not slightly under.

Analyst Grade: B

Amazon.com's Total Asset Turnover:

In the last four years, Amazon’s total asset turnover has continually fallen from 1.4 in 2018 to 1.12 in 2021.  This means that the firm is generating fewer revenues using the total assets of the organization.  To mitigate this problem, the company could start paying out dividends to its shareholders.

Analyst Grade: C+