Amazon.com Financial Statement and Financial Ratios Analysis

Amazon.com: Concise Overview

Headquartered in Seattle, Washington, Amazon.com operates in the consumer cyclical sector, specifically within the internet retail segment.  With an extensive workforce of approximately 1.2 million employees, the company serves consumers and commercial businesses across North America and internationally.  Amazon.com comprises three primary business segments: North America, International, and Amazon Web Services (AWS).  The company retails products and subscriptions, resells external products, and offers its lines of devices such as Kindle, Fire tablets, Fire TVs, Rings, Echo, and more.

From a financial analysis perspective, as of January 26th, 2022, Amazon.com stock is trading at $2799.72.  The organization’s market capitalization is $1.4 trillion, and its beta value is currently 1.1, indicating a slightly higher risk than the overall market.  The stock’s range falls between $2,707 and $3,773.  It is noteworthy that, according to our research, Amazon.com has not yet issued dividends to its shareholders, suggesting the company is still in a growth phase.

Amazon.com Financial Report Sources

The report titled “Amazon.com 2021 Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was authored by Paul Borosky, MBA, and owner of Quality Business Plan.  To gather information for this summarized report, the author extensively researched Amazon.com’s 10k reports from various years, including Amazon.com’s 10k annual reports for 2019, 2016, 2020, and 2014.  These reports served as the primary sources for data collection and analysis.

Upon collecting Amazon.com’s 10k annual statements, the author utilized a customized financial template to organize and present the company’s income statement and balance sheet information.  The financial template allowed for a structured analysis of Amazon.com’s financial statements, facilitating the identification of key financial ratios and trends.

By combining comprehensive research, relevant 10k reports, and a customized financial template, the report provides readers with a detailed examination and analysis of Amazon.com’s financial statements and financial ratios over five years.  This comprehensive approach ensures a thorough understanding of Amazon.com’s financial performance and positions the report as a valuable resource for investors, analysts, and individuals seeking insights into the company’s financial health.

Section 1: Amazon.com Income Statement Analyzed

This section comprehensively explains the income statement, highlighting its significance in financial analysis.  The author defines and elaborates on specific line items within the income statement, including revenues, gross profits, and more, delving into the details of each item.  After thoroughly discussing and defining each line item, the author offers a summary analysis of the crucial income statement line item trends specific to Amazon.com in most instances.

By presenting a broad definition of the income statement and its importance, readers gain a fundamental understanding of this financial statement’s role.  The subsequent focus on individual line items allows a deeper comprehension of the components contributing to Amazon.com’s financial performance.  Through the summary analysis, readers are provided with an overview of the trends within the income statement, enabling them to grasp key patterns and changes over time.

Overall, this section provides readers with a comprehensive breakdown of the income statement, its line items, and a concise analysis of Amazon.com’s income statement trends.  This detailed approach equips individuals with the knowledge and insights to assess Amazon.com’s financial performance.

Importance of Understanding Amazon.com’s Income Statement for Financial Analysis

Understanding Amazon.com’s income statement is crucial for conducting a comprehensive financial analysis.  The income statement summarizes the company’s revenues, expenses, and net income over a specific period.  By analyzing Amazon.com’s income statement, analysts can assess its profitability, revenue growth, and cost management.  Key components such as gross profit margins, operating expenses, and net income reveal insights into the company’s operational efficiency and financial performance.  Understanding the income statement enables analysts to evaluate Amazon.com’s ability to generate profits, identify trends, and compare its performance to industry benchmarks.  This understanding is essential for making informed decisions, assessing investment potential, and evaluating the company’s financial viability.

Revenue Growth:

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

Analyst Grade: A+

Amazon.com 2023 Income Statement Summary
Column1	2023	2022	2021	2020	2019
Revenues	574,785	513,983	469,822	386,064	280,522
COGS	304,739	288,831	272,344	233,307	165,536
Gross Profit	270,046	225,152	197,478	152,757	114,986
SG&A	11,816	11,891	8,823	6,668	5,203
Depreciation	48,663	41,921	34,433	25,180	21,789
R & D	85,622	73,213	56,052	42,740	35,931
Other	-	-	-	-	-
Total Operating Expenses	537,933	501,735	444,943	363,165	265,981
EBIT	36,852	12,248	24,879	22,899	14,541
Other Income			-	-	-
Interest Expense	3,182	2,367	1,809	1,647	1,600
EBT	37,557	(5,936)	38,151	24,178	13,976
Taxes	7,120	3,217	4,791	2,863	2,374
Net Income	30,425	(2,722)	33,364	21,331	11,588

 

Section 2: Amazon.com Balance Sheet Analyzed

In the section dedicated to Amazon.com’s balance sheet, a thorough examination of each significant line item is conducted.  The author takes the time to define and elaborate on essential line items found within Amazon.com’s balance sheet, such as cash, property, plant and equipment, and liabilities.  Through these definitions, readers gain a clear understanding of the specific components that make up Amazon.com’s balance sheet.

Following the definition and discussion of each line item, the author analyzes the crucial line items within Amazon.com’s balance sheet.  This analysis offers valuable insights into the company’s financial position and strength.  By examining these essential line items, readers can evaluate the company’s liquidity, asset composition, and overall financial stability.

By addressing each line item individually and providing analysis, readers can comprehend the intricate details of Amazon.com’s balance sheet.  This approach enhances the reader’s ability to assess the company’s financial health and position.  The analysis serves as a valuable tool for understanding the significance of each line item and its impact on Amazon.com’s overall financial standing.

Importance of Understanding Amazon.com Balance Sheet for Financial Analysis

Understanding Amazon.com’s balance sheet is paramount for conducting a thorough financial analysis.  The balance sheet provides a snapshot of the company’s financial position at a specific time, showcasing its assets, liabilities, and shareholders’ equity.  By examining Amazon.com’s balance sheet, analysts can assess its liquidity, solvency, and overall financial health.  Key elements such as cash reserves, debt levels, and retained earnings offer insights into the company’s ability to meet short-term obligations, manage long-term debt, and fund future growth.  Understanding the balance sheet enables analysts to make informed decisions, identify potential risks, and evaluate Amazon.com’s financial stability and performance within the broader market.

Amazon.com Cash: 

Amazon’s cash holdings have continually increased from $20.5 billion in 2017 to $42.1 billion in 2020.  Fortunately, the organization’s cash holdings will 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.  If it holds, it is an excellent trend, and my assumption is correct.

Analyst Grade: A

Amazon.com 2023 Summary Balance Sheet
Column1	2023	2022	2021	2020	2019
Cash	73,387	53,888	36,220	42,122	36,092
Short Term Investment	13,393	16,138	59,829	42,274	18,929
Account Receivable	52,253	42,360	32,891	24,542	20,816
Inventory	33,318	34,405	32,640	23,795	20,497
Other			-	-	-
Current Assets	172,351	146,791	161,580	132,733	96,334
Net PPE	204,177	186,715	160,281	113,114	72,705
Goodwill	22,789	20,288	15,371	15,017	14,754
Other			-	-	-
Total Assets	527,854	462,675	420,549	321,195	225,248
Accounts Payable	84,981	79,600	78,664	72,539	47,183
Accrued Expense	64,709	62,566	51,775	44,138	32,439
Accrued Taxes	-	-	-	-	-
Notes Payable	-	-	-	-	-
LT Debt - Current	-	-	-	-	-
Other	-	-	-		-
Total Current Liabilities	164,917	155,393	142,266	126,385	87,812
LT Debt	58,314	67,150	48,744	31,816	23,414
Other			-	-	-
Total Liabilities	325,979	316,632	282,304	227,791	163,188
Common Stock	99,134	75,174	55,543	42,870	33,663
Treasury	7,837	7,837	1,837	1,837	1,837
Retained Earnings	113,618	83,193	85,915	52,551	31,220
Other		-	-	-	-
Total Equity	201,875	146,043	138,245	93,404	62,060
Total Equity & Liability	527,854	462,675	420,549	321,195	225,248

 

Section 3: Amazon.com Financial Ratios Analyzed

In the concluding section, the author selects approximately 12 different financial ratios and proceeds to review and discuss some essential financial ratios specific to Amazon.com.  The author begins by providing explicit definitions for each financial ratio, ensuring readers understand its purpose and relevance in financial analysis.  Next, the author supplies the financial formulas for calculating each specific ratio, equipping readers with the tools to perform their ratio analysis.

After presenting the definitions and formulas, a concise analysis of the critical financial ratios is provided.  This analysis offers valuable insights into Amazon.com’s financial performance and position of Amazon.com, allowing readers to evaluate the company’s profitability, liquidity, solvency, and other critical aspects of its financial health.  By assessing these essential financial ratios, readers gain a comprehensive overview of Amazon.com’s financial strength and efficiency.

This section offers readers a well-rounded understanding of the significance and implications of financial ratios on Amazon.com by addressing a range of financial ratios, providing formulas, and offering brief analyses.  The information presented enables readers to interpret and evaluate the company’s financial performance more confidently and precisely.

Amazon.com’s Current Ratio:

Amazon’s current ratio in 2021 was 1.14, slightly above 1.0, 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

Importance of Understanding Amazon.com’s current ratio

Understanding Amazon.com’s current ratio is paramount when conducting a company’s financial analysis.  The current ratio is a crucial liquidity ratio that measures a company’s ability to meet its short-term obligations with its current assets.  For Amazon.com, a high current ratio indicates a strong ability to cover short-term liabilities, signifying financial stability and solvency.  Conversely, a low current ratio may indicate potential liquidity challenges.  By examining Amazon.com’s current ratio, analysts can assess its liquidity position, evaluate its short-term financial health, and make informed decisions regarding investment strategies or financial planning.

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 the firm generates fewer revenues using the organization’s total assets.  To mitigate this problem, the company could start paying dividends to its shareholders.

Analyst Grade: C+

Importance of Understanding Amazon.com’s Totat Asset Turnover in Financial Analysis

Understanding Amazon.com’s total asset turnover is crucial when conducting a financial analysis for the company.  The total asset turnover ratio measures how efficiently a company utilizes its assets to generate sales.  For Amazon.com, a high total asset turnover ratio indicates effective asset management and the ability to generate substantial revenue from its asset base.  This ratio provides insights into the company’s operational efficiency, resource allocation, and productivity.  Analysts can use the total asset turnover ratio to assess Amazon.com’s ability to generate sales relative to its asset investment and compare it to industry benchmarks.  A higher ratio suggests better utilization of assets, while a lower ratio may indicate room for improvement in optimizing asset performance.