Amazon.com Inc. Financial Statements and Financial Ratios Analyzed from 2016 to 2020
Thanks for visiting my Amazon.com Financial Report page. On this page, you will be able to find preliminary information about Amazon.com's current financial performance as well as some historical track records and trends.
For a more detailed examination of Amazon.com's financial performance, please check out the "Financial Report". In this report, written by myself, Paul Borosky, MBA., Doctoral Candidate, and published author, you will find:
- Summarized income statement for the last 5 years.
- Summarized balance sheet for the last 5 years.
- Summary analysis by myself of important income statement, balance sheet, and financial ratio trends and other happenings.
- Five year’s worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
- Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
- Professional financial analysis tips provided in each section to help YOU conduct your OWN financial analysis!
- Each section includes an “in other words” segment. This is were I use plain English to explain concepts.
Enjoy the preliminary information and for a more detailed analysis, buy the financial report!
Sample Financial Report
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 sells its products on a global scale, with a heavy presence in the United States, Europe, Asia, and South America. Their main revenue generators focus on providing a virtual selling platform for sellers and buyers.
Amazon.com Financial Report Sources
Amazon.com 2020 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 2016 to 2020
In this section, I walk through a broad definition as to 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: Amazon ended 2016 with revenues of approximately $135.9 billion in revenues. In the next four years, Amazon would continually grow its revenues ending 2020 at $386.0 billion in sales. On average, this is a 30% annual growth rate. Mind-boggling, to say the least. As compared to other multinational organizations, this is by far the highest sustained growth rate I've seen. Unfortunately, this growth rate may be short-lived due to new competition from brick and mortar companies like Walmart and Target.
Amazon ended 2015 with $107 billion in sales. As of 2019, the organization more than double its sales to approximately $250 billion. This is an annual growth rate of approximately 27%. As the organization matures, investors should expect this growth rate to level off.
Cost of Goods Sold: Amazon’s cost of goods has ranged from 59% of sales to 67% of sales. The 59% of sales were registered in 2019. This shows that the company is doing a better job of negotiating prices for raw materials. Also, such a good showing in this line item may be a result of Amazon passing on raw material cost increases to their customers through higher prices. Regardless, the organization seems to have found a functional business model that allows for continued improvement in the cost of goods area.
Amazon.com Income Statement 2020
|R & D||42,740||35,931||28,837||22,620||16,085|
Section 2: Amazon.com Balance Sheet Analyzed 2016 to 2020
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 important line items.
Cash: Amazon's cash position ended 2016 at $19.3 billion. In the next several years, the organization would substantially increase its cash position ending 2020 at $42.1 billion. As compared to sales, the organization's cash position in 2016 was 14.2%. As of 2020, the organization's cash position as compared to sales fell to 10.9%. In just reviewing the company's cash position, it seems like $42.1 billion is substantial and may be a neglect of optimization for cash handling by the executive team. However, in comparing it to revenues, the firm is actually reducing its cash position as compared to sales. From this insight, holding substantial cash is more than acceptable.
Amazon’s cash position ended in 2015 at $15.8 billion. In the next five years, the company would more than double this number to approximately $36 billion. Such a huge amount of cash shows that the company is not fully optimizing this asset. A better strategy would be to increase its short-term investments. Or, even better, the organization could use some of the cash to buy back stocks. Finally, the organization could even start paying out dividends if no other operational opportunities are available. Regardless, holding so much cash is a poor decision on so many levels.
Short-term Investments: The company ended 2015 with $3.9 billion in short-term investments. In the next five years, the firm would grow this line item to $18.9 billion. This is a substantial increase. However, because the company has such a huge stockpile of cash, its short-term investments should be significantly higher.
Amazon.com Summary Balance Sheet 2020
|Short Term Investment||42,274||18,929||9,500||10,464||6,647|
|LT Debt - Current||-||-||-||-||-|
|Total Current Liabilities||126,385||87,812||68,391||57,883||43,816|
|Total Equity & Liability||321,195||225,248||162,648||131,310||83,402|
Section 3: Amazon.com Financial Ratios Analyzed 2016 to 2020
For this final section, I have chosen about 12 different financial ratios. I also review some important Amazon.com's 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 ended 2016 at 1.04. In the next three years, the organization's current ratio would increase slightly to 1.1 ending in 2019. However, the organization's current ratio would slightly fall in 2020 to 1.05. In general, a current ratio of 1.0 is considered solvent. Amazon is well within an acceptable range of this target number. Also, it seems like Amazon goes through great pains to ensure their current ratio remains near 1.0. An excellent strategy for the organization.
Amazon’s current ratio in 2019 was 1.1. This is the same number as its current ratio for 2018. This indicates that the company has enough current assets to cover its current liabilities. As a result, the company has little to fear from short-term insolvency.
Amazon.com's Total Asset Turnover:
Amazon's total asset turnover in 2016 was 1.63. In the next five years, the organization's total asset turnover would continually decline, ending 2020 at 1.2. This indicates that the organization is producing fewer revenues with more assets held. In other words, the company is becoming less efficient in the use of its assets from the perspective of revenue-generating capabilities. A better strategy would be for the organization to divest assets that are underutilized, such as fixed assets. By doing this, the firm will be able to improve its asset turnover or better utilize assets under management.
Amazon's total asset turnover in 2015 was 1.64. As of 2019, this ratio fell to 1.25. This indicates that the company is not utilizing its assets as efficiently as in previous years. To mitigate this issue, Amazon needs to do something with its cash. This idle asset is not making them any money. As stated previously, they can buy back stocks or pay out dividends. Either action should improve its total asset turnover ratio.
Amazon.com's Return on Equity:
The company’s return on equity has increased from 4.5% in 2015 to 18.7% in 2019. Their return on equity could be substantially higher if the organization takes on more debt. By using debt for future growth, not only is the firm making money on borrowed money, but they are also able to return some of the funds to investors or conduct a stock buyback.
Amazon.com's Debt Ratio:
Amazon’s debt ratio in 2015 was 12.6%. In 2019, their debt ratio declined to 10.4%. This decline, from an investor’s perspective, is unacceptable. The company should be taking on more debt. This is because of its inherent benefits. By taking on debt, the company may write off interest payments for tax purposes. Also, Amazon could use debt funding to buy back stocks. Not only would this lead to higher stock prices for shareholders, but it would also improve the company’s return on equity ratio.
Amazon.com Liquidity Ratios 2020
|Net Working Capital||(26,218)||(2,217)|
Amazon.com Asset Utilization 2020
|Total Asset Turnover||1.20||1.25|
|Fixed Asset Turnover||3.41||3.86|
|Days Sales Outstanding||23.20||27.08|
|Accounts Receivable Turnover||15.73||13.48|
|Working Capital Turnover||(14.73)||(126.53)|
|Average Days Inventory||0.04||0.04|
|Average Days Payable||0.01||0.02|
Amazon.com Profitability Ratios 2020
|Return on Assets||6.64%||5.14%|
|Return on Equity||22.84%||18.67%|
|Net Profit Margin||5.53%||4.13%|
|Gross Profit Margin||60.43%||40.99%|
|Operating Profit Margin||5.93%||5.18%|
|Basic Earning Power||7.13%||6.46%|
Amazon.com Long-term Debt 2020
|Times Interest Earned||13.90||9.09|