Amazon.com Inc. Financial Statements and Financial Ratios Analyzed from 2015 to 2019
Amazon.com 2019 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 book, the author researched Amazon.com 10k, Amazon.com 2017 10k annual report, Amazon's 2016 10k annual report, Amazon's 2015 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.
Amazon.com: Brief Summary
Amazon.com's stock price, in February 2020, was at $2,155.67. The previous year, its stock price was $1,601. This is a growth rate annually of 34.65%. From an investor’s perspective, this growth rate well exceeds overall market returns.
Amazon.com has not paid out dividends in the last five years. The zero dividend payment policy may be due to the company’s need for internal growth. However, over the next several years, investors should expect some type of dividends to be paid once the organization reaches the mature phase of their business cycle.
Amazon.com Financial Statements and Ratios
Page Count: 90
Table of Contents
- Disclaimer 3
- Acknowledgments 4
- Forward 5
- About the Author 7
- Company Summary 8
- Financial Statement Introduction 11
- Income Statement 12
- Amazon.com’s Income Statement – Summary Analysis 13
- Income Statement Discussion 13
- Balance Sheet 24
- Balance Sheet – Summary Analysis 25
- Balance Sheet Discussion 25
- Financial Ratios 45
- Liquidity Ratios 46
- Liquidity Ratios - Summary Analysis 46
- Liquidity Ratios Discussion 47
- Current Ratio 47
- Quick Ratio 48
- Cash Ratio 49
- Other Liquidity Ratios 50
- Net Operating Working Capital 50
- Asset Ratios 52
- Asset Utilization Ratios - Summary Analysis 53
- Asset Utilization Ratios Discussion 53
- Total Asset Turnover 53
- Fixed Asset Turnover 54
- Days Sales Outstanding 55
- Inventory Turnover 56
- Accounts Receivable Turnover 57
- Accounts Payable Turnover 58
- Other Asset Ratio Calculations 59
- Working Capital Turnover 59
- Average Days in Inventory 60
- Average Days Payable 60
- Profitability Ratios 61
- Profitability Ratios - Summary Analysis 62
- Profitability Ratios Discussion 62
- Return on Assets (ROA) 62
- Return on Equity (ROE) 63
- Profit Margin 64
- Gross Profit Margin 65
- Operating Profit Margin 66
- Basic Earnings Power 67
- ROCE 68
- Capital Employed 68
- Debt Ratios 69
- Amazon.com’s Debt Ratios - Summary Analysis 69
- Debt Ratios Discussion 70
- Long-Term Debt Ratio 70
- Debt to Equity Ratio 71
- Times Interest Earned 72
- WACC 74
- Book Value of WACC 74
- Free Cash Flow (FCF) 76
- Amazon.com’s Free Cash Flows – 2015 - 2019 76
- Free Cash Flows – 5 Year Projections 77
- Income Statement – Projections for 5 years 78
- Income Statement – 5 Year Projections 78
- Balance Sheet – Projections for 5 years 80
- Balance Sheet – 5 Year Projections 80
- Company Valuation and Intrinsic Stock Price 83
- Appendix 1: Summarized Income Statement 84
- Appendix 2: Income Statement – Percent of Sales 85
- Appendix 3: Income Statement – Year over Year Growth 86
- Appendix 4: Summarized Balance Sheet 87
- Appendix 5: Balance Sheet as Percent of Total Assets 89
- Appendix 6: Summarized Financial Ratios 90
Section 1: Amazon.com Income Statement Analyzed 2015 to 2019
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 from 2015 to 2019, in most cases.
Revenue Growth: 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's Income Statement 2019
|R & D||35,931||28,837||22,620||16,085||12,540|
Section 2: Amazon.com Balance Sheet Analyzed 2015 to 2019
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 between 2015 to 2019. Next, I then offer an analysis of Amazon.com’s balance sheet important line items.
Cash: 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's Summary Balance Sheet 2019
|Short Term Investment||18,929||9,500||10,464||6,647||3,918|
|LT Debt - Current||-||-||-||-||-|
|Total Current Liabilities||87,812||68,391||57,883||43,816||33,887|
|Total Equity & Liability||225,248||162,648||131,310||83,402||65,444|
Section 3: Amazon.com Financial Ratios Analyzed 2015 to 2019
For this final section, I have chosen about 16 different financial ratios to calculate for Amazon.com from 2015 to 2019. 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.
Current Ratio: 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.
Total Asset Turnover: 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.
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.
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's Liquidity Ratios 2019
|Net Working Capital||(2,217)||3,746|
Amazon.com Asset Utilization 2019
|Total Asset Turnover||1.25||1.43|
|Fixed Asset Turnover||2.91||3.77|
|Days Sales Outstanding||27.08||26.14|
|Accounts Receivable Turnover||13.48||13.96|
|Working Capital Turnover||(126.53)||62.17|
|Average Days Inventory||0.04||0.04|
|Average Days Payable||0.02||0.02||-||-||-|
Amazon.com Profitability Ratios 2019
|Return on Assets||5.14%||6.19%|
|Return on Equity||18.67%||23.13%|
|Net Profit Margin||4.13%||4.33%|
|Gross Profit Margin||40.99%||40.25%|
|Operating Profit Margin||5.18%||5.33%|
|Basic Earning Power||6.46%||7.64%|
Amazon.com Long-term Debt 2019
|Times Interest Earned||9.09||8.77|