FIRE 371-03

EDUARDO CARDOSO MUNIZ GROUP 5

AMAZON.COM INC
1. Overview
Amazon.com, Inc. (Amazon.com), incorporated on May 28, 1996, is an e-commerce company and the
largest Internet company in the US. The Company offers a range of products and services through its Websites.
The Companys products, offered through consumer-facing Websites, include merchandise and content that the
Company purchases for resale from vendors and those offered by third-party sellers. The Company offers its own
products as well as third-party products across various categories, through its retail Websites and through its
mobile Websites and applications. It also manufactures and sells electronic devices, including Kindle e-readers,
Fire tablets, Fire TVs, Echo and Fire phones.
Amazon.com operates in two segments: North America and International. The North America segment
of the Company focuses on retail sales earned through North America-focused Websites. The International
segment focuses on the Companys operations done through its international Websites.
In the media segment, Amazon competes with eBay, Netflix, Time Warner Cable, Apple (iTunes),
Google (Play Store) and Liberty Interactive. Amazon has several competitors in the electronics and general
merchandise segment, including Best Buy, Family Dollar, RadioShack, Staples, Target, Walmart, Sears, Big Lots,
Delia and Systemacs. In the electronics and general merchandise segment online competition includes Alibaba
Group, LightInTheBox Holding Co., Overshock.com, PCM, Vipshop Holdings, JD.com, Wayfair Inc. and Zulily.
In the other operating segment, Amazon competes with several worlds largest companies including CDW, PC
Connection, Insight Enterprise, Google, Oracle, Accenture and Citrix Systems.
2. Analysis
Firstly, the evaluation of the asset turnover ratios, such as accounts receivable turnover and inventory
turnover, to determinate how efficiently assets are being utilized by the business. During the period from 2012 to
2014, the Receivables turnover ratios were 23.50, 24.82 and 26.97 and the Days sales outstanding in A/R ratios
were 15.53, 14.71 and 13.54. The decrease in this last ratio means that the company is taking less days to collect
revenue from credit sales. The total assets turnover ratio were 1.88, 1.85 and 1.63, it has decreased, but it is higher
than 1, which indicates that the company is using its assets more efficiently. The Days sales inventory ratios
were 49.72, 52.34 and 51.21, which indicates ups and downs, but with lower amplitude. The inventory remains
in the warehouse for a stable period.
The Profit margin on sales ratio has been stable (-.06%, .37% and -.27%) with narrow margins, for
2014 period every $1 sale contributed -0.06 cents towards the net profits of the business. The profitability ratios,
ROA, ROE and BEP, have decreased, which means that profitability is deteriorating. In the other hand, Amazon
has a lower capital intensity, it generates more revenue using less assets.

FIRE 371-03

EDUARDO CARDOSO MUNIZ GROUP 5

Amazon.com has been having a low debt ratio (.75, .76 and .80) since 2012, the companys assets are
sufficient to meet its obligation, while it is not very low, which is good because it doesnt indicate underutilization
of resources and restricted growth. The Equity Multiplier has increased (3.97, 4.12 and 5.07), the higher the ration
the lower the financial leverage. The TIE ratio in 2014 was .62, which is unfavorable. Amazon has debt-to-equity
ratio higher than 1.00, more assets are financed by debt that those financed by money of shareholders, indicating
higher risk.
The current ratio has been stable through these years (1.12, 1.07 and 1.12) and greater than 1.00,
indicating that the companys current assets are more than current liabilities and the company should not face any
liquidity problem. The quick ratio has been stable too (.80, .75 and .82), but less than 1.00, which indicates that
the company would not be able to repay all its debts by using its most liquid assets. The cash ratio has stayed
below 1.00, which is appropriate for a business.
The market-to-book ratio indicates that the stock is undervalued because it is above 1.00. Moving in
the same direction, price-to-cash-flow ratio has decreased which means that stock is in a process of
undervaluation.
3. Stock Price

December 31, 2012 Stock price closed in 250.87;

December 31, 2013 Stock price closed in 398.79;

December 31, 2014 Stock price closed in 310.35.

Chart 1. Stock price movement.

Source: Yahoo Finance.

FIRE 371-03

EDUARDO CARDOSO MUNIZ GROUP 5

According to Chart 1, the stock price increased from 2012 to the beginning of 2014. During 2014 year,
the stock price decreased. In the beginning of this year the stock price has started to increase again, the closed
price was 512.89 on August 31st.
4. Conclusion
Amazon.com, Inc. has been investing a lot of money in many things, such as, Amazons tablet line, the
TV show Transparent, Fire TV, the grocery delivery service expanded to Brooklyn and Amazon bought Twitch,
a popular streaming site. These expenses have resulted in negative net income, it translates a loss on paper but
actually strengthens the enterprise for the long term. And the market value ratios indicate undervalue stocks. With
these facts on hands, the recommendation is to buy Amazons stocks.
5. References
[1] Research Inside;
[2] Yahoo Finance;
[3] Reuters;
[4] NY Times;
[5] Investopedia.

Balance Sheets
Cash
Accounts receivable
Inventories
Total current assets
Total assets
Accounts payable
Notes payable
Total current liabilities
Long-term debt
Total Liabilities
Common stock
Retained earnings
Total Equity
Total liabilities and equity

2014
$17,416
$3,300
$8,299
$31,327
$54,505
$16,459
$0
$28,089
$12,489
$43,764
$5
$1,438
$10,741
$54,505

2013
$12,447
$3,000
$7,411
$24,625
$40,159
$15,133
$0
$22,980
$5,181
$30,413
$5
$2,005
$9,746
$40,159

Number of shares outstanding

Stock Price

465.00
$310.35

459.00
$398.79

2014
$88,988
$59,152
$4,746
$130
$210
-$241

2013
$74,452
$51,681
$3,253
$691
$141
$274

$0
-$241

$0
$274

Income Statements
Sales
Cost of goods sold
Depreciation
EBIT
Interest Expense
Net income
Cash dividends
Addition to Retained Earnings

AMAZON.COM, INC.
Ratios
2012
Liquidity
$11,448
Current Ratio
$2,600
Quick Ratio
$6,031
Cash Ratio
$21,296
Debt Management
$32,555
Debt/Equity Ratio
$13,318
Debt Ratio
$0
Equity Multiplier
$19,002
Time Interest Earned
$3,830
Asset Management
$24,365
Total Assets Turnover
$5
Inventory Turnover
$1,677
Days sales in inventory
$8,192
Receivables turnover
$32,555
Days Sales Outstanding in A/R
Capital intensity
454.00
Profitability
$250.87
Profit Margin on Sales
Return on Assets
Return on Equity
2012
Basic Earning Power
$61,093
Market Value
$44,271
P/E Ratio
$2,159
Price/Cash Flow ratio
$672
Book Value per Share
$92
Market-to-Book Ratio
-$39
$0
-$39

2014

2013

2012

1.12
0.82
0.62

1.07
0.75
0.54

1.12
0.80
0.60

4.07
0.80
5.07
0.62

3.12
0.76
4.12
4.90

2.97
0.75
3.97
7.30

1.63
7.13
51.21
26.97
13.54
0.61

1.85
6.97
52.34
24.82
14.71
0.54

1.88
7.34
49.72
23.50
15.53
0.53

-0.27%
-0.44%
-2.24%
0.24%

0.37%
0.68%
2.81%
1.72%

-0.06%
-0.12%
-0.48%
2.06%

-598.81
32.03
23.10
13.44

668.05
51.90
21.23
18.78

-2920.38
53.72
18.04
13.90

Balance Sheets
2014
17416
3300
8299
31327
54505
16459
0
28089
12489
43764
5
1438
10741
54505

=B3-1
12447
3000
7411
24625
40159
15133
0
22980
5181
30413
5
2005
9746
40159

=C3-1
11448
2600
6031
21296
32555
13318
0
19002
3830
24365
5
1677
8192
32555

Number of shares outstanding 465

Stock Price
310.35

459
398.79

454
250.87

=C3
74452
51681
3253
691
141
274

=D3
61093
44271
2159
672
92
-39

Cash
Accounts receivable
Inventories
Total current assets
Total assets
Accounts payable
Notes payable
Total current liabilities
Long-term debt
Total Liabilities
Common stock
Retained earnings
Total Equity
Total liabilities and equity

Income Statements
Sales
Cost of goods sold
Depreciation
EBIT
Interest Expense
Net income

=B3
88988
59152
4746
130
210
-241

Cash dividends
Addition to Retained Earnings

0
0
0
=B29-B31 =C29-C31 =D29-D31

AMAZON.COM, INC.
Ratios
Liquidity
Current Ratio
Quick Ratio
Cash Ratio
Debt Management
Debt/Equity Ratio
Debt Ratio
Equity Multiplier
Time Interest Earned
Asset Management
Total Assets Turnover
Inventory Turnover
Days sales in inventory
Receivables turnover
Days Sales Outstanding in A/R
Capital intensity
Profitability
Profit Margin on Sales
Return on Assets
Return on Equity
Basic Earning Power
Market Value
P/E Ratio
Price/Cash Flow ratio
Book Value per Share
Market-to-Book Ratio

=B3

=C3

=D3

=B7/B11
=(B7-B6)/B11
=B4/B11

=C7/C11
=(C7-C6)/C11
=C4/C11

=D7/D11
=(D7-D6)/D11
=D4/D11

=B13/B16
=B13/B8
=B8/B16
=B27/B28

=C13/C16
=C13/C8
=C8/C16
=C27/C28

=D13/D16
=D13/D8
=D8/D16
=D27/D28

=B24/B8
=B25/B6
=365/G14
=B24/B5
=B5/(B24/365)
=B8/B24

=C24/C8
=C25/C6
=365/H14
=C24/C5
=C5/(C24/365)
=C8/C24

=D24/D8
=D25/D6
=365/I14
=D24/D5
=D5/(D24/365)
=D8/D24

=B29/B24
=B29/B8
=B29/B16
=B27/B8

=C29/C24
=C29/C8
=C29/C16
=C27/C8

=D29/D24
=D29/D8
=D29/D16
=D27/D8

=B20/(B29/B19)
=B20/((B29+B26)/B19)
=B16/B19
=B20/G27

=C20/(C29/C19)
=C20/((C29+C26)/C19)
=C16/C19
=C20/H27

=D20/(D29/D19)
=D20/((D29+D26)/D19)
=D16/D19
=D20/I27