Amazon.com Inc.
Description
Amazon.com Inc. is a worldwide online retailer company that has an international presence. It was started in 1994 in the state of Washington and later reincorporated in Delaware in 1996. The operations of Amazon are premised on retail through online orders and follow up by physical deliveries for goods and online service delivery for services transferable online. Amazon.com Inc. specializes in four broad categories of consumers; retail consumers, sellers, content creators and enterprises. The company has a number of services aimed at diversifying their investment through an expansive portfolio. Other than retail sales, revenue generating sources include marketing and promotional services inclusive of credit branded card agreements and online advertising. The success of the company is premised mainly on two major factors; technology and personnel. The online retail which they serve in is highly competitive necessitating a need for efficiency if not excellence. At Amazon.com Inc. the personnel appreciate the fact that the customer is the king. The fact that customers can get alternative service providers with ease has overtime piled pressure on Amazon.com Inc. to deliver. It is also imperative to note that Amazon.com Inc. started out as an online bookseller. Today, it has spread its tentacles into almost every single commodity that can be sold. This shows the dynamism and resilience of Amazon.com Inc. in the business circles. The company has consistently subscribed to the fact that businesses ought to be ready to engage in any line in as long as it is profitable. This buoyed by a diversified portfolio places the company among the list of business giants worth evaluation and observation in the business circle. Finally, Amazon.com Inc. are credited with facilitating the spread of globalization as their international presence enables spread of the products throughout the world.
Statement of acceptance
We, a registered public auditing firm, for the reason mentioned below accept Amazon.com Inc. as our client and we undertake to engage the company as our audit client guided by the Public Company Auditing Oversight Auditing Board provisions, Generally Accepted Accounting Standards and any other provisions applicable under the law of the land and the auditing principles.
It is our presentation that the company as per the accompanying consolidated statement of accounts for the financial year ended 31 January 2013, has been concomitant to the standards as set out in the Public Company Accounting Oversight Board (United States of America). We, however, take this early opportunity to clarify that financial statements are the responsibility of company’s management. Our responsibility remain merely to express an opinion on the true and fair value of the financial statements. Our audit provides a reasonable basis for opinion thereof.
Introductory paragraph
Amazon.com Inc. is a public company that offers a wide range of products in the entire world. Amazon.com Inc. is not a manufacturer. Rather, it retails products. The beauty with Amazon.com Inc. retail business lies in the reliance on technology. The system of sales and service production is heavily influenced by information technology and the worldwide web. Amazon.com Inc. allows orders to be placed by its customers from any country. Although they mainly deal with countries in which they maintain a physical presence, Amazon.com Inc. also make deliveries to countries in which they do not have a physical presence. This fact makes the company able to provide services to anybody in the world. Their customers are loyal because they are efficient and reliable. Indeed, in the modern world with increased white collar crime including cybercrime, people approach online sales and purchases cautiously. Amazon.com Inc. has gained the confidence of its customers and endeavour on a daily basis to maintain it. In addition, it continues to make acquisitions, enter into agreements and settle on business ideas that favour it and position the firm strategically for any opportunities in the business arena.
Independent Status of Board of Directors
Amazon.com Inc. has a Board of Directors constituted of nine members drawn from a diverse background of business, legal, political and academic fields. Only one member of the board of directors is a full time employee of Amazon.com Inc. Consequently, eight out of the nine members of the board of directors would be found and certified as independent in accordance with the Securities and Exchanges Commission rules. In addition, the board of directors’ diversity ensures it makes informed decisions which are as analytical and accommodative as the diversities of the members would facilitate. The following is a list of five members of the board without following any order and their full time employers. Note that the Chairman is also the chief executive officer and is the only member of the board who works full time in Amazon.com Inc.
However, the board of directors should be extended to take into account members from across the globe. While Amazon.com Inc. remains an international company by all accounts, its board of directors draws membership only from American citizens who also happen to be residents of America. Today, with increased globalization, an inclusive board would score on many accounts.
Audit Committee
All members of the Audit Committee are independent. The independence is in line with the company belief in the provisions and recommendations of Sarbanes Oxley Act and other general auditing principles. The audit committee is composed of three members who are non-executive directors. It is chaired by Thomas Ryder, who also sits in the board of directors.
Financial Statement Form 8 k Filing
The latest form 8k was submitted on the 26th of November 2012. It was in satisfaction of the rules in accordance to the requirements of the Securities and Exchanges Act, 1934. The attached files to the form 8k included the following: an indenture, an officer’s certificate, an opinion of Gibson, Dunn and Crutcher LLP, underwriting agreement, among other statements. The main item of submission entailed the aggregate public offering price of notes worth $ 2.983 billion. In addition, the exhibits and financial statements completed the list of items. This was in full satisfaction of the law. It confirms that Amazon.com Inc. is conformist of the law.
Financial Ratios for Amazon.com Inc. and Barnes and Nobles Inc.
Interpretation and Analysis of the Ratios
Gross margin – The gross margin shows how the company is performing in terms of profits. It indicates the gross profit made as a percentage of sales and is an indicator of the success of the business in terms of the sales revenue. The rival performs better at 26.80% compared to Amazon.com Inc.’s performance.
Operating margin percentage – This ratio gives the margin after incurring the expenses. It indicates the effect of operational expenses on the profits of the company. It can be used comparatively with the gross margin to determine the effect of expenses on the profits. This is because one comes before deduction of expenses while the other employs the results after deduction. Amazon.com Inc. currently stands in a better position as compared to Barnes and Nobles Inc. This indicates that Barnes is likely incurring more expenses that Amazon.com Inc.
Earning Before Tax Margin – This shows the net profit the company makes before the taxation effect is applied. It indicates the earnings net of any expenses that the company incurs. The difference between the EBTM and Operating margin percentage is that the latter only takes into account the operating expenses. That is expenses incurred in relation to business operations. However, the former considers all expenses whether operational or non- operational. The EBTM can be used to indicate the level of expense the company incurs if applied in comparison to the operating margin. In this case, although Amazon.com Inc. shows a larger rate, the range between its EBTM and the operations margin is wider compared to the range of the same in Barnes and Nobles Inc.. This shows the rival incurs more expenses as compared to Amazon.com.
Net Margin – this shows the final profit as a percentage of sales net of all possible expenses including taxation. It shows the effect of tax on the earning and would be essential in examining methods of tax avoidance. It should be noted that net margin only makes sense when applied in connection to the EBTM. The rival company stands at 0.97%, which is some percentages more than double that of Amazon.com Inc. This shows that the company has more sales volumes, profits and pays more taxes as compared to Walmart Inc.
Asset Turnover – This shows the extent to which the annual turnover cover the assets. It shows the extent to which the value of sales can cover the value of total assets. Asset turnover is shown in times. This indicated the number of times the value of turnover can cover assets. It is used as profitability measure to gauge the extent of the sales to the value of the assets.
The rival company’s asset turnover is lower at 1.40 times as opposed to Amazon.com’s 2.11%. This indicates a better profitability performance by Amazon.com.
Return on Assets– this shows the extent to which the profit incurred can cover the assets invested. It shows the profitability in terms of tied up assets in relation to the profits earned. Amazon.com’s return on asset is lower at 1.13% as compared to Barnes and Nobles’ 1, 87. This indicates that Barnes and Noble is making better use of its assets as compared to Target.
Financial Leverage ratio – this ratio indicates the extent of debt in the capital structure of the company. The higher the leverage ratio, the higher the debt level. Debt level not only shows the debt in capital structure, it also indicates the liquidity position of the company as well as communicates the degree of independence of the company. This is because a highly leveraged company usually is restricted on investment activities due to covenants signed. In addition, leveraging enables shareholder enjoy their equity as they pay lesser interest rates on the debt capital and enjoy the surplus capital. Barnes and Noble Company is more levered at 5.04%.
Return on Equity – This is the ratio that strikes the investor’s mind on the surface. It shows the rates of return on the equity in the concern. The higher the return, the more the shareholder’s wealth is maximized. Amazon.com Inc. has a lower return on equity as compared to Barnes and Noble Inc. This makes it the latter a better investment option for investors.
Return on Invested Capital – this shows the ratio of return on the capital invested which is a combination of equity capital and borrowed capital. It hence shows the extent to which the investment in terms of capital is being returned. At 0.97%, Amazon.com Inc. offers a better return on capital employed as compared to Nobles and Barnes Inc.
Earnings Per Share – This ratio shows the amount of earnings in the concern that accrue to shareholders per share. It is essential in determining the growth of one’s investment denoted in units of shares. Amazon.com Inc. offers more returns at 1.12.
Receivables Turnover – This ratio shows the level of receivables payment to credit sales in number of days.A lower the number of days shows that debtors pay promptly while longer days shows that debtors delay in payments. This would be essential in determining the liquidity position of the firm. Barnes and Nobles Inc. is longer at 58.98 days compared to the rival’s 20.59 days. The rival, therefore, stand out to be more liquid at any given time.
References
Amazon.com Inc. (2012, November). Amazon.com Inc. Form 8K. The Wall Street Journal. Retrieved from http://www.faqs.org/sec-filings/121129/AMAZON-COM-INC_8-K/
Amazon.com Inc. (2013). Amazon.com Inc. 2012 Annual Report. Washington: Amazon.com Inc.
Barnes and Nobles Inc. (2013). Barnes and Nobles Inc. Annual Report 2012. New York: Barnes and Nobles Inc.
Garrett, G. (2007). The Causes of Globalization. International Encyclopedia of Politcal Science, 1(2), 941-991.
Kreitner, R. (2008). Management. New York: Cengage Learning.
Lamba, T. (2009). Role of technology in Globalization with to Business Continuity. Global Journal of Enterprise Information System, 1(2), 1-13.
Trachtenberg, J. A. (2013). B&N Aims To Whittle Its Stores For Years. Wall Street Journal. Retrieved from http://online.wsj.com/article/SB10001424127887323854904578264400822084708.html
