AMAZON. COM
Financial Analysis
Amazon.com
Financial statement is the main source of the data that allows to assess the financial health of company. This is important as for external (potential investors, counteragents) as for internal (managers, shareholders) users. Ratio analysis is the important part of the assessment. However, this is not enough to make precise conclusions. The next crucial step is to compare the company’s ratios to industry benchmarks, because every industry has peculiarities in structure of assets, investment strategies etc., and what is appropriate for one industry might be the worrying sign in another one. For example, investment projects in pharmacy are usually long-term(10 + years) and large ($1 million and more) because creating new drug takes long time and investments. Therefore the leverage, especially long-term debt ratio is higher than in other industries, such as retail. Therefore, analysis of the company in isolation is not quite sufficient.
Therefore, the ratios calculated for Amazon.com has been compared to industry benchmarks:
Source for benchmarks: NYISternEdu
Thus, the comparison shows that the company is less profitable that industry average, and the leverage is significantly higher. The liquidity is close to average rates, and stock performance ratios and interest coverage are higher than average. This means, that despite the relatively weaker financial health, the demand for the company’s stock is higher, that is positive sign.
Moreover, the company’s financial statements are appropriate both legally and ethically. The company is constantly publishes the information that might be significant to investors and corporate governance information, including the Code of Business Conduct and Ethics.
Reference list
Tarasoff, J., & McCormack, J. (2013). How to Create Value Without Earnings: The Case of Amazon. Journal Of Applied Corporate Finance, 25(3), 39-43.
Banerjee, A., & De, A. (2015). Capital Structure Decisions and Its Impact on Dividend Payout Ratio during the Pre- and Post-period of Recession in Indian Scenario: An Empirical Study. Vision (09722629), 19(4), 366-377.
Vogelstein, F. (2002). Amazon's second act. Fortune, 146(4), 186-187.
