Amazon\u2019s Financial Statements<\/p>\n
Determine the net income for the current fiscal year (FY). Is this income up or down from the prior year?\u00a0Explain the relevance of changes in net income to investors.<\/strong><\/p>\n Amazon is a publicly traded US company that is founded by Jeff Bezos and originally started off as a book store and is now the largest internet retailer in the world. The net income for the company as of 12\/31\/2017 was $3,033,000 which is up from the previous year\u2019s net income of $2,371,000. This is a net income difference of $662,000 within 1 year of operation. \u00a0Net income tells investors how Amazon is deploying its assets and whether or not it is wise to invest in the company. Investors want to invest in a profitable business and changes in net income will influence their decision-making process.<\/p>\n Determine the ending balance in shareholders’ equity. Why would organizations such as labor unions be interested in this?<\/strong><\/p>\n Shareholders equity is the owners’ claim to assets. The ending balance of shareholders equity for 12\/31\/2017 is $27,709,000 and in the previous year was $19,285,000. Labor unions are interested in the stockholders\u2019 equity to sponsor proposals that would increase their negotiating leverage over corporate management .This leverage gives the labor union the ability to negotiate higher wages and benefits for the unionized employees (Kimmel et. al., 2013).<\/p>\n Determine the total value of assets.\u00a0Discuss the relevance of the total value of assets to potential creditors and why this is important.<\/strong><\/p>\n The total value of assets for Amazon is for 2017 was $60,197,000 and $45,781,000 in 2016. This information is important to creditors because creditors want to see that you have enough to provide financial stability when you take on new debt obligations.<\/p>\n Compute the return on assets. Discuss the relative profitability of the company based on your results.<\/strong><\/p>\n Return on assets indicates the amount of net income generated by each dollar of\u00a0assets. Thus, the higher the\u00a0return on assets, the more profitable the company (Kimmel et. al., 2013).\u00a0.<\/p>\n Return on assets = 5.7%<\/p>\n Total assets 12\/31\/17 $60,197,000<\/p>\n Total assets 12\/31\/16 $45,781,000<\/p>\n Average of total assets $ 52,989,000<\/p>\n Net income 3,033,000\/ Average of total assets 52,989,000 = ROA 5.7%<\/td>\n Amazon\u2019s return on assets is 5.7% which shows that the company is steadily growing and is proven to be profitable.<\/p>\n Compute the working capital and current ratio. Evaluate the relative liquidity of the company based on your results.<\/strong><\/p>\n Working capital is when\u00a0current\u00a0assets exceed\u00a0current\u00a0liabilities,\u00a0working\u00a0capital\u00a0is positive. When this occurs, there is a greater likelihood that the company will pay its liabilities. When\u00a0working\u00a0capital\u00a0is negative, a company might not be able to pay short\u2010term creditors,\u00a0and\u00a0the company might ultimately be forced into bankruptcy (Kimmel et. al., 2013).\u00a0. Amazons working capital is calculated as;<\/p>\n Working Capital: $2,314,000<\/p>\n Current assets: $60,197,000<\/p>\n Current liabilities: $57,883,000<\/p>\n Current assets $60,197,000 – Current liabilities $57,883,000 = $2,314,000<\/p>\n The current ratio measures the short\u2010term ability of the company to pay its maturing obligations\u00a0and\u00a0to meet unexpected needs for cash (Kimmel et. al., 2013).\u00a0. Amazons current ratio is calculated as;<\/p>\n Current Ratio= 1.04:1<\/p>\n Current assets: $60,197,000<\/p>\n Current liabilities: $57,883,000<\/p>\n Current assets $60,197,000\/ Current liabilities: $57,883,000 = Current Ratio 1.04:1<\/p>\n Amazon has a great overall liquidity, 2017\u00a0current\u00a0ratio\u00a0of 1.04:1 means that for every dollar of\u00a0current\u00a0liabilities, Amazon has $1.04 of\u00a0current\u00a0assets.<\/p>\n Compute the debt to assets ratio and the free cash flow for your company. Analyze the results and comment on the relative solvency of the company.<\/strong><\/p>\n The\u00a0debt to assets ratio\u00a0is one measure of solvency.\u00a0It measures the percentage of total financing provided by creditors rather than stockholders.\u00a0Debt\u00a0financing is more risky than equity financing because\u00a0debt\u00a0must be repaid at specific points in time, whether the company is performing well or not. Thus, the higher the percentage of\u00a0debt\u00a0financing, the riskier the company (Kimmel et. al., 2013).\u00a0. Amazons debt to asset ratio is calculated as;<\/p>\n Debt to asset = 96%<\/p>\n Current assets: $60,197,000<\/p>\n Current liabilities: $57,883,000Current liabilities $57,883,000 \/ Current assets $60,197,000 = 96%<\/p>\n Free cash flow\u00a0describes the net\u00a0cash\u00a0provided by operating activities after adjusting for capital expenditures and dividends paid (Kimmel et. al., 2013). Amazons free cash flow is calculated as;<\/p>\n Free Cash Flow = Amazon does not pay cash dividends<\/p>\n Net Cash provided by operating activities: 18,434,000<\/p>\n Capital Expenditures: ($11,955,000)<\/p>\n Cash dividends: History not disclosed<\/p>\n Net Cash provided by operating activities: 18,434,000 – <\/strong>Capital Expenditures: ($11,955,000) – <\/strong>Cash dividends:\u00a0 = Amazon does not pay cash dividends<\/p>\n Long\u2010term creditors and stockholders are interested in a company’s\u00a0s<\/strong>olvency which is its ability\u00a0to\u00a0pay interest as it comes due and\u00a0to\u00a0repay the balance of a\u00a0debt\u00a0due at its\u00a0maturity (Kimmel et. al., 2013).\u00a0Solvency ratios\u00a0measure the ability of the company\u00a0to\u00a0survive over a long period of time. The 2017\u00a0ratio\u00a0of 96% means that every dollar of\u00a0assets\u00a0was financed by 96 cents of\u00a0debt. The higher the\u00a0ratio, the more reliant the company is on\u00a0debt\u00a0financing meaning that Amazons solvency appears to be low because they had a high ratio of debt to assets.<\/p>\n Discuss how the financial statements are used in your current role or a position you would like to hold. How might these aid you in managerial decision making?<\/strong><\/p>\n In the future I would like to own and operate my own childcare center. This would make me an internal user of financial statements. Financial statements will help me answer many questions about my business to ensure its success. For internal\u00a0users, accounting provides internal reports, such as\u00a0financial\u00a0comparisons of operating alternatives, projections of income from new campaigns, and forecasts of cash needs for the next year. I would be able to easily determine if I can give my employees pay raises, what services to continue to offer and what prices I should charge for those services.\u00a0 Financial statements analyzed correctly can give insight on if your business will fail or succeed.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Amazon\u2019s Financial Statements Determine the net income for the current fiscal year (FY). Is this income up or down from the prior year?\u00a0Explain the relevance of changes in net income to investors. Amazon is a publicly traded US company that Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-431586","post","type-post","status-publish","format-standard","hentry","category-essay-paper-writing"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/431586","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=431586"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/431586\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=431586"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=431586"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=431586"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n\n
\n Net income, 2017 $$3,033,000<\/p>\n <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n