Financial Statement Analysis of Amazon

Efficiency Ratio

For the past three years, Amazon has been experiencing an increase in inventory turnover. Through this Amazon has increasingly been efficient in terms of selling its inventory. Comparatively is relatively great in accounts receivable turnover and the total asset turnover, implying that company the company is doing well in liquidity and quality of the accounts receivable.

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Liquidity Ratio

Short-term liquidity ratio indicates whether an organization is having the ability to convert the current assets into cash in a quick manner without losing value. Amazon liquidity ratio shows that from 2016 to 2017, both the company's quick ratio and the current ratios improved by 44%. However, in the year 2015, the company recorded one of the best liquidity years. As compared to other previous years, it was a great improvement for the company. As compared to other companies in the industry, the quick ratio really shines as compared to other organization in the industry standard. Through the current ratios, it is very clear that most of the current assets don't form part of the inventory which gives Amazon the ability to pay its bills much faster than the existing competitors.

It is very clear that a significant improvement was experienced in Amazon's, 2015-2017 current ratios. Overall, Amazon's has a greater degree of liquidity suggesting that Amazon's current assets have a greater chance of covering the current liabilities throughout the period. For acid test ratios above 1, it is very clear that the company has the ability to quickly turning its assets into more cash for current liabilities.

Net Profit Margin

In 2015, Amazon profitability decreased however from then, the companies have been experiencing a continuous increase in profit this can be shown by the increase in the return on gross profit margin and total asset (Easton & Sommers,2018).This is very clear that for Amazon, it is a clear indication that the company has a close ability to generate profit by selling its inventory and greater ability to generate pure income for its assets.

Earnings per Share

Amazon's earning per share is the representation of Amazon's portion profit allocated to every outstanding share of common stock. In this case, the net income will be achieved by recording the period divided by the general number of outstanding shares during that period. Amazon indicated an improvement in the company general earning per share, demonstrating an increase of 19 % from the previous years.

Equity Ratio

Equity ratio is one of the elements that is used in measuring a company's ability to pay its long-term obligations. This demonstrates that Amazon's debt to equity ratio was on the increase during 2015 which demonstrates a stable equity and it went much higher during 2017.Amazon company is experiencing increase debt to equity ratio over the recent years. However, the ratio of Amazon is much lower; indicating that Amazon has less risk of debt repayment and better Equity.

Reference

Easton, M., & Sommers, Z. (2018). Financial Statement Analysis & Valuation, 5e.

Kristensen, M., Penner, J., Nguyen, A., Moy, J., & Lam, S. (2017). Company Synopsis for: Amazon. com, Inc.

McCall, N. C. (2017). Financial Reporting: An Analysis of Accounting Methods and Principles (Doctoral dissertation, The University of Mississippi).

Rivet, D. J. (2017). Amazon's Superior Innovation: A Study of Amazon's corporate structure, CEO, and reasons behind why it has become the most innovative company in today's market.