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Analyzing Amazon

Analyze Amazon.com

Use Excel and financial statement analysis to determine the profitability of an e-commerce company and the viability of its business model. Submit any simplified spreadsheets you created of the company's balance sheet and income statements.

Publicly traded companies, including those specializing in e-commerce, are required to file financial data with the Securities and Exchange Commission (SEC). By analyzing this information, you can determine the profitability of an e-commerce company and the viability of its business model.

Study Amazon's web page that describe the company and explain its purpose and structure. Use the Web to find articles that comment on the company. Then visit the SEC Web site www.sec.gov and select Filings and Forms to access the company's 10-K (annual report) form showing income statements and balance sheets. Select only the sections of the 10-K form containing the desired portions of financial statements that you need to examine, and download them into your spreadsheet. Create simplified spreadsheets of the company's balance sheets and income statements for the past three years.

1.) Is Amazon a success, borderline business, or failure? What information forms the basis of your decision? Why? When answering these questions, pay special attention to the company's three-year trends in revenues, cost of sales, gross margins, operating expenses, and net margins.

Solution Preview

1.) If we evaluate the last three year's income statement of Amazon.com, we can certainly say that Amazon has been a really successful company. Even during such tough economic times, Amazon's revenues have almost doubled in 2011 from the 2009 levels, which really speaks about the strong growth enjoyed by the company.

However, one of the concerns for the company, inspite of the rising revenues, has been steep decline in the net earnings, primarily due to higher selling and other administrative expenses and interest burden which has caused a ...

Solution Summary

1.) Is Amazon a success, borderline business, or failure? What information forms the basis of your decision? Why? When answering these questions, pay special attention to the company's three-year trends in revenues, cost of sales, gross margins, operating expenses, and net margins.

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