Write a thorough conclusion about this info. You need to write a 500 to 1,000 word conclusive analysis comparing the base company to its competitors. You should compare and contrast the analysis that you completed under the 12 items you analyzed. Make references to specific ratios and vertical/horizontal analysis. Do not write the conclusion in terms of the other two companies; it should be very clear what your base company is.

1. Cash and cash equivalents increase year over year due to the significant increase in net income from 2019 to 2020 which is around 10 billions, compared with year 2018 to 2019 by only 1.5 billions. However, the cash and cash equivalent at the beginning and end of the period, in year 2019 and 2020, increase with same amount which was around 4 billions. This is because purchases of property and equipment increase 34 billions compared to 2018 and 2019 with only 3 billions difference. This can bring the company future operating potential— physical store extension, equipment enhancement, and strengthen the prime benefit. Overall the Cash flow looks healthy and companies seek fundamental improvement to construct Healthier business structure.

2. Net product sale increase year by year and gain a significant jump from 2019 to 2020 in an amount of 100 billions compared to 2018 to 2019 with 20 billions. This Increased unit sales were driven largely by the continued efforts to reduce prices for customers, including from shipping offers, and increased demand, including for household staples and other essential and home products. The continue of this trend could increase the margin and benefit to future financial health.

3. Segment operating performance can be break down to North America, International, and AWS which is abbreviation of Amazon Web Service, mainly focuses on subscription fee. Within the North America, although the operating income increase, the company considered the increase amount fall below their expectation partially offset by increased shipping and fulfillment costs due in part to COVID-19. The impact are expected to last at least to the end of Q1. However, what we are excited about is the alternation from negative income to positive in the international market in difference of 2.5 billions. What I’m concerned is that the COVID has impact on delivered and physical store operation, but it gives a improvement of subscription of AWS and if COVID were over, will the income from AWS fall.

4. The total net sales for the year 2019 and 2020 were 280522 and 386064 (millions) , and the cost of sale for the year 2019 and 2020, respectively are 165536 and 233307 (millions), so that the gross margin are respectively 40.99% and 39% which have slightly decrease over year.

Gross margin= (net sale — cost of sale)/ net sale

5. Amazon’s operating expenses composed with the elements of Cost of sales, Fulfillment, Technology and content, Marketing, General and administrative, and other operating expense. All the elements steadily increase year over year so it look like healthy operation. The only concern is the fulfillment increase greater amount so lower the fulfillment in 2021 is what Amazon should do.

6. Adding up Interest income, interest expense, and other income (expense) net we can get the Total non-operating income (expense). 2020 was the year that Amazon have a positive number, and mostly because of increase in other income (expense) net.

7. A provision for income taxes is the estimated amount that a business or individual taxpayer expects to pay in income taxes for the current year. The amount of this provision is derived by adjusting the firm's reported net income with a variety of permanent differences. The number had increased a lot from 2018 to 2019 by 1.2 billions, compared to the difference between 2019 and 2020 with only 0.5 billion. This indicated the business expect decrease in net income.

8. The ability for Amazon to generate cash enhance year over year due to increase in investing activities such as purchases property and equipment. Also, Amazon had repaid it short term debt, at the same time, raise more fund by offering short term debt. This indicate Amazon had fluent cash flow and manage their operation well.


i. Return on Assets

2019 : (11588+1600)/225248 = 0.05855 2020 : (21331+1647)/321195 = 0.07154

ii. Return on Equity

2019 : 11588/62060 = 0.18672 2020 : 21331/93404 = 0.22837

iii. Ratio of Total Liabilities to Total Stockholder’s Equity 2019 : 163188/62060 = 2.62952

2020 : 227791/93404 = 2.43877

9. The Amazon was operating well since the higher return on asset means the purchase of inventories and equipment's had helped Amazon to generate more income. The denominator grow huge which showed Amazon, however, it could still come up with higher rate of return on assets. The denominator for return on equity grow because investors were optimism about amazon future performance so they invest more, while Amazon still came up with higher return on equity which was a good sign. The decrease in Ratio of Total Liabilities to Total Stockholders Equity, refer back to #8, that I addressed amazon were actively paying back the short-term debt so they have fluent cash flow.

10. As I mention in #2, the net product sale had a large increase between 2019 and 2020, and as other expenses increased steadily, so it had collateral influence to raise the net income. By #3 we can see Amazon had decreased their expense in marketing but increase expense in the area of technology and content Technology and content costs include related expenses for employees involved in the research and development of new and existing products and services, development, design, and maintenance of our stores, curation and display of products and services made available in our online stores, and infrastructure costs. As we can see the increase in expense of this area bring amazon's future potential.

A/R Turnover : 2019 , 280522/20816 = 13.47627 2020 , 386064/24542 = 15.73075

Inventory Turnover : 2019 , 165536/20497 = 8.07611 2020 , 233307/23795 = 9.80487

11. The net sales increase by a bigger ratio than the account receivable, this indicates Amazon is able to do good on marketing, while at the same time, able to collect the credit efficiently since the A/R Turnover rate increase between 2019 and 2020. Also, from the inventory turnover ratio, we can tell amazon was doing good since the ratio increase.

12. In the balance sheet, we can see total current assets increases a lot, it results from the big increase in marketable securities and these is the assets that can be liquidated to cash quickly, and these are short-term

liquid securities can be bought or sold on a public stock exchange or a public bond exchange so this gave Amazon a good working capital and quick ratio. Additionally, steady increase in cash and cash equivalents, inventories, and account receivables show Amazon had good fundamentals and generate income stable.

Answer rating: 100% (QA)

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