Analyze Amazon.com

Amazon.com, Inc. (AMZN) is the largest Internet retailer in the United States. Amazons income statements through operating income for two recent years are as follows (in millions):

Amazon.com, Inc.
Income Statements
For the Years Ended December 31
(in millions)
		Year 2		Year 1
Revenues:
Product sales		$94,665		$79,268
Service sales		41,322		27,738
Total revenues		$135,987		$107,006
Operating expenses:
Cost of sales		$(88,265)		$(71,651)
Fulfillment		(17,619)		(13,410)
Marketing		(7,233)		(5,254)
Technology and content		(16,085)		(12,540)
General and administrative		(2,432)		(1,747)
Other operating expense (income), net		(167)		(171)
Total operating expenses		$(131,801)		$(104,773)
Operating income		$4,186		$2,233

Required:

a. Prepare a vertical analysis of the two income statements. Round percentages to one decimal place.

Amazon.com, Inc.
Income Statements
For the Years Ended December 31
(in millions)
		Year 2				Year 1
		Amount		Percent		Amount		Percent
Revenues:
Product sales		$94,665		%		$79,268		%
Service sales		41,322		%		27,738		%
Total revenues		$135,987		%		$107,006		%
Operating expenses:
Cost of sales		$(88,265)		%		$(71,651)		%
Fulfillment		(17,619)		%		(13,410)		%
Marketing		(7,233)		%		(5,254)		%
Technology and content		(16,085)		%		(12,540)		%
General and administrative		(2,432)		%		(1,747)		%
Other operating expense (income), net		(167)		%		(171)		%
Total operating expenses		$(131,801)		%		$(104,773)		%
Operating income		$4,186		%		$2,233		%

b. Use the vertical analysis to explain the increase in operating income.