Amazon Financial Reporting

THE AMAZON

Amazon was incorporated in 1994 in Washington and later reincorporated in 1996 in Delaware with its main headquarters found in Seattle in Washington (Osterwalder, 2004).  The main objective of this revolutionary store is to serve enterprises, sellers, consumers and content creators online. .It also provides other services such as advertising and co-branded credit card agreements. It is operated geographically comprising of the North America and international segments. The consumers are served through retail websites and focus on selection, price, and convenience. It has diversified its business operations by manufacturing and selling of electronic devices. Programmers of this company also designs some user management system that enables buyers and sellers to auction their products online. Amazon also has managed to brand some of their client’s websites these programs are designed for various groups in the society. These groups of users are filmmakers, app developers, musicians, authors and other users to utilize this open source market place. The company also serves developers and enterprises of all sizes through AWS, which provides access to technology infrastructure that enables virtually any type of business. Over the years Amazon has shown a lot of efforts when it comes to serving customers .We are going to analyze on the financial details of the Amazon (Timmers, 2004)

 

Financial analysis of the Amazon.

The revenue is derived from the various products and services offered to customers. On cost reduction, they seek to focus more on fixed cost rather than variable costs which inflate expenditure. In reduction of variable cost per unit to enable lower prices to customers, increasing direct sourcing, increase discounts from suppliers and reduction of detects are important measures while in minimizing fixed cost improvement of efficiencies and maintenance of  a lean culture are necessary (Zott & Amit,2007). For profits to be realized income or revenue must be higher than expenditure or cost. The total operating expenses were seen to increase moderately from the year 2011 to the year 2013. It is worth noting that there were increased sales with time. This was as a result of increased costs in the sales, digital content and shipping costs. The advertising to increase traffic. These costs are also included in the financial statements. The increases payroll and related expenses have led to the increased administrative costs. These have been on the lower hand reduced the gross profit in return (Osterwalder, 2004).

Other costs that were involved include stock-based compensations done to employees that were currently on duty and those who are new. Income taxes varied from time to time due to the pre-tax and taxable income and how they related to each other gross profit was seen to increase throughout the years from 2011 to 2013. This is because of the increased sales in services. The sales were arrived at from third party seller fees and related shipping charges. Marketing is very important in every business. The company uses online marketing methods like the portal (Zott & Amit, 2007).

 

 

Net sales

This sales comprise of both product and services sales. This product sales total revenue from the s products sales, shipping fees and digital content where we are the seller of record. Services sales are the third-party seller fees earned from digital content subscriptions, and non-retail activities such as AWS, advertising services, and our co-branded credit card agreements (Timmers,2004).The consolidated financial statements include the accounts of Amazon.com, Inc., its wholly-owned subsidiaries, and those entities in which the company has a variable interest and of which we are the primary beneficiary. Intercompany balances and transactions between consolidated entities are eliminated.

 

 

 

 

 

 

 

 

 

 

 

Table showing the company’s sales for the three consecutive years.

  2011 2012 2013
North America

 

$44517 $34813 $26705
International $29935

 

$26280 $21372
Consolidated $74452 $61093 $48077
North America

 

28% 30% 43%
International 14%

 

23% 38%
Consolidated 22%

 

27% 41%
North America

 

28% 30% 43%
International 19% 27% 31%

 

Consolidated 24% 29% 37%

 

North America 60%

 

57% 56%
International 40%

 

43% 44%
Consolidated 100% 100% 100%

 

 

Sales grew from 22% in 2011 to 27% in 2012 and then to 41% in 2013 demonstration an increasing in sales in the three years. North America grew from

North America sales grew 28%, 30%, and 43% in 2013, 2012, and 2011, compared to the earlier years. This reflects an increase in unit sales by the company. This is as a result of continued efforts in reduction of prices to customers, shipping offers by sales in faster growing categories like electronics, increment in stock inventory availability and offerings which drive more sales (Timmers, 2004)

The amazon international product sales grew by 14%, 23%, and 38% in 2013, 2012, and 2011 respectively when compared other years. This has been caused by the measures we listed above which are; continued efforts in reduction of prices to customers, shipping offers by sales in faster growing categories like electronics ,increment in stock inventory availability and offerings which drive more sales. In addition, changes in currency had an impact on international sales by $(1.3) billion, $(853) million, and $1.1 billion in 2013, 2012, and 2011.It is however projected than the international segment should produce 50% or more on net sales.

 

 

 

 

 

Financial status and analysis.

 

This is derived from the consolidated financial statements.

In the balance sheet of years 2013 and 2012 ending in December 31 show various information which dictate on the financial position of the company. Cash and its equivalents increased from $8084 to 8656 from 2012 to 2013.Marketable securities also increased from $3664 to $3789 in the same period. Inventories or stock also increased from$ 6031 to $7411 showing progress in the company. This makes an increase in total currents assets from $21296 to $24625 from 2012 to 2013.There is a major increase in the total assets from $32555 to $40159 in the two years. As long as the liabilities are concerned the debtors amounted to $15133 in 2013 which is an increase from $13318 in 2012.There is also an increase in accrued expenses and unearned revenue in the two years bring the total figure of the current liabilities to $3191 in 2013 and 3084 in 2012.The balance sheet further shows us an increment in total long term liabilities over the two years. An equitable company making good profits should show a decrease in liabilities rather than an increase. There is an outstanding shares of $5.It is also well noticeable that the company has filed a decrease in accumulated loss over the two years from $239 to $185.The retained earnings have also increased from $1916 to$2190 bring the total stock holders’ equity from $9746 from $8192.

 

Stock/Inventory.

This is what is available for sale. They are accounted for using the FIFO method, first in, first out meaning that what comes to the store first must be sold first ( Zott & Amit,2007 ).This requires good and proper store keeping. They are valued at a cost less than that of the market. In this valuation based on recent trade of securities in active market or based to quote market prices. Inventory forms a major part in determination of sales and also affects the profit and loss account (Timmers, 2004,)

 

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References

Osterwalder, A. (2004). The business model ontology: A proposition in a design science approach. Institut d’Informatique et Organisation. Lausanne, Switzerland, University of Lausanne, Ecole des Hautes Etudes Commerciales HEC173.

Timmers, P. (2004). Business models for electronic markets. Electronic markets8(2), 3-8.

Zott, C., & Amit, R. (2007). Business model design and the performance of entrepreneurial firms. Organization Science18(2), 181-199.