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Ambra Poindexter

PO BOX 702525

Salt Lake City, UT 84170

July 30, 2017

Professor Shauna Hatfield

Salt Lake Community College

Taylorsville Campus

Dear Professor:

This is an analysis summary of the 2011 and 2012 financial statements of Amazon Corporation. With

the figures provided I believe you will be able to determine if Amazon Corporation would be a safe

investment for you. Provided in the following you will see the profitability and efficiency of this

company. This analysis contains five sections 1) ability to pay current liabilities, 2) efficient use of

assets, 3) ability to pay long term debt 4) profitability, and 5) evaluating stock as an investment. My

overall recommendation will follow, please contact me if you have any questions.

Asset Management:

Working capital was 1.17 and 1.12 for 2011 and 2012. This means that for every dollar of

current liabilities the company has, it has $1.12 of current assets to pay off the current liability. The

average for the industry is 1.54:1. A healthy working capital ratio falls between 1.2 and 2.0. The cash

ratio for 2011 and 2012 of $.35 and $.45 means the company would need more than just cash to pay of

liabilities. They hold less than one-dollar cash for every dollar of current liabilities. The Acid Test Ratio
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measures the companys abilities to liquidate the quick assets to pay off liabilities. Amazon Corporation

is following closely within the industry average.

Inventory Management:

The company does very well with its inventory turnover, consistently exceeding the industry

average. These numbers show that the company sells its inventory quickly on average. The Debt ratio in

2012 is 75%, meaning that the company has many of the assets financed with debt. The Debt to Equity

Ratio shows that with 47% and 18% in 2012 and 2011 the company is using less than the industry

average of 52% to finance liabilities with equity.

Debt Management:

The Times Interest Earned ratio is used to evaluate a companys ability to pay its debts. The

industry average is 5.33 times, meaning that a company can pay its liabilities 5 times over. Amazon

Corporation did well in following closely with the industry average of 5.23 and 15.18 for 2012 and

2011.

Profitability:

The profitability ratios are used to determine a companys ability to generate earnings. In 2012

Amazon Corporation fell short of earnings in many of these measurements. The Gross Profit Percentage

shows that they earned $0.24 for every dollar earned and was behind by six cents of the industry

average. Further evaluation shows that stockholder equity was behind industry average and investors

suffered a loss on their investments.

Conclusion:
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In my evaluation of Amazon Corporations asset and debt management, I believe that the

company has the appropriate amount of assets to liabilities and are utilizing each efficiently. Inventory

has a high turnover rate meaning they have a good number of buyers and desirable products. The

company had a decline in profitability in 2012 and stockholders had a loss on earnings per share. I

would recommend this company to investors.

2012 Industry 2011 Good/Bad/OK

Average

Liquidity Ratios:

Working Capital 1.12 1.54:1 1.17 Ok

Cash Ratio .35 NA .45 Ok

Acid Test Ratio .78 1:82 82 Good

Efficiency:

Inventory Turnover 8.3 4.8 times 9.1 Good


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Days Sales in 43.9 75.42 days 40.1 Good

Inventory

Accounts 20.5 10.11 times 23.2 Good

Receivables

Turnover

Days in Sales 20.1 36.11 15.8 Good

Receivables

Debt Ratio 75% 34% 69% Bad

Debt to Equity 47% 52% 18% Ok

Times Interest 5.23 5.33 15.18 Good

Earned

Profitability:

Profit Margin -.06% 2.87% 1.31% Bad

Rate of Return on -.13% 4.76% 2.86% Bad

Total Assets

Asset Turnover 2.11 1.66 times 2.18

Ratio

Return on Common -.49% 11.39% 8.63% Bad

Stockholders

Equity

Earnings Per Share -.09 NA 1.33 Bad

Price/Earnings -2854.7 47.17 131.37 Bad

Ratio
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Gross Profit 24% 33.55% 33% Ok

Percentage

Ambra Poindexter

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