FIN 6060: Financial Decision Making
Module 1 - Company Analysis Worksheet
Company Analysis
Nneoma Anulika Edebeatu
Masters of Business Administration
FIN 6060: FINANCIAL DECISION MAKING
Nexford University
PROFESSOR KEITH WADE
NOVEMBER 6 2024
FIN 6060: Financial Decision Making
Module 1 - Company Analysis Worksheet
Complete this worksheet using the directions within to guide you. Submit your completed worksheet in the “Assignment and
Grades” tab in your course menu. When you have submitted this assignment for grading, please return to Module 1
for a module wrap-up.
Company Analysis
Directions: Obtain end-of-year financial statements (balance sheets and income statements) for the previous
three years from Amazon and Walmart. Conduct a ratio, horizontal, and vertical analysis for each company. Then
answer the following questions.
How would you evaluate the financial strength of Amazon and Walmart?
Is Amazon in a strong or weak financial position?
Is Walmart in a strong or weak financial position?
Which company (Amazon or Walmart) is in a better financial position? Explain how you know this.
Would you use either Amazon or Walmart to establish benchmarks for the company you currently work for? Why?
If you were the CEO of each company, what recommendations would you make to improve the company’s financial
performance?
Recommendations for Amazon:
Recommendations for Walmart:
FIN 6060: Financial Decision Making
Module 1 - Company Analysis Worksheet
FIN 6060: Financial Decision Making
Module 1 - Company Analysis Worksheet
FINANCIAL ANALYSIS OF AMAZON AND WALMART
The analysis will include:
Key Ratios: Current Ratio, Quick Ratio, Gross Margin, Operating Margin, Net Profit Margin, Debt-to-Equity Ratio, Return on
Assets (ROA), and Return on Equity (ROE).
Horizontal Analysis: Shows the percentage change of each item from year to year
Vertical Analysis: Expresses each item as a percentage of sales (income statement) or total assets (balance sheet).
Based on the analysis above evaluating Amazon and Walmart's financial health includes looking at the growth measures, leverage,
profitability, and liquidity. This is a breakdown:
1. Liquidity:
Walmart: Walmart’s current ratio decreased for the last three years and was at 0.82 in 2023 implying that current assets can
only cater to 82% of current liabilities, which is a tighter liquid position. Its quick ratio has also reduced which shows it has
limited cash or near cash assets when compared to its liabilities.
Amazon: Amazon's current ratio is stronger with its values above 1.0 in 2021 and 2023. Its quick ratio while above Walmart’s
has been fluctuating but remains healthy showing more liquid assets on hand. Overall Amazon has a stronger liquidity
position.
2. Profitability:
Gross Margin: Amazon's business model seems to give it more profitability at the gross level as shown by its far greater
gross margin than Walmart (46.98% in 2023 compared to Walmart's 24.14%).
Operating Margin and Net Profit Margin: Amazon's operating margin keeps changing especially in 2022 when it fell to
2.63%, even though it has a higher gross margin. It did, however, recover to 6.54% in 2023. Walmart’s operating margin
stayed constant but lower showing that the fluctuation is less and also there are less spikes in profitability.
Net Income Growth: Although Walmart's net income growth was steady but declining Amazon's net income fluctuated
drastically, declining heavily in 2022 before having a major recovery in 2023. Amazon’s higher volatility may be seen as a
higher risk, but it also means more opportunities to grow while Walmart appears to be much more stable but less profitable.
FIN 6060: Financial Decision Making
Module 1 - Company Analysis Worksheet
3. Leverage and Capital Structure:
Debt-to-Equity Ratio: In 2021, the ratios of the two companies were similar but, by 2023, Amazon's ratio had dropped to
1.61 showing a decreased reliance on debt in comparison to equity. Walmart’s debt-to-equity ratio rose slightly to 2.08
implying that the company relies on debt financing accruing financial risk if it has to pay higher interest rates or if the economy
turns unfavorable.
Return on Assets (ROA) and Return on Equity (ROE): Walmart's ROA and ROE were more consistent than Amazon's,
which were considerably more unstable, especially in 2022 when lower profitability resulted in negative returns. Amazon’s
financial performance in the year 2023 shows reasonable recovery with 5.76% of ROA and 15.07% of ROE, but maintains the
vulnerability for instability.
4. Asset Utilization and Composition:
Vertical Analysis of Assets: Walmart has a higher percentage of inventory within its assets than Amazon – 23.27% in 2023
– as a result of its retail orientation. However Amazon has a greater percentage of cash and short term investment which
means that more liquidity exists for investment or use in operations.
Total Assets and Equity Growth: Asset and equity of Amazon in 2023 were higher (14.09 % and 38.26 % respectively),
indicating that Amazon has invested heavily in assets and its shareholder equity has also improved. Walmart’s expansion in
these areas was much slower possibly restricting its ability for rapid growth or large investment compared to Amazon.
(Amazon, 2022)
5. Overall Evaluation:
Amazon has more volatility suggesting a higher-risk, higher-reward profile, but it also looks to have more liquidity, greater
growth potential, and profitability (when successful). Amazon is more equipped to deal with economic ups and downs and
pursue ambitious development or investment due to its cash rich structure and reduced reliance on debt.(Amazon, 2022)
Walmart appears financially more stable with smaller variations by margins and returns yet it seems less profitable in
comparison with Amazon. Its dependence on inventory and relatively higher debt level exposes it to certain risks if consumers
spending goes down. However it has a consistent performance rate and comparatively less fluctuation that makes it a reliable
choice for investors who want a low risk investment returns.(Walmart, 2024)
Amazon shows much greater financial strength in terms of liquidity and growth potential but at the same time
carries much greater risk due to volatility in profitability. On the other hand Walmart’s financial strength is due to
stability as well as consistency in performance and has a more conservative financial profile.
FIN 6060: Financial Decision Making
Module 1 - Company Analysis Worksheet
KEY RATIOS HORIZONTAL ANALYSIS FOR KEY FINANCIAL ITEMS
Walmart Walmart Amazon
Walmart Walmart Walmart Amazon Amazon Amazon 2021 to 2022 to 2021 to Amazon
Metric 2021 2022 2023 2021 2022 2023 Metric 2022 2023 2022 2022 to 2023
Current Ratio 0.97 0.93 0.82 1.14 0.94 1.05 S ales Growth 2.43% 6.73% 9.40% 11.83%
Quick Ratio 0.49 0.28 0.21 0.9 0.72 0.84 COGS Growth 2.07% 8.09% 6.05% 5.51%
Gross Margin Gross Income
(%) 24.83% 25.10% 24.14% 42.02% 43.82% 46.98% Growth 3.54% 2.65% 14.01% 19.94%
Operating
Margin (%) 4.82% 4.97% 4.01% 5.31% 2.63% 6.54% S G&A Growth 3.06% 6.70% 22.66% 9.82%
Net Profit
Margin (%) 2.42% 2.39% 1.91% 7.10% -0.53% 5.29% EBIT Growth 5.55% -13.78% -45.82% 178.41%
Debt-to-Equity Net Income
Ratio 2.04 1.84 2.08 2.04 2.17 1.61 Growth 1.21% -14.58% -108.16% 1217.74%
Return on Total Assets
Assets (ROA) 5.35% 5.58% 4.80% 7.93% -0.59% 5.76% Growth -3.02% -0.68% 10.02% 14.09%
Total
Return on Liabilities
Equity (ROE) 16.69% 16.42% 15.23% 24.13% -1.86% 15.07% Growth -7.26% 4.08% 12.16% 2.95%
Total Equity
Growth 3.59% -8.60% 5.64% 38.26%
FIN 6060: Financial Decision Making
Module 1 - Company Analysis Worksheet
VERTICAL ANALYSIS OF INCOME S TATEMENT (% of SALES /REVENUE) VERTICAL ANALYSIS FOR BALANCE SHEET (% OF TOTAL ASSETS)
Walmar Walmart Walmart Amazo Amazon Amazon Walmart Walmart Walmart Amazon Amazon Amazon
Metric Metric
t 2021 2022 2023 n 2021 2022 2023 2021 2022 2023 2021 2022 2023
Cash & Short-
Sales/Revenue 100% 100% 100% 100% 100% 100% Term 7.03% 6.03% 3.55% 22.90% 15.21% 16.54%
Investments
Cost of Goods Accounts
75.18% 74.90% 75.86% 57.98% 56.18% 53.02% 2.58% 3.38% 3.26% 7.76% 9.08% 9.80%
Sold Receivable
Gross Income 24.83% 25.10% 24.14% 42.02% 43.82% 46.98% Inventories 17.81% 17.45% 23.27% 7.76% 7.44% 6.31%
SG&A Total Current
20.00% 20.13% 20.12% 36.71% 41.17% 40.45% 35.68% 33.10% 31.11% 38.42% 31.73% 32.65%
Expense Assets
Net Property,
EBIT 4.82% 4.97% 4.01% 5.31% 2.63% 6.54% Plant & 43.51% 46.00% 49.02% 51.46% 54.65% 52.42%
Equipment
Intangible
Net Income 2.42% 2.39% 1.91% 7.10% -0.53% 5.29% 13.43% 13.81% 13.35% 4.87% 5.70% 5.77%
Assets
Total
65.33% 62.47% 65.46% 67.13% 68.44% 61.76%
Liabilities
Total Equity 34.67% 37.53% 34.54% 32.87% 31.56% 38.24%
FIN 6060: Financial Decision Making
Module 1 - Company Analysis Worksheet
1. Is Amazon in a strong or weak financial position?
Amazon is in a strong financial position especially due to high liquidity, growth potential and recent profitability recovery.
Though its financial instability leads to higher risk.
2. Is Walmart in a strong or weak financial position?
Walmart has strong and steady financial health. Also, it has lower risks, and more stable performance but a lower growth rate
and profitability when compared to Amazon.
3. Which company (Amazon or Walmart) is in a better financial position? Explain how you know this.
Amazon is in a better financial position bearing better liquidity, good asset growth and higher margin which shows better
prospects for profitability and investment. Even though, Walmart is more stable, it does not offer as much flexibility for growth
and investment capacity as Amazon.
4. Would you use either Amazon or Walmart to establish benchmarks for the company you currently work for? Why?
Amazon would have been more appropriate for benchmarking if the objective is growth, cash flows management and
investment in innovations. Walmart could be a better benchmark in cases where the focus is made on operation stability,
inventory management and cost efficiency. The company I work, for is focused on cash flow management and
investment in innovations so Amazon is the most suitable benchmark.
5. If you were the CEO of each company, what recommendations would you make to improve the company’s financial
performance?
Amazon: To improve profitability, Amazon should focus on achieving stability in the profit margins primarily by cost controls of
SG&A (Selling, General, and Administrative expenses), and cash management for profitability.
Walmart: Liquidity should be improved by minimizing reliance on inventory stocks and controlling levels of indebtedness for
greater fluidity for growth prospects.
FIN 6060: Financial Decision Making
Module 1 - Company Analysis Worksheet
REFERENCES
Amazon. (2022). amzn-20220331. Www.sec.gov. https://www.sec.gov/Archives/edgar/data/1018724/000101872422000013/amzn-
20220331.htm
Amazon. (2024). Amazon Annual Report. Amazon.com,Inc. https://s2.q4cdn.com/299287126/files/doc_financials/2024/ar/Amazon-
com-Inc-2023-Annual-Report.pdf
Market, W. (2024). AMZN | Amazon.com Inc. Annual Cash Flow - WSJ. Www.wsj.com.
https://www.wsj.com/market-data/quotes/AMZN/financials/annual/cash-flow
Walmart. (2024). Walmart Investor Relations - Financials Investor Relations > Financials. Stock.walmart.com.
https://stock.walmart.com/financials/annual-reports/default.aspx
WSJ. (2022). WMT | Walmart Inc. Annual Income Statement - WSJ. Www.wsj.com.
https://www.wsj.com/market-data/quotes/WMT/financials/annual/income-statement
WSJ. (2023a). Amazon.com Inc. Wsj.com. https://www.wsj.com/market-data/quotes/AMZN/financials/annual/income-statement
WSJ. (2023b). AMZN | Amazon.com Inc. Annual Balance Sheet - WSJ. Www.wsj.com.
https://www.wsj.com/market-data/quotes/AMZN/financials/annual/balance-sheet
