CHAPTER 4
Analysis
MANAGING OPERATIONS and FINANCE
Analysis
As Amazon UK Operates in distinct fields and has a wide area coverage among the commodity
and service catering industry, thus, the different competitors from different segments work as
constant threats for Amazon Inc.
Strategic awareness of the influence of an atmosphere of complex and demanding resources
Amazon Inc's corporate plan focuses on technology investments, developing logistical
technologies, optimizing web services through fulfilment capability, Mergers and Acquisitions
approach, Cloud services division, deliveries Research and development operations, and
expanding through Fintech. Amazon Inc's corporate plan focuses on technology investments,
developing logistical technologies, optimizing web services through fulfilment capability,
Mergers and Acquisitions approach, Cloud services division, deliveries Research and
development operations, and expanding through Fintech. Zoox with a forward company that is
paving the way for the future of ride-hailing by creating artificial intelligence from the scratch
keeping customers considered sight. Acquisitions have become one of Amazon's most successful
strategies for achieving phenomenal growth and expansion to new regions. Amazon and Zoox
signed a deal in 2020 enabling Amazon to buy Zoox. The eero routers have initiated towards
ensuring whether speech and voice enabled assistants operate in a home, parties to exchange to
be using voice recognition to switch home appliances up and down. Amazon UK paid an
astronomical amount for eero, a company that manufactures gadgets that surround a household
with Wi-Fi transmissions. This same agreement could aid Amazon's efforts to get its Echo virtual
assistant, Buzz alarm systems, including Blinking surveillance systems into residential gardens.
To say that Amazon.com UK current operating margins has been high is also an underestimate.
The corporation's revenues have increased by upwards of 160 percent ever since 2015, thanks to
a boom in internet shopping and banking facility boom. Due to excessive expenditures, operating
earnings was already marginally more unpredictable, however this number also erupted in the
last 3 years.
In 2019, the company announced a 20 percent overall growth in revenue to USD 280.50 billion.
That same year, these three components expanded, with North America contributing USD 29.40
billion. Also for the fourth year in a row, Amazon UK reported a historic operating revenue of
USD 11.60 billion, increasing against USD 10.10 billion the previous financial period. Capital
would have been about USD 36.40 billion at the end of 2019, up USD 4.20 billion from either
the previous period. Cash flow from operations accounted for USD 38.50 billion, whilst capital
expenditures accounted for USD 24.30 billion, mostly in the form of cash equivalents
acquisitions. Another USD 10.10 billion was spent on funding operations, as Amazon Inc made
capital debt payments to financial liabilities commitments.
Financial Ratio Analysis of Amazon
The researchers performed a ratio study of the respective firm, Amazon Inc, in terms of
gathering the required financial data and information from the company's financial statements.
The researcher will use fiscal and financial ratios to portray different facets of the annual report
and financial statements, which will aid in portraying Amazon Inc's commercial enterprise
situation. In other terms, the researcher employed a ratio study of the relevant business, Amazon
Inc., in order to gather the appropriate financial, capital and management information and details
from the company's financial statements. The researcher would use financial ratios to present the
interdisciplinary in nature aspects of the financial statements that will continue to reflect and aid
the company's current business situation. The researchers will discuss the various categorizations
of Amazon Inc's ratios, including the liquidity ratio, profitability ratio, turnover ratios, and
market value ratios for two financial years that is 2019 and 2020.
Financial Year 2019
Liquidity Ratio Analysis
Current Ratio = Current Assets: Current Liabilities
Here,
Current Assets = $ 96334 Million
Current Liabilities= $ 87812 Million
Therefore,
Current Ratio = $ 96334 Million / $ 87812 Million
= 1.09
Quick Ratio = Quick Assets/ Current Liabilities
Here,
Quick assets = Current Assets - Inventories = $ (96334- 20497) Million = $ 75837 Million
Current Liabilities= $ 87812 Million
Thus,
Quick Ratio = $ 75837 Million : $ 87812 Million
= 0.86
Net Working Capital Ratio = (Current Assets - Current Liabilities)/ Total Assets
Here,
Current Assets = $ 96334 Million
Current Liabilities= $ 87812 Million
Total Assets = $225248 Million
Therefore,
Net Working Capital Ratio = ($96334 Million - $ 87812 Million) / $225248 Million
= (0.04)
Operating Cash Flow Ratio = Operating flow of cash /Current Liabilities
Here,
Operating cash inflow and outflow = $ 38514 million
Current Liabilities= $87812 Million
Thus,
Operating Cash Flow Ratio = $ 38514 million / $ 87812 Million
= 0.43
Profitability Ratios
Return on Assets = Total Revenues/ Aggregated net Assets
Here,
Total Revenues / Net Income = $ 48120 Million
Aggregated net Assets / Average Total Assets = $225248 Million
Therefore,
Return on Assets (ROA) = $ 48120 Million / $225248 Million
= 21%
Return on Equity (ROE) = Net Revenues or Income / Aggregate Stockholder Equity
Here,
Total Revenues or Income = $ 48120 Million
Aggregate Stockholder Equity = $62060 Million
Therefore,
Return on Equity = $ 48120 Million / $ 62060 Million
= 77%
Net Profit Margin = Net Income/ Sales
Here,
Net Income= $ 11588 Million
Sales = $ 280520 million
Thus,
Net Profit margin = ($ 11588 Million / $ 280520 million) = 4.1%
Turnover Ratios
Inventory Turnover Ratio = (COGS)/ Aggregate Inventories And Stock
Here,
Costs of Goods Sold (COGS)= $ 8,228 Million
Aggregate Inventories And Stock = $ 7,781million
Thus,
Inventory Turnover Ratio = $ 8,228 Million / $ 7,781million
= 1.057
Assets Turnover Ratio = Sales/ Aggregate Total Assets
Here,
Net Sales= $ 280520 million
Average Net Assets= $225248 Million
Therefore,
Assets Turnover Ratio = $ 280520 million/ $225248 Million
= 1.245
Financial Year 2020
Liquidity Ratio Analysis
Current Ratio = Current Assets: Current Liabilities
Here,
Current Assets = $ 132733 Million
Current Liabilities= $ 126385 Million
Therefore,
Current Ratio = $ 132733Million / $ 126385 Million
= 1.05
Quick Ratio = Quick Assets/ Current Liabilities
Here,
Quick assets = Current Assets - Inventories = $ (132733 Million - 23795 million) Billion = $
102938 Million
Current Liabilities= $ 126385 Million
Thus,
Quick Ratio = $ 102938 Million : $ 126385 Million
= 0.81
Net Working Capital Ratio = (Current Assets - Current Liabilities)/ Total Assets
Here,
Current Assets = $ 132733 Million
Current Liabilities= $ 126385 Million
Total Assets = $321195 Million
Therefore,
Net Working Capital Ratio = ($ 132733 Million - $ 26385 Million) / $321195 Million
= 0.33
Operating Cash Flow Ratio = Operating flow of cash /Current Liabilities
Here,
Operating cash inflow and outflow = $ 66064 million
Current Liabilities= $ 126385 Million
Thus,
Operating Cash Flow Ratio = $ 66064 million / $ 126385 Million
= 0.52
Profitability Ratios
Return on Assets = Total Revenues/ Aggregated net Assets
Here,
Total Revenues / Net Income = $ 125555 million
Aggregated net Assets / Average Total Assets = $321195 Million
Therefore,
Return on Assets (ROA) = $ 125555 million/ $321195 Million
= 39.08%
Return on Equity (ROE) = Net Revenues or Income / Aggregate Stockholder Equity
Here,
Total Revenues or Income = $1255550 million
Aggregate Stockholder Equity = $ 93404 Million
Therefore,
Return on Equity = $ 1255550 million / $ 93404 Million
=13.44%
Net Profit Margin = Net Income/ Sales
Here,
Net Income= $ 21330 Million
Sales = $ 100000 million
Thus,
Net Profit margin = ($ 21330 Million / $100000 million) =21.33%
Turnover Ratios
Inventory Turnover Ratio = (COGS)/ Aggregate Inventories And Stock
Here,
Costs of Goods Sold (COGS)= $ 8,228 Million
Aggregate Inventories And Stock = $ 7,781million
Thus,
Inventory Turnover Ratio = $ 8,228 Million / $ 7,781million
= 1.057
Assets Turnover Ratio = Sales/ Aggregate Total Assets
Here,
Net Sales= $ 100000 million
Average Net Assets= $321195 Million
Therefore,
Assets Turnover Ratio = $ 100000 million/ $321195 Million
= 0.311
References
Cachia, F., 2017. Analysing the European Commission’s Final Decisions on Apple, Starbucks,
Amazon and Fiat Finance & Trade. EC Tax Review, 26(1).
Tou, Y., Watanabe, C., Moriya, K., Vurpillat, V. and Neittaanmäki, P., 2019. A new concept of
R&D in neo open innovation: transformation of R&D triggered by Amazon. International
Journal of Managing Information Technology, 11(1).
de Lautour, V.J., ALIGNING STRATEGY, OPERATIONS AND FINANCE.
Lynch, L.J. and Haskins, M.E., Amazon. Com, Inc. Buys Whole Foods Market.
Sims, S., 2018. Acquisitions: Walmart vs Amazon.
Kristensen, M., Penner, J., Nguyen, A., Moy, J. and Lam, S., 2017. Company Synopsis for:
Amazon. com, Inc.
Dandapani, K., 2017. Electronic finance–recent developments. Managerial Finance.
Myers, A., 2018. Amazon Doesn't Have an Antitrust Problem: An Antitrust Analysis of
Amazon's Business Practices. Hous. J. Int'l L., 41, p.387.
Hahn, Y., Kim, D. and Youn, M.K., 2018. A Brief Analysis of Amazon and Distribution
Strategy. The Journal of Distribution Science, 16(4), pp.17-20.
Bryan, D., Rafferty, M. and Wigan, D., 2017. Capital unchained: finance, intangible assets and
the double life of capital in the offshore world. Review of International Political Economy, 24(1),
pp.56-86.
Dolata, U., 2017. Apple, Amazon, Google, Facebook, Microsoft: Market concentration-
competition-innovation strategies (No. 2017-01). SOI Discussion Paper.
