Financial Analysis

Financial Analysis

Research and Analysis: Amazon Company

Horizontal and Vertical Analysis of Amazon

Vertical Analysis

Horizontal Analysis

2010

2009

2010

2009

2010

Current liabilities:

  $

  $

  %

 %

  %

Accounts payable

8,051

$5,605

42.83

40.578

143.6396075

Accrued expenses and other

2,321

1,759

12.34772

12.73

131.9499716

Total current liabilities

10,372

7,364

55.17902

53.31

140.8473656

Long-term liabilities

1,561

1,192

8.304517

8.63

130.9563758

Total liabilities

11,933

8,556

63.48353

61.94

139.4693782

 

 

 

 

 

According to vertical analysis, Amazon Company increased its total liabilities from 61% to 63% which showed an increase in liability from 2%. This showed that in 2010, company took debt for its international operations.

Analysis of Financing Activities

This section of cash flow measures the flow of cash between the various stakeholders of the firms. Negative number in the long term debt and capital financing lease showed that the Amazon was able to served the debt while it also showed that Amazon was making large amount of dividend payment to investors and repurchasing its stock. Investors were very glad to see the financing activities of the company.

Ratios

Current Ratio: current asset/ current liabilities

Current Ratio

2010

2009

1.325395

1.33039

Amazon had more current asset than the current liabilities. The current asset can be used for decreasing the total long term liabilities in the future.

Debt to Asset ratio: total debt / total asset

Debt to Asset Ratio

2010

2009

63.4835346

61.94165

Amazon Company had 62% to 63% debt and only 38% equity, which was not a good sign of profitable company.

Weighted Average Interest Rate

Long term debt of Amazon Company for year 2010 was $184 million and weighted average interest rate was 5.5%. While in 2009, long term debt was $109 million and weighted average interest rate was 6.4%.

Analysis of Long Term Liabilities

Long term liabilities are said to be the obligations for one or more than year in the future. Amazon long term debt was increased from 184$ to $109 million, which was the increased of 75$ million. Increased of 75$ million showed that the amount was borrowed for funding the international operation of the company.

Entrepreneurial Decision Making: Valley Clothing Shop

Computation of Net Income

Plan: 1

Valley Clothing shop

Credit sales

49500

Allowance for Bad Debts

-1980

Total credit Sales

47520

less:

Billing Expense

-990

Record keeping Expense



-495

46035

less: tax expenses

-13811

Net Income

32224.5

Plan: 2

Valley Clothing shop

Credit sales

82500

less:

credit card fees

-4537.5

Record keeping Expense



-4125

73837.5

less: tax expenses

-22151.25

net income

51686.25

Recommendation

Valley clothing shop had to accept the plan 2 which means to accept the credit card for new credit sales. In this way, shop can increased its sales and it will not have to bear bad debt expenses in its credit sales.

Evaluation of other Factors

For increasing the credit sales through accepting the credit card, Valley clothing shop have to make a merchandise account. Merchandise account can be open through many sources like local bank, credit card processing companies because will be deal with credit card instead of cash. For increasing the credit sales, credit policy, credit risk, credit terms, credit qualification and credit review analysis should be considered.

Short Memo: Play Hard Fitness Center

To: Play Hard Fitness Center

From: Certified Public Accountant

Subject: Depreciation Method for Tax Purposes

As requested, below are the methods which should be used for evaluating the effective tax purposes. There are two alternative methods which can be used for calculating the tax. In the declining method or reducing method, the first year will take the higher cost and ...