Question

How does Amazons financing activities (proceeds from long term debt) impact the balance sheet, income statement, cash flow and shareholders equity based on 2017 10 K filing report?

https://www.sec.gov/.../000101872418000005/amzn-20171231x10k.htm

Answer 1

Amazon's investing activities are primarily comprising of investment in fixed assets. The investment is being used towards addition to fixed capital.

Impact on the balance sheet:

1. Reduces the surplus cash balance on the balance sheet
2. Increases the debt on the balance sheet required to part fund the investment activities
3. Investing activities increases the gross / net fixed assets on the balance sheet

Impact on Income statement:

1. Leads to depreciation and amortization expenses on the income statement
2. Debt funding of the investment activities leads to increase in interest cost

Impact on cash flow

1. The cash flow due to investing activities is negative.
2. It set's off cash flow from operating activities and financing activities
3. Appears as capital investment on the cash flow statement

Impact on shareholder equity:

1. Investing activities in nth years leads to increase in profits next year. Any capital investment starts generating revenue for the firm. This incremental revenue translates into the profits of the firm and increases shareholder's equity in the long run.