Question

Module 7

Book: Financial Reporting & Analysis 13 Edition

Final Statement Analysis

Choose a publicly traded company and perform an expanded analysis on the financial statements. Use the most current 10K statements available on SEC or annual statements in Yahoo Finance. Complete the following for your chosen firm in an Excel spreadsheet: Company Chosen: Amazon

***https://finance.yahoo.com/quote/AMZN/financials?p=AMZN***

Horizontal and vertical analysis of the income statements for the past three years (all yearly balances set as a percentage of total revenues for that year). Horizontal and vertical analysis of the balance sheets for the past three years (all yearly balances set as a percentage of total assets for that year). Ratio analysis (eight ratios of your choosing) for the past three years PLUS a measurement for the creditworthiness of your firm as measured by Altman’s Z-score. Note that if you used your chosen firm for our ratio-related discussion posts, then you MUST also present industry-average ratios or current year competitor ratios for your ratio analysis. Comparing your firm’s ratios to a close competitor or an industry-average ratio makes your analysis much more meaningful.

Answer 1

Vertical Analysis of Income Statement
	12/31/2016	12/31/2015	12/31/2014		12/31/2016		12/31/2015		12/31/2014
Cost of Revenue	64.91%	66.96%	70.52%		88,265,000	135,987,000	71,651,000	107,006,000	62,752,000	88,988,000
Gross Profit	35.09%	33.04%	29.48%		47,722,000	135,987,000	35,355,000	107,006,000	26,236,000	88,988,000
Selling General and Administrative	32.01%	30.95%	29.28%		43,536,000	135,987,000	33,122,000	107,006,000	26,058,000	88,988,000
Operating Income or Loss	3.08%	2.09%	0.20%		4,186,000	135,987,000	2,233,000	107,006,000	178,000	88,988,000
Total Other Income/Expenses Net	0.14%	-0.19%	-0.09%		190,000	135,987,000	-206,000	107,006,000	-79,000	88,988,000
Earnings Before Interest and Taxes	3.22%	1.89%	0.11%		4,376,000	135,987,000	2,027,000	107,006,000	99,000	88,988,000
Interest Expense	0.36%	0.43%	0.24%		484,000	135,987,000	459,000	107,006,000	210,000	88,988,000
Income Before Tax	2.86%	1.47%	-0.12%		3,892,000	135,987,000	1,568,000	107,006,000	-111,000	88,988,000
Income Tax Expense	1.05%	0.89%	0.19%		1,425,000	135,987,000	950,000	107,006,000	167,000	88,988,000
Net Income From Continuing Ops	1.74%	0.56%	-0.27%		2,371,000	135,987,000	596,000	107,006,000	-241,000	88,988,000
Net Income Applicable To Common Shares	1.74%	0.56%	-0.27%		2,371,000	135,987,000	596,000	107,006,000	-241,000	88,988,000
Horizontal Analysis of Income Statement
	12/31/2016	12/31/2015	12/31/2014		12/31/2016		12/31/2015		12/31/2014
Cost of Revenue	140.66%	114.18%	100%		88,265,000		71,651,000		62,752,000
Gross Profit	181.90%	134.76%	100%		47,722,000		35,355,000		26,236,000
Selling General and Administrative	167.07%	127.11%	100%		43,536,000		33,122,000		26,058,000
Operating Income or Loss	2351.69%	1254.49%	100%		4,186,000		2,233,000		178,000
Total Other Income/Expenses Net	-240.51%	260.76%	100%		190,000		-206,000		-79,000
Earnings Before Interest and Taxes	4420.20%	2047.47%	100%		4,376,000		2,027,000		99,000
Interest Expense	230.48%	218.57%	100%		484,000		459,000		210,000
Income Before Tax	-3506.31%	-1412.61%	100%		3,892,000		1,568,000		-111,000
Income Tax Expense	853.29%	568.86%	100%		1,425,000		950,000		167,000
Net Income From Continuing Ops	-983.82%	-247.30%	100%		2,371,000		596,000		-241,000
Net Income Applicable To Common Shares	-983.82%	-247.30%	100%		2,371,000		596,000		-241,000	Vertical Analysis of Balance Sheet 12/31/2016 12/31/2015 12/31/2014 12/31/2016 12/31/2015 12/31/2014 Cash And Cash Equivalents 23.18% 24.54% 26.71% 19,334,000 83,402,000 15,890,000 64,747,000 14,557,000 54,505,000 Short Term Investments 7.97% 6.05% 5.25% 6,647,000 83,402,000 3,918,000 64,747,000 2,859,000 54,505,000 Net Receivables 10.00% 8.73% 10.30% 8,339,000 83,402,000 5,654,000 64,747,000 5,612,000 54,505,000 Inventory 13.74% 15.82% 15.23% 11,461,000 83,402,000 10,243,000 64,747,000 8,299,000 54,505,000 Total Current Assets 54.89% 55.15% 57.48% 45,781,000 83,402,000 35,705,000 64,747,000 31,327,000 54,505,000 Property Plant and Equipment 34.91% 33.73% 31.13% 29,114,000 83,402,000 21,838,000 64,747,000 16,967,000 54,505,000 Goodwill 4.54% 5.81% 6.09% 3,784,000 83,402,000 3,759,000 64,747,000 3,319,000 54,505,000 Other Assets 5.66% 5.32% 5.31% 4,723,000 83,402,000 3,445,000 64,747,000 2,892,000 54,505,000 Accounts Payable 46.82% 47.52% 48.19% 39,048,000 83,402,000 30,769,000 64,747,000 26,266,000 54,505,000 Other Current Liabilities 5.72% 4.82% 3.34% 4,768,000 83,402,000 3,118,000 64,747,000 1,823,000 54,505,000 Total Current Liabilities 52.54% 52.34% 51.53% 43,816,000 83,402,000 33,887,000 64,747,000 28,089,000 54,505,000 Long Term Debt 9.23% 12.71% 15.16% 7,694,000 83,402,000 8,227,000 64,747,000 8,265,000 54,505,000 Other Liabilities 15.12% 14.28% 13.60% 12,607,000 83,402,000 9,249,000 64,747,000 7,410,000 54,505,000 Total Liabilities 76.88% 79.33% 80.29% 64,117,000 83,402,000 51,363,000 64,747,000 43,764,000 54,505,000 Common Stock 0.01% 0.01% 0.01% 5,000 83,402,000 5,000 64,747,000 5,000 54,505,000 Retained Earnings 5.89% 3.93% 3.58% 4,916,000 83,402,000 2,545,000 64,747,000 1,949,000 54,505,000 Treasury Stock -2.20% -2.84% -3.37% -1,837,000 83,402,000 -1,837,000 64,747,000 -1,837,000 54,505,000 Capital Surplus 20.61% 20.69% 20.43% 17,186,000 83,402,000 13,394,000 64,747,000 11,135,000 54,505,000 Other Stockholder Equity -1.18% -1.12% -0.94% -985,000 83,402,000 -723,000 64,747,000 -511,000 54,505,000 Total Stockholder Equity 23.12% 20.67% 19.71% 19,285,000 83,402,000 13,384,000 64,747,000 10,741,000 54,505,000 Net Tangible Assets 18.59% 14.87% 13.62% 15,501,000 83,402,000 9,625,000 64,747,000 7,422,000 54,505,000 Horizontal Analysis of Balance Sheet 12/31/2016 12/31/2015 12/31/2014 12/31/2016 12/31/2015 12/31/2014 Cash And Cash Equivalents 132.82% 109.16% 100.00% 19,334,000 15,890,000 14,557,000 Short Term Investments 232.49% 137.04% 100.00% 6,647,000 3,918,000 2,859,000 Net Receivables 148.59% 100.75% 100.00% 8,339,000 5,654,000 5,612,000 Inventory 138.10% 123.42% 100.00% 11,461,000 10,243,000 8,299,000 Total Current Assets 146.14% 113.98% 100.00% 45,781,000 35,705,000 31,327,000 Property Plant and Equipment 171.59% 128.71% 100.00% 29,114,000 21,838,000 16,967,000 Goodwill 114.01% 113.26% 100.00% 3,784,000 3,759,000 3,319,000 Other Assets 163.31% 119.12% 100.00% 4,723,000 3,445,000 2,892,000 Accounts Payable 148.66% 117.14% 100.00% 39,048,000 30,769,000 26,266,000 Other Current Liabilities 261.55% 171.04% 100.00% 4,768,000 3,118,000 1,823,000 Total Current Liabilities 155.99% 120.64% 100.00% 43,816,000 33,887,000 28,089,000 Long Term Debt 93.09% 99.54% 100.00% 7,694,000 8,227,000 8,265,000 Other Liabilities 170.13% 124.82% 100.00% 12,607,000 9,249,000 7,410,000 Total Liabilities 146.51% 117.36% 100.00% 64,117,000 51,363,000 43,764,000 Common Stock 100.00% 100.00% 100.00% 5,000 5,000 5,000 Retained Earnings 252.23% 130.58% 100.00% 4,916,000 2,545,000 1,949,000 Treasury Stock 100.00% 100.00% 100.00% -1,837,000 -1,837,000 -1,837,000 Capital Surplus 154.34% 120.29% 100.00% 17,186,000 13,394,000 11,135,000 Other Stockholder Equity 192.76% 141.49% 100.00% -985,000 -723,000 -511,000 Total Stockholder Equity 179.55% 124.61% 100.00% 19,285,000 13,384,000 10,741,000 Net Tangible Assets 208.85% 129.68% 100.00% 15,501,000 9,625,000 7,422,000 Ratios 12/31/2016 12/31/2015 12/31/2014 12/31/2016 12/31/2015 12/31/2014 Gross Profit Margin 35.09% 33.04% 29.48% 47,722,000 135,987,000 35,355,000 107,006,000 26,236,000 88,988,000 Net Profit Margin 1.74% 0.56% -0.27% 2,371,000 135,987,000 596,000 107,006,000 -241,000 88,988,000 Return on Equity 14.52% 4.94% -2.24% 2,371,000 16,334,500 596,000 12,062,500 -241,000 10,741,000 Current Ratio               1.04                1.05                1.12 45,781,000 43,816,000 35,705,000 33,887,000 31,327,000 28,089,000 Quick Ratio               0.78                0.75                0.82 34,320,000 43,816,000 25,462,000 33,887,000 23,028,000 28,089,000 Net Working Capital Ratio 2.36% 2.81% 5.94% 1,965,000 83,402,000 1,818,000 64,747,000 3,238,000 54,505,000 Assets Turnover Ratio 183.58% 179.46% 163.27% 135,987,000 74,074,500 107,006,000 59,626,000 88,988,000 54,505,000 Debt to Equity Ratio 332.47% 383.76% 407.45% 64,117,000 19,285,000 51,363,000 13,384,000 43,764,000 10,741,000 Gross Profit Margin: Gross Profit/ Total Sales Net Profit Margin: Net Profit/ Total Sales Return on Equity: Net Income/Average Stockholders' Equity Current Ratio: Current Asset/Current Liabilities Quick Ratio: Quick Assets/Current Liabilities Quick Asset= Current Asset-Inventory Net Working Capital Ratio: Net Working Capital/Total Assets Net Working Capital : Current Asset-Current Liabilities Assets Turnover Ratio: Sales/Average Total Assets Debt to Equity Ratio: Total Liabilities/Total Stockholders' Equity AZ-Score = 1.2A + 1.4B + 3.3C + 0.6D + 1.0E 2.07575724 Where: A = Working Capital/Total Assets               0.02 B = Retained Earnings/Total Assets               0.06 C = Earnings Before Interest & Tax/Total Assets               0.05 D = Market Value of Equity/Total Liabilities               0.30 E = Sales/Total Assets               1.63 The lower the score, the higher the odds are that a company is headed for bankruptcy. A Z-score of lower than 1.8, in particular, indicates that the company is heading for bankruptcy. Companies with scores above 3 are unlikely to enter bankruptcy.