Watching Amazon Flows

Seattle- Market gurus warn us of companies with losses and rising debt. one of those companies, however, is Amazon.com the largest U.S. Internet retailer. Jeff Bezos, founder and CEO of Amazon, started the company in his garage. "The first initial start-up capital for Amazon.com came primarily from my parents, and they invested a large fraction of their life savings," recalls Jeff. "My dad's first question was, 'What's the Internet?'... He wasn't making a bet on this company or this concept. He was making a bet on his son."

Jeff has grown Amazon from an online bookstore into one of the world's largest online retail stores to compete with the likes of Walmart and Target. Amazon's income and liabilities for the past four years follow:

($ millions) 2011 2012 2013 2014
Net Income $631 $(39) $274 $(241)
Liabilities 17,521 24,363 30,413 43,764

Interestingly, while Amazon reports negative income and rising debt, the market sees the company in a positive light. Financial publications such as Forbes named Amazon the 6th "Most Innovative Company in the World" and ranked it as the 13th "World's Most Valuable Brand."

Given Amazon's losses and debt levels, is the market failing to incorporate this? Is there something else that the market is focusing on?

Lets dig a bit deeper. Amazon's financial statement reveal rising sales, narly doubling over the past four years. Although costs exceed slaes in two of the recent four years, the growth in revenues foretells a positive future. Further, Amazon has pursued sizeable investments in research and development --to the tune of $9 billion in 2014 alone, which could yield large future payoffs. Finally, there are its cash flows, which are depicted here:

($ millions) 2011 2012 2013 2014
Operating CF $3903 $4180 $5475 $6842
Investing CF (1930) (3595) (4276) (5065)
Financing CF (482) 2259 (539) 4432

A key here is its operating cash flows, which have increased 75% over the past four years... an impressive trend! In addition, its large investing cash outflows are what we expect from a growth company. Also, its relatively small financing cash inflows suggest that much of its expansion is self-funded (a positive finding).

It is clear that analysis of Amazon requires examination and interpretation of its cash flows. Moreover, while there is risk in investing in a company with high research and development outlays, the market often sees such outlays as a precursor to sales and income growth. While only the future can reveal the success or failure of such cash outlays, it is clear that the market utilizes cash flow numbers in predicting the future and for stock valuation. "We earn trust with customers over time," insists Jeff. "And that actually does mazimize free cash flow over the long term."

Review the chapter's opener involving Amazon.com and its founder, Jeff Bezos. (UP ABOVE)

Requred

1. In a business such as Amazon, monitoring cash flow is always a priority. Even though Amazon now has billions in annual sales and sometimes earns a positive net income, explain how cash flow can lag behind net income.

2. Amazon is a publicly traded corporation. What are potential sources of financing for its future expansion?

I would like for the project to be on Amazon

The Project to be addressed by the Paper:

You have just graduated from Keiser University’s MBA program and have secured a position as a fund manager for a well known investment banking house. You have been given $25 million to manage/invest in a single stock. The fund is a pension/retirement fund so its perspective is long term with moderate risk of loss of capital and a required return of 9% per annum. Your assignment is to determine if the fund you are managing should invest $25 million dollars in the stock of the company you have selected for your first analysis/investment decision. Select a publicly traded US based company. Do not select a bank or financial intermediary (i.e Investment Bank, Insurance Company, Brokerage House etc). Your decision to invest or not invest will be supported by the research paper and a Power Point Presentation.

NOTE: Most of the data needed for this assignment can be found in Yahoo/finance. Go to Yahoo/finance, select your company, and view the table of contents on the left side of the page.

Your analysis, based on the concepts covered in this course, will address each of the following:

1.      Business Strategy Analysis: Develop an understanding of the business and

               competitive strategies of the company. Which of the three generic competitive

               strategies does the company utilize (low cost provider, differentiation, focus)?   This should be covered in not more than three paragraphs. Do not spend time

               writing a history of the company. This is an analysis, not a history lesson.

2.      Accounting Analysis: Do the accounting practices adopted by the company

generally reflect an accurate picture of the economic performance of the

company? Did your research find any public announcements of restatement of earnings or other financial statements that would indicate that the financial statements may be of dubious value? This can be done by reviewing the company's 8K filings with the SEC (a mandatory requirement for this paper). These filings can generally be found on the company's website under Investor Relations - SEC filings.

3.      Financial Analysis: Analyze financial ratios and cash flow measures of the

company relative to its historical performance. For purposes of this research paper a 2 year look back is sufficient and required. You must use at least 10 of the ratios noted on page 119 of the text including all four of the profitability ratios. (Liquidity: Current; Quick; Total assets assets turnover; fixed assets turnover; Days sales outstanding (DSO); Inventory turnover; Debt-to-assets ratio; Times-interest-earned; profit margin on sale; Basic earning power; return on total assets

4.      Prospective Analysis: Develop forecasted performance measures and list the   

assumptions associated with your forecast. List your assumptions and reasons for your forecast. You may also cite the works of other analysts who have published forecasted earnings for the time frame you are addressing. (Hint: take a look at Yahoo/finance - analysts opinion

5.      Conclusion: Will you or will you not invest $25 million in this particular

Company? Support your conclusion? Remember a negative conclusion is just as valid and valuable as a positive conclusion.

Use the following data to answer the next question: ============================================================================= # Hofstede's Individualism: Denmark: 74; England: 89; Greece: 35; Ireland: 70; Malaysia: 26; Portugal: 27; Russia: 39; Singapore: 20; South Korea: 18 # Hofstede's Power Distance: Denmark: 18; Greece: 60; England: 35; Ireland: 28; Malaysia: 100; Portugal: 63; Russia: 93; Singapore: 74; South Korea: 60 # Hofstede's Uncertainty Avoidance: Denmark: 23; England: 35; Greece: 100; Ireland: 35; Malaysia: 26; Portugal: 99; Russia: 95; Singapore: 8; South Korea: 85 # Hofstede's Masculinity: Denmark: 16; England: 66; Greece: 57; Ireland: 68; Malaysia: 50; Portugal: 31; Russia: 36; Singapore: 48; South Korea: 39 # Hofstede's Indulgence: Denmark: 70; England: 69; Greece: 50; Ireland: 65; Malaysia: 57; Portugal: 33; Russia: 20; Singapore: 46; South Korea: 29 ============================================================================= Imagine you were sent by your multinational company to a foreign subsidiary to start a new product line. However, since the beginning there was quite a bit of confusion in headquarters about the launch’s timeline. It was not exactly clear when the product should be launched, and to what extent the product should be changed to fit the needs of the local market. As time passed, you grew tense and restless, you could not sleep or function properly due to the situation at work. Your fellow countrymen understood what you felt, as they would feel exactly as you did. However, to your surprise, your local counterparts were quite undisturbed, and would calmly say that they would adapt to whatever decisions were made, and that it would all go well in the end. According to the data provided, and assuming the listed variables is all the information you have, there is a much greater probability that you were sent to a country such as ________, than to _______ : Group of answer choices

Portugal; Denmark

Greece; Malaysia

South Korea; Malaysia

Singapore; Russia

Perform a linear time series regression (“Trend Analysis” in Minitab or “Trendline” in Excel) of the historical data. For the parts below, generate a regression output report produced in either Excel or Minitab and submit it with your completed test.

a.   Attach a copy of your “Trend Analysis” or “Trendline” graph in a space created BELOW.

b.   State (here) the equation of the fitted regression line.

c.   On the basis of this regression analysis, calculate and state numerical values of the sales revenue forecasts for all four quarters of 2018.

d.   Calculate and state (here) the RMSE of this simple linear regression. [Hint: Different from forecasting, for regression RMSE = √SSE/√(n-2).]

1. Suppose a new company is interested in promoting their new diet management program. The concept is similar to weight watchers and involves an overall reduction of daily calorie intake. Before making a more direct effort at promoting the success of their program, the company wants to get an idea of how effective their program is based on a SRS. Assume the following table represents results pre and post intervention of 5 individuals varying approximately to a normal distribution.

A) What type of t-test would you use here?

B) Carry out an appropriate t test investigating the effectiveness of the new weight loss intervention at reducing overall calorie intake with alpha=.05. Be sure to include each of the four steps of hypothesis testing. Do not use excel or graphing calculator.

The claims department at Wise Insurance Company believes that younger drivers have more accidents and, therefore, should be charged higher insurance rates. Investigating a sample of 1,200 Wise policyholders revealed the following breakdown on whether a claim had been filed in the last 3 years and the age of the policyholder. Is it reasonable to conclude that there is a relationship between the age of the policyholder and whether or not the person filed a claim? Use the .05 significance level. Age Group No Claim Claim 16 up to 25 170 74 25 up to 40 240 58 40 up to 55 400 44 55 or older 190 24 Total 1,000 200 With Excel inputs and formulas

Determining Lower of Cost or Net Realizable Value (NRV)

Crane Company had the following inventory at December 31, 2017.

a. Determine the ending inventory amount by applying the net realizable value rule to:
1. Each item of inventory.
$Answer

2. Each major category of inventory.
$Answer

3. Total inventory.
$Answer

1. CC Car Wash specializes in car cleaning services. The services offered by the company, the exact service time, and the resources needed for each of them are described in the table following:

   Service	Description	Processing Time	Resource
   A. Wash	Exterior car washing and drying	10 minutes	1 automated washing machine
   B. Wax	Exterior car waxing	15 minutes	1 automated waxing machine
   C. Wheel Cleaning	Detailed cleaning of all wheels	16 minutes	1 employee
   D. Interior Cleaning	Detailed cleaning inside the car	20 minutes	1 employee

   The company offers the following packages to their customers:

   • Package 1: Includes only car wash (service A).

   • Package 2: Includes car wash and waxing (services A and B).

   • Package 3: Car wash, waxing, and wheel cleaning (services A, B, and C).

   • Package 4: All four services (A, B, C, and D).

   Customers of CC Car Wash visit the station at a constant rate (you can ignore any effects of variability) of 50 customers per day. Of these customers, 30 percent buy Package 1, 30 percent buy Package 2, 15 percent buy Package 3, and 25 percent buy Package 4. The mix does not change over the course of the day. The store operates 10 hours a day.

   g. What resource has the highest utilization rate? Input 1 for washing machine, input 2 for waxing machine, input 3 for employee at C, input 4 for employee at D.

   Your answer is .

After the first three cases were culture confirmed, the management at the factory requested that workers report any symptoms of illness that they might have experienced during the month of July. Of the 3155 employees, 74 reported gastrointestinal symptoms (i.e., diarrhea) in July and stool samples were obtained from these workers. Of the 74 workers who reported that they were ill, 56 were culture-confirmed. Based on retrospective interviews, the onset dates for diarrhea for these 56 workers were as follows:

1. What was the incidence rate for this eight day period?  
2. List two plausible reasons why only 56 of the 74 workers who said that they had experienced gastrointestinal problems could be culture-confirmed as being infected by e coli O157:H7.