Amazon.com Inc. is a corporate organization that provides online retail services. Essentially, Amazon.com Inc. operates in different business segments; these include amazon web services (AWS), International, as well as North America. Precisely, the north American segment consists of customer subscriptions throughout North America and the retail of consumer products. Apart from the North American segment, the international category Amazon.com Inc. operations offer consumer with different retail services that include subscriptions in internationally-based websites and the retail of consumer products. Amazon web services, the third segment of Amazon.com Inc. Has broader components of business categories such as AWS services, database, storage, and computing. Usually, the AWS provides support for privately owned, academic institutions, businesses, and government agencies. Despite the intense competition in the different business segments of Amazon.com Inc., the company has excelled and registered increase profit margins. Indeed, the last three financial statements of Amazon.com Inc. highlight the milestone that the company has accomplished in establishing itself as a reputable corporate organization.
Company Analysis of the Income Statements Over the Last Three Years and The Noticeable Trends
Any detailed evaluation of the success of a corporate organization must take into consideration its recent and current financial statements. Certainly, income statements depict accurate scopes of the financial position of any corporate entity. With regards to Amazon.com Inc., recent, the analysis of its income statements will financial years’ f 2016, 2017, and 2018. To examine accurate financial details, it is imperative to consider the common size consolidated income statement of Amazon.com Inc.
Consolidated Income Statements for Amazon.Com Inc.
The consolidated income statements of Amazon.com Inc. illustrate different trends of the company, especially in net sales, operating income, non-operating income (loss) before taxes, as well as net income (loss). Considering the financial years consisting of 12 months ending in 2016, 2017, and 2018, the net product sales, net service sales, underwent a gradual increase in the subsequent financial years. To illustrate, the net product sales in 2016, 2017, and 2018 are 60.61%, 66.5%, and 60.94%, respectively. Despite the marginal discrepancies the overall trends of the net sales across the three years, it is clear that the net product sales of Amazon.com Inc. underwent a gradual decrease.
On the other hand, the three financial years saw a gradual increase in gross profit. For example, Amazon.com Inc.’s gross profit increased from 35.09% in 2016 to 40.25% in 2018. Essentially, the overall increase in gross profit was 5.16%. Similar trends are replicated in operating income, net operating income, income or loss before taxes, as well as net income. with regard to the income before income taxes, Amazon.com Inc. registered mixed results within the three financial years. Precisely, the company recorded 2.86% in 2016. However, there was a marginal decline in 2017 during which Amazon.com Inc. recorded income before income taxes at 2.14%. However, the trend catapulted to 4.84% in 2018.
Even though consolidated income statements of Amazon.com Inc. illustrate fairly mixed results, there are key noticeable trends that underscore the overall performance of the company and illustrate its profitability. Indeed, the noticeable overall trend of Amazon.com Inc. is largely incremental, especially with regards to net income, operating income, gross profit, as well as net sales. Hence, the incremental trends in the company’s consolidated financial statements are clear pointers of the excellence and desirable performance of the company.
Amazon’s Overall Business; Budgeted Performance and Current Trends
Detailed budgeting, planning, and oversight on financial expenditure are prerequisite aspects of a successful corporate organization. Indeed, apart from technological innovations, proper budgeting has become an instrumental tool in the success of Amazon.com Inc. According to the consolidated financial statements of the company, the current ration of the company deteriorated design the financial years of 2016, 2017, and 2018. Such an aspect is a clear pointer of the liquidity ratio of the company and illustrates the ration between the current assets and liabilities. In its current budgeting, Amazon.com Inc. has embarked on a concerted effort to tackle the deteriorated aspects of the current ratio to stabilize its current assets. Besides, Amazon.com Inc. has broadened the scope of diversification of the company, an aspect that will enable t to bolster the gross sales for an overall increase in net profit, hence performance.
Amazon Profit Margin and Profit Margin Ratios
The profit margin ratio is also referred to as the gross profit ratio or the return on sales ratio. Usually, auditors rely on the profit margin ratio as well as the margin ratios to determine the scope of profitability of a corporate institution. In the recent three consecutive financial years, Amazon.com Inc. has demonstrated varying profit margin and profit margin ratios. To understand the varying scopes of amazon’s profit margins, there is an imperative need to determine the profit margin ratios for the three consecutive years by dividing net income by net sales.
The table illustrates marginal changes in the profit margin, as well as the profit margin ratios of Amazon.com Inc., which is relatively low. However, the ratio is relatively desirable, given the prevailing intense competition in the retail business within North America. However, a concerted effort to increase the profit margin ratio will lay a remarkable role in enhancing the profitability of Amazon.com Inc.
- Stock Analysis on Net. (2019). Amazon.com Inc. (AMZN). Retrieved from https://www.stock-analysis-on.net/NASDAQ/Company/Amazoncom-Inc/Financial-Statement/Income-Statement