Module 7 Book Financial Reporting Analysis 13 Edition Final

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.

Solution

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.