Analysis of balance sheet

Horizontal analysis

Horizontal analysis of balance sheet uses the balance sheet of company and analyzes its absolute change and relative change to find changes and trend of the assets and capital in a company during fiscal 2011 to 2015.

Table 4.1: Annual change in balance sheet (2011-2015) unit: US dollars million

2011-2012 2012-2013 2013-2014 2014-2015

Absolut

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Amazon are increasing faster with a growth rate at 35.7%, the 27.2% growth rate of current assets and 49.2% growth rate of non-current assets contributed to this high growth rate.

It is obviously that during years 2014 to 2015, the growth of total liability and total assets is slower and of equity is faster. In this period, absolute change of total liability is 8,296 million dollars which is not the lowest absolute change during the five years, but the relative change is only 19.0% which is the lowest relative change of total liability during the five years and absolute change of total assets is 10,939 million dollars which is not the lowest absolute change during the five years, but the relative change is only 20.1% which is the lowest relative change of total liability during the five years In this period, the total equity grows from 10,741 million dollars to 13,384 million dollars, with an absolute change in 2,643 million dollars and 24.6% in relative change.

Graph 4.1: Absolute change in balance sheet (2011-2015) unit: US dollars million

According to this graph, we can find that the capital of Amazon is keeping growing during 2011 to 2015. And it obviously that from 2013 to 2014 most part of balance sheet has the greatest growth during the five years. In this period, the amount of total assets had grown from 40,159 million dollars to 54,505 million dollars. Current assets increased 6,702 million dollars and non-current assets increased 7,644 million dollars. During this period, Cash and cash equivalents, as a part of current assets, increase 5,899 million dollars and the net increase

0

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of property and land is 6,018 million dollars contributed to increase of non-current assets. In the same time, the amount of liability is also increase with big amount that the amount of non-current assets increased by 8,242 million dollars with long-term debt increases 5,074 million dollars as a part of non-current assets and total liability growth from30,418 million dollars to 43,764 million dollars. However, total equity of Amazon is not increasing with its greatest absolute change during the five years which is 2,643 million dollars and during 2013 to 2014, the growth of equity id only 995 million dollars, or 10.2%.

During the increasing of last five years, assets of Amazon grow from 25,278 million dollars to 65,444 million dollars and each of cash and cash equivalents, property and equipment, fixture and equipment has a growth more than 10,000 million dollars. The liability grows from 17,521 million dollars to 52,060 million dollars and accounts payable increased about 10,000 million dollars during the 5 years. And total equity grows from 7,757 million dollars to 13,384 million dollars. During the five years, most items are increasing and there are still some items decreasing.

Vertical analysis

Vertical analysis of Amazon in structure of assets and capital is based on its balance sheet during fiscal 2011 to 2015. Vertical analysis can help us find out the relationship between every items during the five years.

Table 4.2: Assets of Amazon (2011-2015) unit: US dollars million

2011 2012 2013 2014 2015

Total cash 37.88% 35.17% 30.99% 31.95% 30.27%

Receivables 10.17% 10.33% 11.87% 10.30% 9.81%

Inventories 19.75% 18.53% 18.45% 15.23% 15.65%

Deferred income taxes 1.39% 1.39% ××× ××× ×××

Property, plant and equipment, net 17.47% 21.69% 27.26% 31.13% 33.37%

Goodwill 7.73% 7.84% 6.61% 6.09% 5.74%

Intangible assets 2.56% 2.23% 1.61% ××× ×××

Deferred income taxes 0.11% 0.38% ××× ××× 1.66%

Other long-term assets 2.93% 2.45% 3.20% 5.31% 3.50%

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According to table 4.2 and chart 4.1, we can find that the structure of total assets is quite stable. The main items of assets are total cash; property, plant and equipment; inventories;

receivables; and goodwill.

Chart 4.1: Assets structure of the Amazon （2011-2015）

The proportions of items in assets are quite stable but the structure of assets is change slowly.

It is obviously that the in 2011, the biggest part of asset in Amazon is cash which takes about 37% of assets. And the second is inventories which takes about 20% in assets. The third one is property, plant and equipment which take about 18% in assets. These three parts hold about 75% of total assets. However, during the five years, the structure of assets is slowly changed and the amount of total assets is increasing.

In the fiscal 2015, it is obviously that the structure of assets is changed that the property, plants and equipment became the biggest part of total assets and it holds about 32% of assets.

Then, the second one is cash which takes about 30% of the total assets. The third one is inventories which takes 15% of total assets. These three parts takes about 77% of total assets.

And the proportion of non-current assets became higher than current assets.

0%

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The proportion of cash is decreasing and proportion of fixed assets such as property, plant and equipment is increasing. This means the company prefers to hold non-current assets. And with the decreasing of proportion of cash taken in assets, the profitability of the company is increasing because the profitability of cash is very low.

Table 4.3: Capital of Amazon (2011-2015) unit: US dollars million

2011 2012 2013 2014 2015

Total liabilities 17521 24363 30413 43764 52060

Total equity 7757 8192 9746 10741 13384

Total liabilities and equity 25278 32555 40159 54505 65444 Percentage of liability 69.313% 74.836% 75.731% 80.294% 79.549%

Percentage of equity 30.687% 25.164% 24.269% 19.706% 20.451%

According to table 4.3, it can be found that most of Amazon is made up by liability, greater than 69%. The proportion of total liability increased from 17,521 million dollars to 52,060 million dollars in the fiscal 2011 to 2015. And in the fiscal 2015, the absolute changes of liability and equity were greatest as 8,296 million dollars and 2,643 million dollars but the relative changes were lower than previous fiscal year. The proportion of equity decreased yearly, in fiscal 2011, total equity is 7,757 million dollars which takes about 30.7% but it is only about 20.5% in fiscal 2015 with an amount as 13,384 million dollars.