Amaazon

Balance Sheet Analysis

1. Explain the findings regarding the company’s asset accounts for the previous five years. Include the following details in your response:
   1. Describe in detail the material changes in the asset accounts, including changes in cash, AR, inventory, property, plant and equipment, and goodwill.
   2. Explain what these changes might be related to.
2. Explain the findings regarding the company’s liability accounts for the previous five years. Include the following details in your response:
   1. Describe in detail the material changes in both current and long-term liabilities.
   2. Explain what these changes might be related to.
3. Explain the findings regarding the company’s equity accounts for the previous five years. Include the following details in your response:
   1. Describe in detail the changes to equity accounts, including common stock, treasury stock, or additional paid in capital (i.e., whether the company raised funds or retired stock).
   2. Explain how the changes compare to the net income or other sections of the balance sheet.
   3. Identify whether the company is paying out dividends.
   4. Explain in detail how the company’s dividend payouts have changed over the past five years.
   5. Describe in detail the changes in “total equity” (representing the current “book value” of the company).
4. Explain what the company’s current and prior year liquidity and debt-to-equity ratios say about the company’s financial health. Consider the following questions to guide your response:
   1. What is an appropriate level of debt?
   2. How does this year’s performance compare to the previous year?

Income Statement and Cash Flow Analysis

1. Explain the profitability ratios that are included in the company’s financial statements. Include the following detail in your response:
   1. Explain any trends and relate any changes back to the balance sheet and income statement accounts used in the ratio calculation.
2. Explain the profitability of the company for the prior and current years. Consider the following questions to guide your response:
   1. What does a vertical analysis of the company’s gross revenue show you? What is the percentage (%) of change year over year for these past five years?
   2. How are the company’s COGS and gross profit margin being managed?
   3. How are the company’s sales, general, and administrative expenses being managed as a percentage of sales? What does this tell you about the company’s current business cycle? Remember that it is normal for this percentage to rise when sales are dropping and fall when sales are rising. If this is not happening, what might be the reason?
3. Describe what free cash flow is and how it is calculated.
4. Explain the free cash flow history for the company.
5. Explain the data reported in the cash flow statement for all five years reported. Include the following details in your response:
   1. Identify the amount of cash flow reported from operations.
   2. Identify the amount of cash flow reported from investments.
   3. Identify the amount of cash flow reported from financing.
   4. Explain the correlation between each of these categories of cash flow for the past five years.

Normalization Adjustments Analysis

1. Define the term normalization adjustment.
2. Identify three examples of balance sheet normalization adjustments that might appear.
3. Identify three examples of income statement normalization adjustments that might appear.

Summary

1. Summarize your findings for the valuation team. Include the following details in your response:
   1. Explain what you learned as you researched the company.
   2. Identify the key points the valuation team needs to be aware of.
2. Create at least one effective visualization that supports key points. Include the following detail in your response:
   1. Provide appropriate labels for the visualization(s).