Instructions
Throughout this course, you have been working on your research paper on Amazon Inc. For this assignment, you will consolidate the parts of the assignment you wrote in Units II, V, and VI, which are all attached. In addition, you will add a new section that comprises content you have learned in this unit.
First, combine Parts I-III of your paper. Be sure to make any changes necessary. Make sure that you include an introduction and transitions so that these three parts read as one cohesive document.
Then, you will need to examine Amazon’s working capital management. Look at Amazon’s annual report and answer the following questions:
§ What is Amazon’s cash position? Do they reflect positive cash balances for the last three years?
§ What methods does Amazon use to ensure and maintain positive cash flows?
§ What methods of short-term financing does Amazon use?
§ Conclude your paper with a final recommendation about whether or not Amazon would be a good investment for potential investors.
Your finished paper must be a minimum of seven pages long, and you must use at least five sources (most of which were likely used in other units). Adhere to APA Style when creating citations and references for this assignment.
Please see Unit II, V, and VI attached.
UNIT II SCHOLARLY ACTIVITY 1 UNIT II SCHOLARLY ACTIVITY2 The company that I have chosen for this assignment is Amazon Incorporation. Amazon Incorporation is one of the largest and biggest company in the world. The Headquarter of the company is situated in Washington. The company was first listed on the Stock Exchange in the year 1997 and the symbol is “AMZN”. The company was founded by Jeff Bezos in the year 1994 and the primary business of the company back then was to sell books to the customers online. Since then, the company has started selling all kinds of products online including but not limited to electronics, software, video games, apparel, furniture, etc. In the year 2015, Amazon Incorporation left behind the Walmart as the biggest retailer of goods and services in the United of America by market capitalization (Amazon, 2020). In the year 2017, Amazon Incorporation acquired Whole Foods in a deal estimated to be around $13.40 Billion Dollars which helped the company to increase its physical stores and help serve the customers faster and more conveniently. Due to COVID-19 and huge demand of Online Orders the Market Capitalization of the company has increased many folds and the company has went on to become the most valuable company in the world. Even though the company started as an online retailer of goods and services, the company has now diversified its business operations by entering into markets like downloading and distribution of music and video through its Amazon Prime Video. Amazon also has a subsidiary known as Amazon Web services will is in the business of cloud computing and another of its subsidiary known as Amazon Studios is in the business producing movies and web series (Amazon, 2020). The products and services are sold by Amazon Incorporation by using their website amazon.com. The list of products available on the website of the company are apparel, baby products, consumer electronics, beauty products, food items, groceries, health care products, personal products, kitchen products, toys and game products, etc. Amazon is available in many countries and has established separate website for each country which can used by the residents of that country to order the products. One of the reasons that the Amazon Incorporation has used to successfully deliver products to the customer is third party sellers. The company contacts small third-party sellers and registers them on their website and the sellers can list their products on the amazon website. Once the products are listed on the website, if any customer orders the products offered by the seller then the seller will get a notification by the website and then the seller can directly send the ordered product to the customer and amazon will make payment to the seller as and when received by the company from the customer. The company only invests in the short-term investments and does not invest in long term investments. Since the nature of the industry in which the company is that more funds are needed in the Working Capital of the company to help keep the operations of the company running smoothly, Hence the company only invests in the short-term investments which can be converted into cash by the company anytime as and when the requirement of the company is. As for the short-term investments, the company only invests in the AAA rated money market funds and short-term fixed income securities. Since the company might need, he funds anytime and the company is not making investments with the intention of higher profits, hence the company only invests in the AAA rated instruments on which the company might get lower returns. These investments are disclosed by the company in their balance sheet as a part of Cash and Cash Equivalents or Marketable Securities (SEC Filings, 2020). The Marketable securities which are debt securities are valued by the company at fair value and classifies as available for sale and the gain or loss due to the change in the fair value of the securities is reported by the company as Other Comprehensive income. Reference Amazon. (2020). Annual Report for the year 2020. Retrieved from https://s2.q4cdn.com/299287126/files/doc_financials/2020/ar/2019-Annual-Report.pdf SEC Filings. (2020). Amazon 10-k Filing. Retrieved from https://www.sec.gov/ix?doc=/Archives/edgar/data/1018724/000101872421000004/amzn-20201231.htm#i75de98b9097f40f3b5884e541f532421_73 UNIT V SCHOLARLY ACTIVITY 1 UNIT V SCHOLARLY ACTIVITY2 Amazon is currently listed on NASDAQ-GS. It is a recognized stock exchange and it is a global electronic marketplace for buying and selling securities. NASDAQ was created by the National Association of Securities Dealers (NASD) to enable investors to trade securities on a computerized, speedy and transparent system, and commenced operations on February 8, 1971 (Amazon, 2020). Taking a look back in the previous three years, the worth of stock was undervalued as it hasn’t reached its full potential. Even today stock is sky roaring high and even predicted to go much higher. Being the largest company to deal and the prime business of e-commerce in the world the stock price of Amazon for the last three years was highly undervalued. Although the stock of the company was increasing, but not at the pace at which it was anticipated to increase. Therefore, for the last three years Amazon has focused on its product and delivery system. They have also employed people across the globe and trained them to provide a better delivery service to the customers even in smallest of towns. The stock of the company should have increased at a much higher rate, but it increased slowly. At the current level also, the company is rapidly growing. The average stock price was around $ 2,904.32 at that time and since then it has grown at a steady rate providing good return to the investor. The fifty-two weeks high/low price at the very same period was $3,552.25 and $ 2,256.38 respectively (SEC Filings, 2020). If considering someone has bought stock at that low price, then definitely has earned almost 47% to 50% and similarly if bought at a high price it’s still going high ensuring return for the investors (Amazon, 2020). Amazon's stock split three times, as per the research conducted. In the month of June 1998, the company split its shares for the first time where in the holder of one equity share would have received two equity shares. The share split ratio was decided at 1:1. The second stock split happened within six months after the first stock split. It was announced in the month of January 1999. The third stock split happened in the month of September 1999. The first of these two was a three-for-one split. According to sources Amazon has 1% of its share outstanding and recently has shifted its authorized share capital from 400 crore to 2000 crore, 200 crore equity shares at ten per share (SEC Filings, 2020). It would have been a very wise decision to have invested in Amazon back in 1990’s due to the great potential in it at that time and with the given three splits of stock. Even $ 1,000 would have made anyone rich today but investing in it today is also not a bad option. Though its major potential is exhausted, but who knows what’s going to happen in the future. Therefore, yes you can still invest in Amazon and get some return from it since it still has P/E ratio of 81.65. That is good with quarterly earnings of 121% year on year basis, so it’s a good option available. The P/E ratio of 81.65 denotes that to earn $1 in in Amazon investor has to invest $81.65 (SEC Filings, 2020). This shows that the market price of the company is very high. From an investors perspective the company is performing really well since the investors are ready to pay high premium to invest in Amazon. This is not just due to the dividend, but because of the capital appreciation that Amazon has brought over the years to the stockholders. The company has been constantly increasing and outdoing the past performance of the past few years. Amazon has become one of the largest companies in the world. Thus, the quarterly earnings of the company were 121 % on your two-year basis which is an outstanding performance in today's market. In the recent times the E-Commerce has flourished, but also there have been companies who couldn't perform well. Amazon was able to build a brand of itself and the investors are satisfied with the return on equity as received by them. As we are talking about the rivals of the company, there is eBay in one hand and Amazon in other. Both in terms of price and activity Amazon is superior as they are pricing at $3,552.25 and eBay at $ 61.57 (SEC Filings, 2020). In terms of volatility Amazon is more volatile and volume trading in Amazon is far greater than eBay. This shows that Amazon, as a performer in the market, is very huge as the trading volumes of the company is very high. Also, the shift in the market prices of Amazon is where a lot of it is. Comparing only the market price of the company is not a good sign. Reference Amazon. (2020). Annual Report for the year 2020. Retrieved from https://s2.q4cdn.com/299287126/files/doc_financials/2021/ar/Amazon-2020-Annual-Report.pdf SEC Filings. (2020). Amazon 10-k Filing. Retrieved from https://www.sec.gov/ix?doc=/Archives/edgar/data/1018724/000101872421000004/amzn-20201231.htm#i75de98b9097f40f3b5884e541f532421_73 UNIT VI SCHOLARLY ACTIVITY 1 UNIT VI SCHOLARLY ACTIVITY2 Liquidity Ratio: The liquidity ratios are the ratios used by the companies to determine the liquidity of the company by measuring whether the company will be able to meet the short-term obligations of the company with the current assets of the company. The two liquidity ratios calculated under this assignment are as under: (a). Current Ratio: Current Ratio is the ratio which is used by the companies to determine whether the current assets of the company are sufficient to pay the current liabilities of the company (Liquidity, 2021). The formula used to calculate the current ratio of the company are as under: Current Assets / Current Liabilities Current Assets (In Billions $) $ 132.73 Current Liabilities (In Billions $) $ 126.39 Current Ratio 1.05 (b). Liquid Ratio: Current Ratio is the ratio which is used by the companies to determine whether the liquid assets of the company are sufficient to pay the current liabilities of the company. The formula used to calculate the liquid ratio of the company are as under: Liquid Ratio / Current Liabilities Liquid Assets (In Billions $) $ 108.94 Current Liabilities (In Billions $) $ 126.39 Liquidity Ratio 0.86 Profitability Ratio: Profitability ratios are the ratios used to determine the net profit generated by the company in relative to its revenue, operating costs, balance sheet items or shareholders equity. The two profitability ratios calculated under this assignment are as under: (a). Return on Equity (ROE): The return on equity is the ratio used to determine the return earned by the company in relative to the equity