ACCT 1120 ~ Financial Accounting II
Financial Statement Analysis Assignment
Revised November 12, 2010
This is a two part project. In part one you are going to have the opportunity to gather financial information on a public corporation. You will be asked to answer several questions and submit that information to your instructor as part of the project. In part two you are going to have a chance to analyze that same information by writing a short report that discusses your opinion of the company’s financial position. This project was designed to give you a first hand experience of being a “User” of financial information. Good luck and have fun! It is due on the date shown on the calendar.
PART One. ~ Information Gathering on Amazon
Step 1:Go to
At bottom of page click on Investor Relations
On left side of page click on Annual Report and Proxies
Download 2006 Annual Report (issued in 2007)
Step 2:Print the financial statements (pages 46-49)
Step 3: Use the 2007 Annual Report at the back of your text
You now have every thing you need to finish part one. Great start! All questions refer to2007 unless otherwise indicated. Most of the ratios asked forare summarized in the book on page 693. Dollar amounts on the financial statements are in millions. When answering questions remember to add 6 zeros to your numbers when applicable. You must show your calculations to receive credit. Show your work neatly. I recommend making a copy of this handout to work on and then give me the final copy.
- Who audited the financial statements?
Ernst & Young LLP, Independent Registered Public Accounting Firm
- What is the name of the Income Statement?
Consolidated Statement of Operations
- What is the amount of “cost of goods sold”?
$14,896,000,000
- What is the amount of net income?
$645,000,000
5.What is the basic earnings per share amount found on the Income Statement?
$1.52
6. What is the diluted earnings per share amount found on the Income Statement?
$1.49
7.What is the name of the Balance Sheet?
Consolidated Balance Sheet
8.What is the amount of Marketable Securities?
$958,000,000
9.What was the net change in unrealized gains/losses on AFS securities, net of tax?
($1,000,000)
10.Does the company have a preferred stock outstanding?
No
Using the 2008 Balance Sheet determine:
11. How many shares of common stock are issued?
12. How many shares of common stock are outstanding?
13.How many shares of treasury stock are owned?
With a value of how much?
14.Were any dividends declared this year?
15.Which format does Amazon.com use to report the operating section of the Statement of Cash Flows?
Horizontal Analysis
16.What is the amount of income tax paid in cash?
$53,000,000
17.What were cash flows from operations?
$1,697,000,000
18.What was the largest single inflow of investing cash?
Sales and maturities of marketable securities and other investments
19.What was the largest single outflow of investing cash?
Purchases of marketable securities and other investments
20.What was the largest single outflow of financing cash?
Repayments of long term debt and capital lease obligations
Answers for Questions 21-25 are found in the Notes to Consolidated Financial Statements
21.Was Goodwill impaired in 2008 or 2007?
No
22.Which method does Amazon use to depreciate fixed assets?
Straight Line Method
23.As Shown on the income statement, what is the basic weighted-averagenumber of shares outstanding for the most current year?
What would be the number of weighted-average shares assuming dilution (if everything which could be converted into common stock was converted)?
24.What were the balances in the Allowance for Doubtful Accounts on:
December 31, 2008 $81,000,000
December 31, 2007 $64,000,000
25.What inventory valuation method is used?
FIFO Method
26.On which page number of the annual report does it state what Amazon
classifies as cash equivalents?
850
27.How is “Revenue” recognized from product sales or services rendered?
When the following 4 revenue recognition criteria are met: persuasive evidence
of an arrangement exists, delivery has occurred or services have been
rendered, the selling price is fixed or determinable, and collectability is
reasonably assured.
28.What were the Company’s current 2008 taxes?
$252,000,000
29.Is Amazon involved in any legal proceedings?
If so, how many?
Yes, 7 legal proceedings
30.Were there any changes in Internal Control over Financial Reporting?
No
31. A. Calculate Gross Profit Percentage for the current year:
4,270,000,000/19,166,000,000= 22.3%
B. Prior year?
3,353,000,000/14,835,000,000= 22.6%
32. A. Calculate Days Sales in Receivables for the current year:
365/25.02= 14.59
B. Prior year:
365/26.88= 13.58
33. A. Calculate Inventory Turnover for the current year:
14,896,000,000/(1,399,000,000+ 1,200,000,000/2)= 11.46
B. Prior year:
11,482,000,000/(1,200,000,000 + 877,000,000/2)= 11.06
34. A. Calculate Current Ratio for the current year:
6,157,000,000/4,746,000,000= 1.30
B. Prior year:
5,164,000,000/3,714,000,000= 1.39
35. A. Calculate Debt Ratio for the current year:
5,642,000,000/8,314,000,000= .68
B. Prior year:
5,288,000,000/6,485,000,000= 82
36. A. Calculate Acid-Test (Quick) Ratio for the current year:
2,769,000,000+958,000,000+827,000,000/4,746,000,000= .96
B. Prior year:
2,539,000,000+573,000,000+705,000,000/3,714,000,000= 1.03
37. A. Calculate Rate of Return on Net Sales for the current year:
645,000,000/19,166,000,000= 3%
B. Prior year:
476,000,000/14,835,000,000= 3%
38. A. Calculate Rate of Return on Common Stockholder’s Equity for the current year:
645,000,000/(2,672,000,000+1,197,000,000/2)= .33
B. Prior year:
476,000,000/(1,197,000,000+431,000,000/2)= .58
39. A. Calculate Times Interest Earned Ratio for the current year:
842,000,000/71,000,000= 11.86
B. Prior year:
655,000,000/77,000,000= 8.51
40.A. Calculate the Price/Earnings ratio for the current year:
51.28/1.52= 33.74
B. Prior year:
92.64/1.15= 80.56
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