a. Based on the information contained in this financial statement, compute free cash flow for the company for the most recent year provided.

b. What conclusions concerning the management of cash can be drawn from this data?

AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2014 2015 8,658 $ 14.557 S 2016 15,890 $ (241) 596 2.371 4,746 1,497 6.281 2,119 155 250 129 8,116 2.975 160 (20) (246) (829) 59 (316) (6) 81 (119) (2,187) (1,755) 4,294 (1.193) (1,039) 1.759 706 4,433 (3.692) 6,842 (1,426) (3,367) 5,030 1.724 11.931 913 7,401 (6,109) 11.920 (9.976) 16,443 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD OPERATING ACTIVITIES: Net income (loss) Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation of property and equipment, including internal-use software and website development, and other amortization, including capitalized content costs Stock-based compensation Other operating expense, net Other expense (income), net Deferred income taxes Excess tax benefits from stock-based compensation Changes in operating assets and liabilities: Inventories Accounts receivable, net and other Accounts payable Accrued expenses and other Additions to unearned revenue Amortization of previously unearned revenue Net cash provided by (used in) operating activities INVESTING ACTIVITIES: Purchases of property and equipment, including internal-use software and website development, net Acquisitions, net of cash acquired, and other Sales and maturities of marketable securities Purchases of marketable securities Net cash provided by (used in) investing activities FINANCING ACTIVITIES: Excess tax benefits from stock-based compensation Proceeds from long-term debt and other Repayments of long-term debt and other Principal repayments of capital lease obligations Principal repayments of finance lease obligations Net cash provided by (used in) financing activities Foreign currency effect on cash and cash equivalents Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS, END OF PERIOD SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest on long-term debt Cash paid for interest on capital and finance lease obligations Cash paid for income taxes, net of refunds Property and equipment acquired under capital leases Property and equipment acquired under build-to-suit leases (4.893) (979) 3,349 (2.542) (5.065) (4,589) (795) 3,025 (4,091) (6,450) (6,737) (116) 4.733 (7,756) (9,876) 6 829 6,359 621 (513) (1,285) (135) 4,432 (310) 5,899 119 353 (1.652) (2.462) (121) (3,763) (374) 1,333 (354) (3,860) (147) (2,911) (212) 3,444 $ 14,557 $ 15,890 $ 19,334 S 91 $ 86 177 325 $ 153 273 4,717 544 290 206 412 5,704 1.209 4,008 920 See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Year Ended December 31, 2015 2014 2016 $ 70,080 $ 18,908 88,988 79,268 $ 27,738 107,006 94,665 41,322 135,987 62,752 10,766 4,332 9,275 1,552 133 71,651 13,410 5,254 12,540 1,747 171 104,773 2.233 Net product sales Net service sales Total net sales Operating expenses: Cost of sales Fulfillment Marketing Technology and content General and administrative Other operating expense, net Total operating expenses Operating income Interest income Interest expense Other income (expense), net Total non-operating income (expense) Income (loss) before income taxes Provision for income taxes Equity-method investment activity, net of tax Net income (loss) Basic earnings per share Diluted earnings per share Weighted-average shares used in computation of earnings per share: Basic 88,810 178 39 (210) (118) (289) (111) (167) 50 (459) (256) (665) 1,568 (950) (22) 596 $ 1.28 $ 88,265 17,619 7,233 16,085 2,432 167 131,801 4,186 100 (484) 90 (294) 3,892 (1,425) (96) 2,371 5.01 37 $ $ (241) $ (0.52) $ (0.52) $ $ 1.25 $ 4.90 474 462 462 467 477 Diluted 484 See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in millions) Year Ended December 31, 2015 2014 2016 (241) $ 596 $ 2,371 (325) (210) (279) Net income (loss) $ Other comprehensive income (loss): Foreign currency translation adjustments, net of tax of $(3), $10, and $(49) Net change in unrealized gains (losses) on available-for-sale securities: Unrealized gains (losses), net of tax of $1, $(5), and $(12) Reclassification adjustment for losses (gains) included in "Other income (expense), net," net of tax of $(1), $0, and $0 Net unrealized gains (losses) on available-for-sale securities Total other comprehensive income (loss) Comprehensive income (loss) $ 2 (7) 9 (3) 8 17 (1) (326) (567) $ 5 (2) (212) 384 $ (262) 2,109 See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31, 2015 2016 ASSETS $ Current assets: Cash and cash equivalents Marketable securities Inventories Accounts receivable, net and other Total current assets Property and equipment, net Goodwill 15,890 $ 3,918 10,243 5,654 35,705 21.838 3.759 19,334 6,647 11,461 8,339 45,781 29,114 3,784 4,723 83,402 Other assets 3,445 64,747 $ $ $ 20,397 $ 10.372 3,118 33.887 8,227 9,249 25,309 13,739 4,768 43.816 7,694 12,607 Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses and other Unearned revenue Total current liabilities Long-term debt Other long-term liabilities Commitments and contingencies (Note 7) Stockholders' equity: Preferred stock, $0.01 par value: Authorized shares - 500 Issued and outstanding shares - none Common stock, $0.01 par value: Authorized shares - 5,000 Issued shares - 494 and 500 Outstanding shares -- 471 and 477 Treasury stock, at cost Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 5 (1,837) 13,394 (723) 2,545 13,384 5 (1,837) 17,186 (985) 4,916 19,285 83,402 $ 64,747 $ See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in millions) Common Stock Shares Accumulated Additional Other Treasury Paid-In Comprehensive Amount Stock Capital Income (Loss) 5 $ (1,837) $ 9.573 $ (185) $ 459 $ Balance as of January 1, 2014 Net loss Total Retained Stockholders' Earnings Equity 2,190 $ 9,746 (241) (241) (326) 2 11 | | | (326) 6 2 _ - - - 6 6 1 - - 1,510 - - 1,510 44 44 465 5 (1,837) 11.135 (511) 1,949 596 10,741 596 (212) LI (212) 6 4 4 Other comprehensive income (loss) Exercise of common stock options Excess tax benefits from stock-based compensation Stock-based compensation and issuance of employee benefit plan stock Issuance of common stock for acquisition activity Balance as of December 31, 2014 Net income Other comprehensive income (loss) Exercise of common stock options Excess tax benefits from stock-based compensation Stock-based compensation and issuance of employee benefit plan stock Issuance of common stock for acquisition activity Balance as of December 31, 2015 Net income Other comprehensive income (loss) Exercise of common stock options Excess tax benefits from stock-based compensation Stock-based compensation and issuance of employee benefit plan stock Balance as of December 31, 2016 119 - 119 | - - - 2.131 2,131 5 5 471 5 (1,837) 13,394 (723) 2,545 2.371 IT 13,384 2,371 (262) 1 (262) 1 - 829 829 2,962 5 $ (1,837) $ 17,186 $ 2,962 19,285 477 $ (985) $ 4,916 $ See accompanying notes to consolidated financial statements