Question
Analyzing, Forecasting, and Interpreting Both Income Statement and Balance Sheet Following are the income statements and balance sheets of Amazon.com Inc. AMAZON.COM INC. Consolidated Statement
Analyzing, Forecasting, and Interpreting Both Income Statement and Balance Sheet Following are the income statements and balance sheets of Amazon.com Inc.
AMAZON.COM INC. | |||
---|---|---|---|
Consolidated Statement of Operations | |||
$ millions | Dec. 31, 2015 | Dec. 31, 2014 | |
Net product sales | $79,268 | $70,080 | |
Net service sales | 27,738 | 18,908 | |
Total net sales | 107,006 | 88,988 | |
Operating expenses | |||
Cost of sales | 71,651 | 62,752 | |
Fulfillment | 13,410 | 10,766 | |
Marketing | 5,254 | 4,332 | |
Technology and content | 12,540 | 9,275 | |
General and administrative | 1,747 | 1,552 | |
Other operating expense (income), net | 171 | 133 | |
Total operating expenses | 104,773 | 88,810 | |
Income from operations | 2,233 | 178 | |
Interest income | 50 | 39 | |
Interest expense | (459) | (210) | |
Other income (expense), net | (256) | (118) | |
Total non-operating (expense) | (665) | (289) | |
Income (loss) before income taxes | 1,568 | (111) | |
Provision for income taxes | (950) | (167) | |
Equity-method investment activity, net of tax | (22) | 37 | |
Net income (loss) | $596 | $(241) |
AMAZON.COM INC. | |||
---|---|---|---|
Consolidated Balance Sheets | |||
In millions, except par value | Dec. 31, 2015 | Dec. 31, 2014 | |
Current Assets | |||
Cash and cash equivalents | $15,890 | $14,557 | |
Marketable securities | 3,918 | 2,859 | |
Inventories | 10,243 | 8,299 | |
Accounts receivable, net and other | 6,423 | 5,612 | |
Total current assets | 36,474 | 31,327 | |
Property and equipment, net | 21,838 | 16,967 | |
Goodwill | 3,759 | 3,319 | |
Other assets | 3,373 | 2,892 | |
Total assets | $65,444 | $54,505 | |
Current Liabilities | |||
Accounts payable | $20,397 | $16,459 | |
Accrued expenses and other | 10,384 | 9,807 | |
Unearned revenue | 3,118 | 1,823 | |
Total current liabilities | 33,899 | 28,089 | |
Long-term debt | 8,235 | 8,265 | |
Other long-term liabilities | 9,926 | 7,410 | |
Stockholders' equity | |||
Preferred stock, $0.01 par value: Authorized shares-500 | |||
Issued and outstanding shares-none | 0 | 0 | |
Common stock, $0.01 par value: Authorized shares-5,000 | |||
Issued shares-494 and 488 Outstanding shares-471 and 465 | 5 | 5 | |
Treasury stock, at cost | (1,837) | (1,837) | |
Additional paid-in capital | 13,394 | 11,135 | |
Accumulated other comprehensive loss | (723) | (511) | |
Retained earnings | 2,545 | 1,949 | |
Total stockholders' equity | 13,384 | 10,741 | |
Total liabilities and shareholders' equity | $65,444 | $54,505 |
Forecast Amazon's 2016 income statement using the forecast assumptions, which are expressed as a percentage of total net sales unless otherwise indicated ($ in millions).
Net product sales growth | 15% |
Net service sales growth | 40% |
Cost of sales | 67.0% |
Fulfillment | 12.5% |
Marketing | 4.9% |
Technology and content | 11.7% |
General and administrative | 1.6% |
Interest income | $60 |
Interest expense | $520 |
Income tax expense (% pretax income) | 38% |
- Forecast no change in the following income statement accounts: Other operating expense, net, Other expense, net; and Equity method investment activity.
-
Do not use negative signs with any of your answers in the income statement.
AMAZON.COM INC. | ||
---|---|---|
Forecated Income Statement | ||
$ millions | 2016 | |
Net product sales | 91,158 | |
Net service sales | 38833 | |
Total net sales | 129991 | |
Operating expenses | ||
Cost of sales | 87094 | |
Fulfillment | 16249 | |
Marketing | 6370 | |
Technology and content | 15209 | |
General and administrative | 2080 | |
Other operating expense, net | 171 | |
Total operating expenses | 127173 | |
Income from operations | 2818 | |
Interest income | 60 | |
Interest expense | -520 | |
Otherexpense, net | -256 | |
Total non-operating income | -716 | |
Income (loss) before income taxes | 2102 | |
Provision for income taxes | -799 | |
Equity-method investment activity, net of tax | -22 | |
Net income (loss) | 1281 |
Forecast Amazon's 2016 balance sheet using the forecast assumptions, which are expressed as a percentage of total net sales unless otherwise indicated ($ in millions).
Inventories | 9.6% |
Accounts receivable, net and other | 6.0% |
Other assets | 3.2% |
Accounts payable | 19.1% |
Accrued expenses and other | 9.7% |
Unearned revenue | 2.9% |
Other long-term liabilities | 9.3% |
- Forecast no change in the following balance sheet accouts: Marketable securities, Goodwill, Preferred stock, Common stock, Treasury stock, APIC, and AOCL.
- Assume that in 2016, CAPEX will be 4.3% of Sales and depreciation expense will be 28.9% of the PPE balance at the start of the year.
- The company will repay $238 million of long-term debt in 2016.
- The company pays no dividends.
-
Round answers to the nearest whole number.
- Do not use negative signs with any of your answers in the balance sheet.
AMAZON.COM INC. | ||
---|---|---|
Forecasted Balance Sheet | ||
in millions | 2016 | |
Current Assets | ||
Cash and cash equivalents | Answer | |
Marketable securities | Answer | |
Inventories | Answer | |
Accounts receivable, net and other | Answer | |
Total current assets | Answer | |
Property and equipment, net | Answer | |
Goodwill | Answer | |
Other assets | Answer | |
Total assets | Answer | |
Current Liabilities | ||
Accounts payable | Answer | |
Accrued expenses and other | Answer | |
Unearned revenue | Answer | |
Total current liabilities | Answer | |
Long-term debt | Answer | |
Other long-term liabilities | Answer | |
Total liabilities | Answer | |
Stockholders' equity | ||
Preferred stock, $0.01 par value: Authorized shares-500 | ||
Issued and outstanding shares-none | Answer | |
Common stock, $0.01 par value: Authorized shares-5,000 | ||
Issued shares-494 and 488 Outstanding shares-471 and 465 | Answer | |
Treasury stock, at cost | Answer | |
Additional paid-in capital | Answer | |
Accumulated other comprehensive loss | Answer | |
Retained earnings | Answer | |
Total stockholders' equity | Answer | |
Total liabilities and shareholders' equity | Answer |
b. What does the forecasted adjustment to balance the accounting equation from part a reveal to us about the forecasted cash balance and related financing needs of the company? Explain. Check and choose the best answer:
- Amazon will generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust marketable securities, increasing total assets.
- Amazon will generate sufficient cash for the coming year. The cash balance increases fairly significantly, we could adjust marketable securities, leaving total assets unchanged.
- Amazon will not generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust marketable securities, leaving total assets unchanged.
- Amazon will not generate sufficient cash for the coming year. The cash balance decreases fairly significantly, we could adjust short-term debt, increasing total assets unchanged.
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