Calculate Amazon's current ratio (current assets / current liabilities) at 12/31/2020 and at 12/31/2021 (round your following computation to two decimal places (5.6793 = 5.68). Then select the correct answer below.

a.

Current ratio at 12/31/2020	Current ratio at 12/31/2021
1.10 times	1.05 times	Amazon's liquidity has decreased between the last two balance sheet dates.

b.

Current ratio at 12/31/2020	Current ratio at 12/31/2021
1.10 times	1.05 times	Amazon's liquidity has increased between the last two balance sheet dates.

c.

Current ratio at 12/31/2020	Current ratio at 12/31/2021
2.57 times	2.54 times	Amazon's liquidity has decreased between the last two balance sheet dates.

d.

Current ratio at 12/31/2020	Current ratio at 12/31/2021
1.05 times	1.14 times	Amazon's liquidity has increased between the last two balance sheet dates.

Which of Amazon's accounts increased when the company made a credit sale?

	a.	Accounts receivable.
	b.	Cash.
	c.	Inventories.
	d.	Accounts payable.

When Amazon collects an accounts receivable from a customer:

	a.	accounts payable decreases.
	b.	total assets increase.
	c.	total assets do not change.
	d.	net income does not change.
	e.	both answer c and answer d are correct.

Amazons most recent income statement:

	a.	is a picture of the company's financial position at December 31, 2021.
	b.	shows the changes in the company's stockholders' equity for the year ended December 31, 2021.
	c.	shows the companys results of operations for the year ended December 31, 2021.
	d.	shows how much cash revenues exceeded cash expenses for the year ended December 31, 2021.

Amazon's total net earned revenue from both cash and credit sales for its most recent year end was (in millions) :

	a.	$241,787.
	b.	$469,822.
	c.	$228,035.
	d.	$232,887.

How much did Amazon's earned operating revenues exceed its incurred operating expenses during the most recent reporting period (in millions)?

	a.	$197,478.
	b.	$22,899.
	c.	$24,879.
	d.	$33,364.

Amazon's inventory on hand:

	a.	increased $3,298 (in millions) over the last two balance sheet dates.
	b.	increased $8,845 (in millions) over the last two balance sheet dates.
	c.	decreased $8,845 (in millions) over the last two balance sheet dates.
	d.	decreased $39,037 (in millions) over the last two balance sheet dates.

Amazon's cost of inventory sold during the recent reporting period was (in millions):

	a.	$32,640.
	b.	$23,795.
	c.	$233,307.
	d.	$272,344.

Assuming rising prices, Amazon's inventory method results in more total assets than if LIFO was used.

True

False

Calculate Amazon's inventory turnover ratio (Cost of sales / Inventories) for the last two balance sheet dates. Round to two decimal places (5.6728 = 5.67). Then select the correct answer below.

	a.	Amazon's inventory turnover ratio increased from 9.80 times in 2020 to 8.34 times in 2021. Amazon sold inventory more quickly in 2021 than in 2020.
	b.	Amazon's inventory turnover ratio decreased from 9.80 times in 2020 to 8.34 times in 2021. Amazon sold inventory more slowly in 2021 than in 2020.
	c.	Amazon's inventory turnover ratio increased from 8.08 times in 2020 to 9.80 times in 2021. Amazon sold inventory more quickly in 2021 than in 2020.
	d.	Amazon's inventory turnover ratio cannot be determined.

AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2019 2020 32,173 $ 36,410 $ 2021 42,377 S 11.588 21,331 33,364 21,789 6,864 164 (249) 796 25,251 9,208 (71) (2,582) (554) 34,296 12,757 137 (14,306) (310) (3,278) (7,681) 8,193 (1,383) (2,849) (8,169) 17,480 5,754 1,265 66,064 (9,487) (18,163) 3,602 2,123 2,314 46,327 1,711 38,514 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization of property and equipment and capitalized content costs, operating lease assets, and other Stock-based compensation Other operating expense income), net Other expense (income), net Deferred income taxes Changes in operating assets and liabilities: Inventories Accounts receivable, net and other Accounts payable Accrued expenses and other Unearned revenue Net cash provided by (used in) operating activities INVESTING ACTIVITIES: Purchases of property and equipment Proceeds from property and equipment sales and incentives 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: Proceeds from short-term debt, and other Repayments of short-term debt, and other Proceeds from long-term debt Repayments of long-term debt Principal repayments of finance leases Principal repayments of financing obligations Net cash provided by (used in) financing activities Foreign currency effect on cash, cash equivalents, and restricted cash Net increase (decrease) in cash, cash equivalents, and restricted cash CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD (16,861) 4,172 (2,461) 22,681 (31,812) (24,281) (40,140) 5,096 (2,325) 50,237 (72,479) (59,611) (61,053) 5,657 (1,985) 59,384 (60,157) (58,154) 1,402 (1,518) 871 (1,166) (9,628) (27) (10,066) 70 4,237 36,410 6,796 (6,177) 10,525 (1,553) (10,642) (53) (1,104) 618 5,967 42,377 7,956 (7,753) 19,003 (1,590) (11,163) (162) 6,291 (364) (5,900) 36,477 $ $ See accompanying notes to consolidated financial statements. Table of Contents 2021 241,787 228,035 469,822 272,344 75,111 35,931 56,052 32,551 8,823 62 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Year Ended December 31, 2019 2020 Net product sales S 160,408 $ 215,915 $ Net service sales 120,114 170,149 Total net sales 280,522 386,064 Operating expenses: Cost of sales 165,536 233,307 Fulfillment 40,232 58,517 Technology and content 42,740 Marketing 18,878 22,008 General and administrative 5,203 6,668 Other operating expense (income), net 201 (75) Total operating expenses 265,981 363,165 Operating income 14,541 22,899 Interest income 832 555 Interest expense (1,600) (1,647) Other income (expense), net 203 2,371 Total non-operating income (expense) (565) 1,279 Income before income taxes 13,976 24,178 Provision for income taxes (2,374) (2,863) Equity-method investment activity, net of tax (14) 16 Net income S 11,588 $ 21,331 $ Basic earnings per share $ 23.46 42.64 S Diluted earnings per share $ 23.01 $ 41.83 S Weighted average shares used in computation of earnings per share: 494 500 444,943 24,879 448 (1,809) 14,633 13,272 38,151 (4,791) 4 33,364 65.96 64.81 Basic 506 Diluted 504 510 515 See accompanying notes to consolidated financial statements. 37 Table of Contents 2021 33,364 (819) AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Year Ended December 31, 2019 2020 Net income $ 11,588 $ 21,331 S Other comprehensive income (loss): Net change in foreign currency translation adjustments: Foreign currency translation adjustments, net of tax of $(5), $(36), and $47 78 561 Reclassification adjustment for foreign currency translation included in "Other operating expense (income), net," net of tax of $29, $0, and $0 (108) Net foreign currency translation adjustments (30) 561 Net change in unrealized gains (losses) on available-for-sale debt securities: Unrealized gains (losses), net of tax of $(12), S(83), and $72 83 273 Reclassification adjustment for losses (gains) included in Other income (expense), net," net of tax of $0, $8, and $13 (4) (28) Net unrealized gains (losses) on available-for-sale debt securities 79 245 Total other comprehensive income (loss) 49 806 Comprehensive income 11,637 $ 22,137 S (819) (343) (34) (377) (1,196) 32,168 See accompanying notes to consolidated financial statements. 38 AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31, 2020 2021 S 42,122 $ 42,274 23,795 24,542 132,733 113,114 37,553 15,017 22,778 321,195 $ 36,220 59,829 32,640 32,891 161,580 160,281 56,082 15,371 27,235 420,549 S S ASSETS Current assets: Cash and cash equivalents Marketable securities Inventories Accounts receivable, net and other Total current assets Property and equipment, net Operating leases Goodwill Other assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses and other Unearned revenue Total current liabilities Long-term lease 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 527 and 532 Outstanding shares 503 and 509 Treasury stock, at cost Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 72,539 $ 44,138 9,708 126,385 52,573 31,816 17,017 78,664 51,775 11,827 142,266 67,651 48,744 23,643 5 5 (1,837) 42,865 (180) (1,837) 55,538 (1,376) 85,915 138,245 420,549 52,551 93,404 321,195 S $ See accompanying notes to consolidated financial statements. Income Taxes Income tax expense includes U.S. (federal and state) and foreign income taxes. Certain foreign subsidiary earnings and losses are subject to current U.S. taxation and the subsequent repatriation of those earnings is not subject to tax in the U.S. We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we would incur significant, additional costs upon repatriation of such amounts. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as net operating loss and tax credit carryforwards, and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred tax assets represent amounts available to reduce income taxes payable in future periods. Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe they will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative loss experience and expectations of future earnings, capital gains and investment in such jurisdiction, the carry- forward periods available to us for tax reporting purposes, and other relevant factors. We utilize a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating our tax positions and estimating our tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes. We include interest and penalties related to our tax contingencies in income tax expense. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1 Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. We measure the fair value of money market funds and certain marketable equity securities based on quoted prices in active markets for identical assets or liabilities. Other marketable securities were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. We did not hold significant amounts of marketable securities categorized as Level 3 assets as of December 31, 2020 and 2021. We hold equity warrants giving us the right to acquire stock of other companies. As of December 31, 2020 and 2021, these warrants had a fair value of $3.0 billion and $3.4 billion, and are recorded within Other assets" on our consolidated balance sheets with gains and losses recognized in Other income (expense), net" on our consolidated statements of operations. These warrants are primarily classified as Level 2 assets. Cash and Cash Equivalents We classify all highly liquid instruments with an original maturity of three months or less as cash equivalents. Inventories Inventories, consisting of products available for sale, are primarily accounted for using the first-in, first-out method, and are valued at the lower of cost and net realizable value. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category. The inventory valuation allowance, representing a write-down of inventory, was $2.3 billion and $2.6 billion as of December 31, 2020 and 2021. 45 Table of Contents We provide Fulfillment by Amazon services in connection with certain of our sellers programs. Third-party sellers maintain ownership of their inventory, regardless of whether fulfillment is provided by us or the third-party sellers, and therefore these products are not included in our inventories. We also purchase electronic device components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, we enter into agreements with contract manufacturers and suppliers for certain electronic device components. A portion of our reported purchase commitments arising from these agreements consists of firm, non-cancellable commitments. These commitments are based on forecasted customer demand. If we reduce these commitments, we may incur additional costs. We also have firm, non-cancellable commitments for certain products offered in our Whole Foods Market stores. Accounts Receivable, Net and Other Included in "Accounts receivable, net and other on our consolidated balance sheets are amounts primarily related to customers, vendors, and sellers. As of December 31, 2020 and 2021, customer receivables, net, were $14.8 billion and $20.2 billion, vendor receivables, net, were $4.8 billion and $5.3 billion, and seller receivables, net, were $381 million and $1.0 billion. Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory. We estimate losses on receivables based on expected losses, including our historical experience of actual losses. Receivables are considered impaired and written- off when it is probable that all contractual payments due will not be collected in accordance with the terms of the agreement. The allowance for doubtful accounts was $718 million, $1.1 billion, and $1.1 billion as of December 31, 2019, 2020, and 2021. Additions to the allowance were $1.0 billion, $1.4 billion, and $1.0 billion, and deductions to the allowance were $793 million, $1.0 billion, and $1.1 billion in 2019, 2020, and 2021. Software Development Costs We incur software development costs related to products to be sold, leased, or marketed to external users, internal-use software, and our websites. Software development costs capitalized were not significant for the years presented. All other costs, including those related to design or maintenance, are expensed as incurred. Property and Equipment, Net Property and equipment are stated at cost less accumulated depreciation and amortization. Incentives that we receive from property and equipment vendors are recorded as a reduction to our costs. Property includes buildings and land that we own, along with property we have acquired under build-to-suit lease arrangements when we have control over the building during the construction period and finance lease arrangements. Equipment includes assets such as servers and networking equipment, heavy equipment, and other fulfillment equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful lives of the assets (generally the lesser of 40 years or the remaining life of the underlying building, three years prior to January 1, 2020 and four years subsequent to January 1, 2020 for our servers, five years for networking equipment, ten years for heavy equipment, and three to ten years for other fulfillment equipment). Depreciation and amortization expense is classified within the corresponding operating expense categories on our consolidated statements of operations. Leases We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in "Property and equipment, net." All other leases are categorized as operating leases. Our leases generally have terms that range from one to ten years for equipment and one to twenty years for property. Certain lease contracts include obligations to pay for other services, such as operations and maintenance. For leases of property, we account for these other services as a component of the lease. For substantially all other leases, the services are accounted for separately and we allocate payments to the lease and other services components based on estimated stand-alone prices. Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives using a discount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases or lease prepayments reclassified from "Other assets" upon lease commencement. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term. 46 Table of Contents Consolidated Statements of Cash Flows Reconciliation The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets to the total of the same such amounts shown in the consolidated statements of cash flows (in millions): December 31, 2021 Cash and cash equivalents December 31, 2020 42,122 233 22 Restricted cash included in accounts receivable, net and other Restricted cash included in other assets Total cash, cash equivalents, and restricted cash shown in the consolidated statements of cash flows 42,377 Note 3 PROPERTY AND EQUIPMENT Property and equipment, at cost, consisted of the following (in millions): Gross property and equipment (1): Land and buildings $ 57,324 S 81,104 Equipment 97,224 128,683 Other assets 3,772 4,118 Construction in progress 15,228 24,895 Gross property and equipment 173,548 238,800 Total accumulated depreciation and amortization (1) 60,434 78,519 Total property and equipment, net $ 113,114 S 160,281 (1) Includes the original cost and accumulated depreciation of fully-depreciated assets. Depreciation and amortization expense on property and equipment was $15.1 billion, $16.2 billion, and $22.9 billion which includes amortization of property and equipment acquired under finance leases of $10.1 billion, $8.5 billion, and $9.9 billion for 2019, 2020, and 2021. 52 $ $ 2020 S S December 31, 2021 36,220 242 15 36,477