Case Questions

1.

Graph the financial statement items in Exhibit 1 (given the different scales, provide a

graph for revenue and COGS and a second graph for the other items in Exhibit1).

Familiarize yourself with the 1997 and 2010 financial statements (Exhibits 4-6 and 7-9).

10

Using your judgment, identify time periods of similar characteristics and classify them

using the following business life cycle terms: introduction, growth, maturity, or decline

(see Exhibit 10 for definitions). For each period labeled, provide support for your

classification. Specifically discuss the patterns observed (e.g. in revenue, income,

operating cash flow, investing cash flow, and financing cash flow) and how they indicate

where Amazon.com is in the life cycle at different times.

2.

Comment on the general trend in total investment in Exhibit 3 (cash and stock) over time

(excluding marketable securities). Provide possible explanations for the variation

observed.

3.

What factors do you think influence Amazon.com's decision to use cash versus stock in

its acquisitions? Comment on trends observed over time in the relative amount of cash

versus stock acquisitions in Exhibit 3.

4.

Why do you think Amazon.com invests in marketable securities? What effect does this

have on investing cash flow (

CFI

)?

5.

What are the largest adjustments listed in the operating section of the cash flow statement

for 1997 (Exhibit 4)? Provide an interpretation and discuss whether they should be of

concern to investors.

6.

Referring only to the income statement and the balance sheet (Exhibits 5 and 6 for 1997,

and Exhibits 8 and 9 for 2010) estimate (i) the amount of cash collected from customers

and (ii) the amount of cash paid for inventory in 1997 and 2010.

7.

Referring to the cash flow statements from 1997 and 2010 (Exhibits 4 and 7), does the

change in the balance sheet accounts you used to answer question 6 articulate with (i.e.,

agree with) what is reported in the statement of cash flows?

8.

Refer to the most recent financial statements of Amazon.com. (For 2014, see

file:///C:/Users/Administrator/Downloads/AMAZON%202014%20Annual

%20Report.pdf

). In the light of complaints about Amazon's tax avoidance activities (see

https://en.wikipedia.org/wiki/Amazon.com_controversies

and

http://www.bbc.com/news/magazine-20560359), review the notes to the statements

(especially note s 11 and 12, focusing on income tax and segmental information). Why is

this information useful (or not)?

9.

Refer to the most recent financial statements of Amazon.com. (For 2014, see

file:///C:/Users/Administrator/Downloads/AMAZON%202014%20Annual

%20Report.pdf

). In the light of concerns about its risk management practices, how far do

you believe the notes to the financial statements (especially Note 8), provide useful

information?

10.

On August 2015, the New York Times provided an expose of Amazon.com's employment

practices (see

http://www.nytimes.com/2015/08/16/technology/inside-amazon-wrestling-

11

big-ideas-in-a-bruising-workplace.html?_r=0

and also

https://en.wikipedia.org/wiki/Amazon.com_controversies). Does the Annual report

provide any information useful in determining the nature and extent of these practices?

Should they?