Choose a publicly traded company and perform an expanded analysis on the financial statements (AMAZON.COM INC) . Use the annual statements in Yahoo Finance ( http://finance.yahoo.com/quote/AMZN?p=AMZN ). Complete the following for your chosen firm in an Excel spreadsheet:

1. Horizontal and vertical analysis of the income statements for the past three years (all yearly balances set as a percentage of total revenues for that year).

2. Horizontal and vertical analysis of the balance sheets for the past three years (all yearly balances set as a percentage of total assets for that year).

3. Ratio analysis (nine ratios of your choosing) for the past three years PLUS a measurement for the creditworthiness of your firm as measured by Altmans Z-score. You MUST also present current year competitor ratios for your ratio analysis Ebay; ( http://finance.yahoo.com/quote/EBAY/?p=EBAY ). Comparing your firms ratios to a close competitor or an industry-average ratio makes your analysis much more meaningful.

**Financial ratios are mathematical comparisons of financial statement accounts or categories; 1. The current ratio is calculated by dividing current assets by current liabilities. 2. The working capital ratio is calculated by dividing current assets by current liabilities. 3. The times interest earned ratio is calculated by dividing income before interest and income taxes by the interest expense. 4. Accounts receivable turnover is calculated by dividing net credit sales by the average accounts receivable for that period. 5. The inventory turnover ratio is calculated by dividing the cost of goods sold for a period by the average inventory for that period. 6. The asset turnover ratio is calculated by dividing net sales by average total assets 7. The return on equity ratio formula is calculated by dividing net income by shareholder's equity. 8. The profit margin ratio formula can be calculated by dividing net income by net sales. 9. The return on assets ratio formula is calculated by dividing net income by average total assets.**

Much of this course has concentrated on learning the financial statements, primarily because there was not an accounting prerequisite. Because of this concentration, you may find this assignment challenging. However, if you understand the financial statements, then the horizontal and vertical analysis should be rather intuitive. For example, if you see sales rise by 20%, then shouldnt you also see net income rise by 20% or more if the managers are effective at controlling costs? If you see sales rise by 20% and assets rise by 40%, you have to ask why this is happening. It would appear that assets have risen too far given the sales that are generated from those assetswhy did this occur? You may have to research that type of question and discuss it in your analysis.

Amazon's financial statements:

http://finance.yahoo.com/quote/AMZN?p=AMZN