Expand Your Critical Thinking 3-03 Financial statements of Amazon.com, Inc. are presented in Appendix D. Click here to view Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Click here to view Appendix E. Instructions for accessing and using the complete annual reports of Amazon and Wal-Mart, including the notes to the financial statements, are also provided in Appendices D and E, respectively. (a) Based on information contained in these financial statements, determine the following for each company. (Enter decrease in account balance with a negative sign preceding the number, e.g. -45,000,000 or parentheses, e.g. (45,000,000).) Amazon Wal-mart (a) Increase (decrease) in interest expense from 2014 to 2015. $ $ (b) Increase (decrease) in net income from 2014 to 2015. (c) Increase (decrease) in cash flow from operations from 2014 to 2015. $ $ Question Attempts: 0 of 1 used SAVE FOR LATER SUBMIT ANSWER AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2015 2014 14,557 $ 8,658 $ $ 2013 8,084 596 (241) 274 6.281 2,119 155 3,253 1,134 114 5 4,746 1,497 129 (3) 62 (316) (6) 245 1 166 (156) (78) 81 (119) 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 (income), net Losses (gains) on sales of marketable securities, 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 (1.193) (1,039) 1,759 (2,187) (1,755) 4,294 913 7,401 (6,109) 11.920 706 4,433 (1,410) (846) 1,888 736 2,691 (2,292) 5,475 (3,692) 6,842 (4,589) (795) 3,025 (4,091) (6,450) (4,893) (979) 3,349 (2,542) (5,065) (3,444) (312) 2,306 (2.826) (4,276) Net cash provided by (used in) investing activities (6,450) (5,065) (4,276) AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2014 2015 2013 119 6 78 394 (231) (775) (5) (continued) 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 353 (1,652) (2.462) (121) (3,763) (374) 1,333 15,890 $ 6,359 (513) (1.285) (135) 4.432 (310) 5,899 14,557 $ (539) (86) 574 8,658 $ $ 91 $ 97 86 41 325 $ 153 273 4,717 544 177 4,008 920 169 1.867 877 See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) 2013 $ Year Ended December 31, 2015 2014 79,268 $ 70,080 $ 27,738 18,908 107,006 88,988 60,903 13,549 74.452 54.181 71,651 13,410 5,254 12,540 1,747 171 62.752 10,766 4,332 9,275 1,552 133 8,585 3,133 6,565 1.129 114 Net product sales Net service sales Total net sales Operating expenses (1): Cost of sales Fulfillment Marketing Technology and content General and administrative Other operating expense (income), net Total operating expenses Income from operations 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 tax Net income (loss) Basic earnings per share Diluted earnings per share 104,773 2.233 50 88,810 178 39 (210) (118) (289) (111) (459) (256) (665) 1,568 (950) (22) 596 $ 1.28 $ 73,707 745 38 (141) (136) (239) 506 (161) (71) 274 (167) 37 2 $ (241) $ (0.52) $ (0.52) S 0.60 1.25 $ 0.59 TIT:1... Weighted-average shares used in computation of earnings per share: Basic 462 467 477 457 465 Diluted 462 $ 294 (1) Includes stock-based compensation as follows: Fulfillment Marketing Technology and content General and administrative 88 482 $ 190 1,224 223 375 $ 125 804 193 603 149 See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in millions) 2015 Year Ended December 31, 2014 596 $ (241) $ 2013 $ 274 (210) (325) 63 Net income (loss) Other comprehensive income (loss): Foreign currency translation adjustments, net of tax of $10, $(3), and $(20) Net change in unrealized gains (losses) on available-for-sale securities: Unrealized gains (losses), net of tax of $(5), $1, and $3 Reclassification adjustment for losses (gains) included in "Other income (expense), net," net of tax of $0, $(1), and $(1) Net unrealized gains (losses) on available-for-sale securities Total other comprehensive income (loss) Comprehensive income (loss) $ (7) 2 (10) 5 1 (2) (212) 384 $ (3) (1) (326) (567) $ (9) 54 328 Comprehensive income (loss) $ 384 $ (567) $ 328 See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31, 2015 2014 ASSETS $ 14,557 2,859 8,299 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 6,423 36,474 21,838 3,759 3,373 65,444 $ 5,612 31,327 16,967 3,319 2.892 54,505 Other assets $ $ Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses and other Uneamed revenue Total current liabilities Long-term debt 16,459 9,807 20,397 $ 10,384 3,118 33,899 8,235 1,823 28,089 8,265 8,235 9,926 8,265 7,410 Long-term debt Other long-term liabilities Commitments and contingencies (Note 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 488 Outstanding shares 471 and 465 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 65,444 $ 5 (1,837) 11,135 (511) 1,949 10,741 54,505 $ See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in millions) Common Stock Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Shares Total Stockholders' Equity Retained Earnings Amount Shares Amount Accumulated Additional Other Treasury Paid-In Comprehensive Stock Capital Income (Loss) $ (1,837) $ 8,347 $ (239) $ Earnings Total Retained Stockholders' Equity 1,916 $ 8,192 274 274 454 $ 54 54 5 4 4 73 73 1,149 9,573 459 (1,837) (185) 2.190 (241) 1,149 9,746 (241) (326) (326) 2 | 6 2 6 6 | Balance as of January 1, 2013 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, 2013 Net loss 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 1,510 1,510 44 44 11,135 465 (1,837) (511) 1,949 596 10,741 596 (212) (212) 6 4 4 119 119 | - - - 2,131 2,131 | 5 5 471 $ 5 $ (1,837) $ 13,394 $ (723) $ 2,545 $ 13,384 APPENDIX E Specimen Financial Statements: Wal-Mart Stores, Inc. The following are Wal-Mart Stores, Inc.'s financial statements as presented in the company's 2016 annual report. The complete annual report, including notes to the financial statements, is available at the company's website. Consolidated Statements of Income Fiscal Years Ended January 31, 2016 2015 2014 $478,614 3,516 482,130 $482,229 3,422 485,651 $473,076 3,218 476,294 360,984 97,041 24,105 365,086 93,418 27,147 358,069 91,353 26,872 (Amounts in millions, except per share data) Revenues: Net sales Membership and other income Total revenues Costs and expenses: Cost of sales Operating, selling, general and administrative expenses Operating income Interest: Debt Capital lease and financing obligations Interest income Interest, net Income from continuing operations before income taxes Provision for income taxes: Current Deferred Total provision for income taxes Income from continuing operations 2,027 521 (81) 2,467 2,161 300 (113) 2,348 2,072 263 (119) 2,216 21,638 24,799 24,656 7,584 8,619 (1,026) 6,558 15,080 8,504 (519) 7,985 16,814 (514) 8,105 16,551 1,027 6,558 21 7,985 16,814 285 15,080 11 8,105 16,551 144 16,695 (673) $ 16,022 15,080 (386) $ 14,694 17,099 (736) $ 16,363 $ 4.58 $ $ 5.01 0.06 4.87 0.03 Total provision for income taxes Income from continuing operations Income from discontinued operations, net of income taxes Consolidated net income Consolidated net income attributable to noncontrolling interest Consolidated net income attributable to Walmart Basic net income per common share: Basic income per common share from continuing operations attributable to Walmart Basic income per common share from discontinued operations attributable to Walmart Basic net income per common share attributable to Walmart Diluted net income per common share: Diluted income per common share from continuing operations attributable to Walmart Diluted income per common share from discontinued operations attributable to Walmart Diluted net income per common share attributable to Walmart Weighted average common shares outstanding: Basic Diluted Dividends declared per common share $ 4.58 $ 5.07 $ 4.90 $ 4.57 $ $ 4.99 0.06 4.85 0.03 $ 4.57 $ 5.05 $ 4.88 3,207 3,230 3,243 3.269 3,283 3,217 1.96 $ $ 1.92 $ 1.88 See accompanying notes. Consolidated Statements of Comprehensive Income (Amounts in millions) Consolidated net income Less consolidated net income attributable to nonredeemable noncontrolling interest Less consolidated net income attributable to redeemable noncontrolling interest Consolidated net income attributable to Walmart Fiscal Years Ended January 31, 2016 2015 2014 $15,080 $17,099 $16,695 (386) (736) (606) (67) 14,694 16,363 16,022 Other comprehensive income (lossl net of income taxes 14,694 16,363 16,022 (4,558) 379 (5,220) 366 (202) 86 (3,221) 75 207 153 (470) (69) Consolidated net income attributable to Walmart Other comprehensive income (loss), net of income taxes Currency translation and other Net investment hedges Cash flow hedges Minimum pension liability Other comprehensive income (loss), net of income taxes Less other comprehensive income (loss) attributable to nonredeemable noncontrolling interest Less other comprehensive income (loss) attributable to redeemable noncontrolling interest Other comprehensive income (loss) attributable to Walmart Comprehensive income, net of income taxes Less comprehensive income (loss) attributable to nonredeemable noncontrolling interest Less comprehensive income (loss) attributable to redeemable noncontrolling interest Comprehensive income attributable to Walmart (4,970) 541 (4,718) 546 (2,786 311 66 (4,429) 10,110 155 (4,172) 12,381 (190) (2,409) 13,909 (295) (1) $10,265 $12,191 $13,613 See accompanying notes. Consolidated Balance Sheets Fiscal Years Ended January 31, (Amounts in millions) 2016 2015 ASSETS Current assets: Cash and cash equivalents Receivables, net Inventories Prepaid expenses and other Total current assets Pronorty and cauinmont. $ 8,705 5,624 44,469 1,441 $ 9,135 6,778 45,141 2,224 60,239 63,278 1,441 2,224 60,239 63,278 177,395 176,958 (66,787) Prepaid expenses and other Total current assets Property and equipment: Property and equipment Less accumulated depreciation Property and equipment, net Property under capital lease and financing obligations: Property under capital lease and financing obligations Less accumulated amortization Property under capital lease and financing obligations, net Goodwill Other assets and deferred charges (63,115) 114,280 110,171 11,096 (4,751) 6,345 16,695 5,239 (2,864) 2,375 18,102 5,455 $203,490 6,131 Total assets $199,581 LIABILITIES AND EQUITY Current liabilities: Short-term borrowings Accounts payable Accrued liabilities Accrued income taxes Long-term debt due within one year Capital lease and financing obligations due within one year Total current liabilities $ 2,708 38,487 19,607 521 2,745 551 $ 1,592 38,410 19,152 1,021 4,791 287 64,619 65,253 40,889 Long-term debt Long-term capital lease and financing obligations Deferred income taxes and other 38,214 5,816 7,321 2,606 8,805 Commitments and contingencies Equity: Common stock Capital in excess of par value Retained earnings 317 1,805 90,021 323 2,462 85,777 Retained earnings Accumulated other comprehensive income (los) Total Walmart shareholders' equity Nonredeemable noncontrolling interest Total equity Total liabilities and equity 90,021 (11,597) 80,546 3,065 83,611 $199,581 85,777 (7,168) 81,394 4,543 85,937 $203,490 See accompanying notes. Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interest Accumulated Total Other Walmart Comprehensive Shareholders Income (Loss) Equity $ (587) $ 76,343 16,022 Nonredeemable Noncontrolling Interest Retained Earnings $72,978 16,022 Total Equity $ 81,738 16,617 Redeemable Noncontrolling Interest $ 519 78 $ 5,395 595 (2,409) (2,409) (311) (2,720) (66) Capital in Common Stock Excess of (Amounts in millions) Shares Amount Par Value Balances as of February 1, 2013 3,314 $332 $3,620 Consolidated net income Other comprehensive income, net of income taxes Cash dividends declared ($1.88 per share) Purchase of Company stock (87) (9) (294) Redemption value adjustment of redeemable noncontrolling interest (1,019) Other 6 55 Balances as of January 31, 2014 3,233 323 2,362 Consolidated net income Other comprehensive loss, net of income taxes (6,139) (6,254) (6,139) (6,557) (6,139) (6,557) | I (1,019) (581) 1,019 (59) (41) (595) (1,019) 14 76,255 16,363 (2,996) 1,491 76,566 16,363 5,084 736 81,339 17,099 (4,172) (4,172) (546) (4,718) - - (4,172) (4,172) (546) (4,718) (6,185 (6,185) (950) (6,185) (980) (13) (1) (29) (980) (1,491) 8 1 129 113 (731) 3,228 323 2,462 net of income taxes Cash dividends declared ($1.92 per share) Purchase of Company stock Purchase of redeemable noncontrolling interest Other Balances as of January 31, 2015 Consolidated net income Other comprehensive income, net of income taxes Cash dividends declared ($1.96 per share) Purchase of Company stock Cash dividend declared to noncontrolling interest Other (17) 85,777 14,694 (7,168) 81,394 14,694 4,543 386 (618) 85,937 15,080 _ _ (4,429) (4,429) (541) (4,970) 1 ) (65) (6) (6,294) (4,148) (102) 11 (6,294) (4,256) (6,294) (4,256) (691) (632) (691) (1,195) (1) (555) (8) (563) Balances as of January 31, 2016 3,162 $317 $1,805 $90,021 $(11,597) $80,546 $3,065 $83,611 $ See accompanying notes. Consolidated Statements of Cash Flows Fiscal Years Ended January 31, 2016 2015 2014 $ 15,080 (Amounts in millions) Cash flows from operating activities: Consolidated net income Income from discontinued operations, net of income taxes Income from continuing operations Adjustments to reconcile income from continuing operations to net cash provided by operating activities: $ 17,099 (285) 16,814 $ 16,695 (144) 16,551 15,080 9,454 (672) 1,410 9,173 (503) 785 8,870 (279) 938 provided by operating activities: Depreciation and amortization Deferred income taxes Other operating activities Changes in certain assets and liabilities, net of effects of acquisitions: Receivables, net Inventories Accounts payable Accrued liabilities Accrued income taxes Net cash provided by operating activities (19) (703) 2,008 1,303 (472) (569) (1,229) 2,678 1,249 166 (566) (1,667) 531 103 (1,224) 23,257 27,389 28,564 (13,115) 727 Cash flows from investing activities: Payments for property and equipment Proceeds from disposal of property and equipment Proceeds from disposal of certain operations Other investing activities Net cash used in investing activities (11,477) 635 246 (79) (12,174) 570 671 (192) (138) (10,675) (11,125) (12,526) Cash flows from financing activities: Net change in short-term borrowings Proceeds from issuance of long-term debt Payments of long-term debt Dividends paid Purchase of Company stock Dividends paid to noncontrolling interest Purchase of noncontrolling interest Other financing activities Net cash used in financing activities 1,235 39 (4,432) (6,294) (4,112) (719) (1,326) (513) (6,288) 5,174 (3,904) (6,185) (1,015) (600) (1,844) (409) 911 7,072 (4,968) (6,139) (6,683) (426) (296) (260) (16,122) (15,071) (10,789) (514) (442) Effect of exchange rates on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of period (1,022) (430) 9,135 $ 8,705 1,854 7,281 $ 9,135 (500) 7,781 $ 7,281 Receivables, net Inventories Accounts payable Accrued liabilities Accrued income taxes Net cash provided by operating activities (19) (703) 2,008 1,303 (472) 27,389 (569) (1,229) 2,678 1,249 166 (566) (1,667) 531 103 (1,224) 23,257 28,564 (13,115) 727 Cash flows from investing activities: Payments for property and equipment Proceeds from disposal of property and equipment Proceeds from disposal of certain operations Other investing activities Net cash used in investing activities (11,477) 635 246 (79) (10,675) (12,174) 570 671 (192) (11,125) (138) (12,526) Cash flows from financing activities: Net change in short-term borrowings Proceeds from issuance of long-term debt Payments of long-term debt Dividends paid Purchase of Company stock Dividends paid to noncontrolling interest Purchase of noncontrolling interest Other financing activities Net cash used in financing activities Effect of exchange rates on cash and cash equivalents Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of period 1,235 39 (4,432) (6,294) (4,112) (719) (1,326) (513) (16,122) (6,288) 5,174 (3,904) 6,185) (1,015) (600) (1,844) (409) (15,071) 911 7,072 (4,968) (6,139) (6,683) (426) (296) (260) (10,789) (1,022) (430) 9,135 $ 8,705 (514) 1,854 7,281 $ 9,135 (442) (500) 7,781 $ 7,281 Supplemental disclosure of cash flow information: Income taxes paid Interest paid 8,111 2,540 8,169 2,433 8,641 2,362