Expand Your Critical Thinking 4-57 Comparative Analysis Problem: Amazon.com, Inc. vs. Wal-Mart Stores, Inc. CT4.3 Amazon.com, Inc.'s financial statements are presented in Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. The complete annual reports of Amazon and Wal-Mart, including the notes to the financial statements, are available at each company's respective website. Instructions a. Based on the information contained in these financial statements, determine the following for Amazon at December 31, 2015, and Wal-Mart at January 31, 2016. 1. Total current assets. 2. Net amount of property and equipment (fixed assets), net. 3. Total current liabilities. 4. Total equity. b. What conclusions concerning these two companies can be drawn from these data? APPENDIX D Specimen Financial Statements: Amazon.com, Inc. Amazon.com, Inc. is the world's largest online retailer. It also produces consumer electron- ics-notably the Kindle e-book reader and the Kindle Fire Tablet computer-and is a major provider of cloud computing services. The following are Amazon's financial statements as presented in the company's 2015 annual report. The complete annual report, including notes to the financial statements, is available at the company's website. AMAZON.COM, INC. , CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2015 2014 2013 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD $ 14,557 $ 8,658 $ 8,084 OPERATING ACTIVITIES: Net income (loss) 596 (241) 274 Adjustments to reconcile nct 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 6,281 4.746 3,253 Stock-based compensation 2,119 1.497 1,134 Other operating expense (income), net 155 129 114 Losses (gains) on sales of marketable securities, net 5 (3) 1 Other expense (income), net 245 62 166 Deferred income taxes 81 (316) (156) Excess tax benefits from stock-based compensation (119) (78) Changes in operating assets and liabilities: Inventories (2,187) (1.193) (1,410) Accounts receivable, net and other (1.755) (1.039) (846) Accounts payable 4,294 1.759 1,888 Accrued expenses and other 913 706 736 Additions to tneamed revenue 7,401 4.433 2,691 Amortization of previously uncamed revenue (6,109) (3,692) (2,292) Net cash provided by used in operating activities 11,920 6,842 5,475 INVESTING ACTIVITIES: Purchases of property and equipment, including internal-use software and website development, net (4,589) (4,893) (3,444) Acquisitions, net of cash acquired, and other (795) (979) (312) Sales and maturities of marketable securities 3,025 3,349 2,306 Purchases of marketable securities (4,091) (2,542) (2,826) Net cash provided by used in) investing activities (6,450) (5,065) (4,276) (continued next page) D-1 AMAZON.COM, INC. , CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31. - 2014 2015 2013 (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 119 353 (1.652) (2,462) (121) (3.763) (374) 1.333 15,890 S 6 6,359 (513) (1,285) (135) 4.432 (310) 5,899 14,557 S 78 394 (231) (775) (5) (539) (86) 574 8,658 $ $ 915 97 41 325 153 273 4,717 544 86 177 4.008 169 1,867 877 920 See accompanying notes to consolidated financial statements, AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) 2013 s Year Ended December 31, 2015 2014 79,268 S 70,080 $ 27,738 18,908 107,006 88,988 60,903 13,549 74.452 71,651 13,410 5,254 12,540 62,752 10,766 4,332 9,275 1,552 1.747 171 133 88,810 178 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 m.cano 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 of tax Net income (loss) Basic earnings per share Diluted earnings per share Weighted average shares used in computation of earnings per share: Basic 104,773 4.13 2,233 ** 50 (459) ( (256) (665) 1,568 (950) (22) 596 S 1.28 $ 1.25 $ 39 () (210) 110 (118) (289) (111) (167) 37 (241) $ (0.52) $ (0.52) S 54,181 8,585 3,133 6,565 1,129 114 73.707 745 38 () (141) (136) (239) V2 506 (161) (71) 274 0.60 S s S 0.59 467 462 457 Diluted 477 462 465 375 $ (1) Includes stock-based compensation as follows: Fulfillment Marketing Technology and content General and administrative 125 482 S 190 1,224 223 294 88 603 149 804 193 See accompanying notes to consolidated financial statements. D-2 Specimen Financial Statements: Amazon.com, Inc. D-3 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in millions) 2015 Year Ended December 31, 2014 596 s (241) $ 2013 $ 274 (210) (325) 63 Net income (loss) Other comprehensive income (loss): Foreign currency translation adjustments, net of tax of $10, S(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 S(1) Net unrealized gains (losses) on available-for-sale securities Total other comprehensive income (loss) Comprehensive income (loss) (7) 2 (10) 1 (9) 5 (2) (212) 384 $ (3) (1) (326) (567) S 54 328 $ See accompanying notes to consolidated financial statements. D-4 APPENDIX D Specimen Financial Statements: Amazon.com, Inc. AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31, 2015 2014 $ 15,890 $ 3,918 10,243 6,423 36,474 21,838 14,557 2,859 8,299 5,612 31.327 16,967 3,319 2,892 54,505 3,759 3,373 65,444 $ S 16,459 9,807 1,823 ASSETS Current assets: Cash and cash equivalents Marketable securities Inventories Accounts receivable, net and other Total current assets Property and equipment, net Goodwill Other assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses and other Unearned revenue Total current 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- 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 20,397 $ 10,384 3,118 33,899 8,235 9,926 28,089 8,265 7,410 5 (1,837) 13,394 (723) 2,545 13,384 65,444 $ 5 (1,837) 11,135 (511) 1,949 10,741 54,SOS See accompanying notes to consolidated financial statements. Specimen Financial Statements: Amazon.com, Inc. D-5 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (in millions) Common Stock Accumulated Additional Other Treasury Puid-In Comprehensive Shares Amount Stock Capital Income (Less) 454 S 5 $ (1,837) $ 8,347 $ (239) S Total Retained Stockholders' Earnings Equity 1,916 $ 8,192 274 274 54 54 5 4 4. 73 73 1,149 9,573 459 5 (1,837) (185) 2.190 (241) 1,149 9,746 (241) (326) (326) 6 2 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 cmployee benefit plan stock Issuance of common stock for acquisition activity Balance as of December 31, 2015 1,510 1,510 44 465 5 (1,837) 11,135 (511) 1,949 596 44 10,741 596 (212) 4 (212) 6 4 119 119 2,131 2,131 5 471 $ $ 5 5 $ (1,837) S 13,394 $ (723) S 2,545 $ 13,384 See accompanying notes to consolidated financial statements. 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 Year Ended January 31 2016 2005 2014 $478,614 3,516 482,130 5482,229 3.422 485,651 $473,076 3.218 476.294 360,984 97,041 24,105 365,086 93,418 27,147 358069 97353 26,872 2,027 521 (81) 2,467 2,161 30D (113) 2072 263 (119) 2216 24656 2348 24,799 21,638 Amountsions, except pershare data Revenues: Nec sales Membership and other income Total revenues Costs and expenses: Cost of sales Operating selling general and administrative expenses Operating income Interest: Deot Capital lease and financing obligations interest income Interest, ner , Income from continuing operations before income taxes Provision for income taxes: Current Deferred 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 7,584 (1,026) 6,558 15,080 8,504 (519) 7.985 16814 285 17,099 (736) $ 16363 8619 (514) 8,105 16.551 144 15,080 (386) $ 14,694 16,695 (673) $ 16,022 $ 4.58 $ 501 005 437 003 $ 490 $ 4.58 $ 5.07 $ 4.57 5 499 0.06 54.85 0.03 $ 4.57 $ 5.05 $ 4.88 3.230 3243 3,207 3,217 1.96 3.269 3283 $ $ 1.92 $ 1.BB See accoming E-1 E-2 APPENDIX E Specimen Financial Statements: Wal-Mart Stores, Inc. Consolidated Statements of Comprehensive Income Fiscal Years Ended January 31, 2016 2015 2014 $15,080 $17,099 $16.695 (386) 1736 (606) (67) 14,694 16363 16,022 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 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 (oss) attributable to nonredeemable noncontrolling interest Less other comprehensive income floss) 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 (5,220) 366 (202) 86 (4558) 379 (470) 69 (4.970) 541 (4,718) 546 3,221) 75 207 153 (2,786) ( 311 66 12.409) 13.909 (295) (1) (4,429) 10,110 155 4,172) 12381 (190) $10,265 $12.191 $13,613 See accompanying notes Specimen Financial Statements: Wal-Mart Stores, Inc. E-3 Consolidated Balance Sheets Fiscal Years Ended January 31 2016 2015 $ 8,705 5,624 44,469 1,441 $ 9,135 6,278 45,141 2,224 60,239 63,278 ( (Amounts in millions) ASSETS Current assets: Cash and cash equivalents Receivables, net Inventories 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 Total assets 176,958 (66,787) 110,171 177,395 163,115) 114,280 11,096 (4,751) 5,239 (2.864) 6,345 16,695 6,131 $199,581 2,375 18,102 5,455 $203,490 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 Long-term debt Long-term capital lease and financing obligations Deferred income taxes and other 38,214 5,816 7,321 40,889 2,606 3,805 Commitments and contingencies Equity: Common stock Capital in excess of par value Retained earnings Accumulated ather comprehensive income foss) Total Walmart shareholders' equity Nonredeemable noncontrolling interest Total equity Total liabilities and equity See accompanying notes 317 1,805 90,021 (11,597) 80,546 3,065 323 2462 85,777 (7,168) 81.394 4543 85.937 83,611 $199,581 $203490 E-4 APPENDIX E Specimen Financial Statements: Wal-Mart Stores, Inc. Consolidated Statements of Shareholders' Equity and Redeemable Noncontrolling Interest Nonredeemable Noncontrolling Interest Tot Fourty $ 81,738 16,617 Redeemable No controlina Interest $ 519 78 $5,395 595 (311) 2,720) (66) (6,139 (6,557 (1,019) (581) (595) 1019 (59) 81,339 1.491 5,084 736 17,099 (546) (4.718) Accumulated TOR Capital in Other Walmart Common Stock Excesso Retained Comprehensive Shareholders (Amounts on milion States Amount Parva Farnings Income) Equity Balances as of February 1, 2013 3,314 $332 $3,620 $72,978 $ (587) $ 76,343 Consolidated net income 16022 16,022 Other comprehensive income, net of income taxes 12,409) (2,409) Cash dividends declared ($1.88 per share) (6,139) (6,139) Purchase of Company stock (87) 19 (6,254 (6,557 Redemption value adjustment of redeemable no controlling interest (1,019) (1,019) Other 6 5S (41) 14 Balances as of January 31, 2014 3,233 323 2,362 76,566 12,996) 76,255 Consolidated net income 16,363 16,363 Other comprehensive loss net of income taxes (4.172) 14,172) Cash dividends declared ($1.92 per share) (6,185) (6,185) Purchase of Company stock (13) (29) 1950) 1980) Purchase of redeemable noncontrolling Interest Other 8 1 129 (17) 113 Balances as of January 31, 2015 3,228 323 2,462 85,777 (7,168) 81,394 Consolidated net income 14,694 14,694 Other comprehensive income, net of income taxes 14,429) (4,429) Cash dividends declared ($1.96 per share) (6,294) (6,294) Purchase of Company stock (65) (6) (102) (4,148) 14,256) Cash dividend declared to noncontrolling interest Other (1) (555) (8) (563) Balances as of January 31, 2016 3,162 $317 $1,805 $90,021 $(11,597) $80,546 Ser companying notes 6,185) 1980) e (1.491) (731) 4,543 386 (618) 85,937 15,080 (541) (4,970) (6,294) (4,256) (691) (632) $3,065 (691) (1,195) $83,611 $ Specimen Financial Statements: Wal-Mart Stores, Inc. E-5 Consolidated Statements of Cash Flows Fiscal Years Ended January 31 2016 2015 2014 $ 15,080 $ 17,099 (285) 16,814 $ 16,695 (144) 16,551 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 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 9,454 (672) 1,410 9,173 (503) 785 8,870 (279) 938 (19) (703) 2,008 1,303 (472) (569) (1.229) 2678 1.249 166 (566) (1,667) 531 103 (1,224) 27,389 28,564 23,257 (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) (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 pald 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) (16,122) (6,288) 5,174 3,904) (6.185 (1,015) (600) (1844) (409) 911 7,072 (4,968) (6,139) (6,683) (426) (296) (260) (10,789) (15,071) (514) 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 1854 7,281 $ 9.135 (442) (500) 7.781 $ 7.281 $ 8,705 Supplemental disclosure of cash flow information: Income taxes paid Interest paid 8,111 2,540 8.169 2,433 8.641 2,362 See accompanying noter