Question
For purposes of this discussion, assume that you have been hired as an operational risk manager by Etsy, an online retailer of craft goods. You
For purposes of this discussion, assume that you have been hired as an operational risk manager by Etsy, an online retailer of craft goods. You are meeting with a management team to discuss operational strategy, and you are invited to present an analysis of the recent management and operations at both Etsy, and Amazon (Motley Fool, n.d.) as a competitor, comparing the two firms' relative financial strategies. (Bensinger, 2015). For purposes of this comparison, you will refer back to the financial statements of Etsy, which were included in the previous (Module One) discussion. Amazon's financial statements are supplied here. Assume that the group that you are speaking to includes design specialists that are not trained in financial principles.
Period Ending | 12/31/2015 | 12/31/2014 | 12/31/2013 | |
Current Assets | ||||
Cash And Cash Equivalents | 15,890,000 | 14,557,000 | 8,658,000 | |
Short Term Investments | 3,918,000 | 2,859,000 | 3,789,000 | |
Net Receivables | 6,423,000 | 5,612,000 | 4,767,000 | |
Inventory | 10,243,000 | 8,299,000 | 7,411,000 | |
Total Current Assets | 36,474,000 | 31,327,000 | 24,625,000 | |
Long Term Investments | - | - | - | |
Property Plant and Equipment | 21,838,000 | 16,967,000 | 10,949,000 | |
Goodwill | 3,759,000 | 3,319,000 | 2,655,000 | |
Other Assets | 3,373,000 | 2,892,000 | 1,930,000 | |
Total Assets | 65,444,000 | 54,505,000 | 40,159,000 | |
Current Liabilities | ||||
Accounts Payable | 30,781,000 | 26,266,000 | 21,821,000 | |
Other Current Liabilities | 3,118,000 | 1,823,000 | 1,159,000 | |
Total Current Liabilities | 33,899,000 | 28,089,000 | 22,980,000 | |
Long Term Debt | 8,235,000 | 8,265,000 | 3,191,000 | |
Other Liabilities | 9,926,000 | 7,410,000 | 4,242,000 | |
Total Liabilities | 52,060,000 | 43,764,000 | 30,413,000 | |
Stockholders' Equity | ||||
Common Stock | 5,000 | 5,000 | 5,000 | |
Retained Earnings | 2,545,000 | 1,949,000 | 2,190,000 | |
Treasury Stock | -1,837,000 | -1,837,000 | -1,837,000 | |
Capital Surplus | 13,394,000 | 11,135,000 | 9,573,000 | |
Other Stockholder Equity | -723,000 | -511,000 | -185,000 | |
Total Stockholder Equity | 13,384,000 | 10,741,000 | 9,746,000 | |
Net Tangible Assets | 9,625,000 | 7,422,000 | 7,091,000 |
Table1. Amazon Balance Sheet
Revenue | 12/31/2015 | 12/31/2014 | 12/31/2013 | |
Total Revenue | 107,006,000 | 88,988,000 | 74,452,000 | |
Cost of Revenue | 71,651,000 | 62,752,000 | 54,181,000 | |
Gross Profit | 35,355,000 | 26,236,000 | 20,271,000 | |
Operating Expenses | ||||
Research Development | - | - | - | |
Selling General and Administrative | 33,122,000 | 26,058,000 | 19,526,000 | |
Operating Income or Loss | 2,233,000 | 178,000 | 745,000 | |
Income from Continuing Operations | ||||
Total Other Income/Expenses Net | -206,000 | -79,000 | -98,000 | |
Earnings Before Interest and Taxes | 2,027,000 | 99,000 | 647,000 | |
Interest Expense | 459,000 | 210,000 | 141,000 | |
Income Before Tax | 1,568,000 | -111,000 | 506,000 | |
Income Tax Expense | 950,000 | 167,000 | 161,000 | |
Net Income | 596,000 | -241,000 | 274,000 | |
Preferred Stock And Other Adjustments | - | - | - | |
Net Income Applicable To Common Shares | 596,000 | -241,000 | 274,000 |
Table 2. Amazon Income Statement
Period Ending | 12/31/2015 | 12/31/2014 | 12/31/2013 | |
Net Income | 596,000 | -241,000 | 274,000 | |
Operating Activities, Cash Flows Provided By or Used In | ||||
Depreciation | 6,281,000 | 4,746,000 | 3,253,000 | |
Adjustments To Net Income | 2,486,000 | 1,363,000 | 1,181,000 | |
Changes In Accounts Receivables | -1,755,000 | -1,039,000 | -846,000 | |
Changes In Liabilities | 12,608,000 | 6,898,000 | 5,315,000 | |
Changes In Inventories | -2,187,000 | -1,193,000 | -1,410,000 | |
Changes In Other Operating Activities | -6,109,000 | -3,692,000 | -2,292,000 | |
Total Cash Flow From Operating Activities | 11,920,000 | 6,842,000 | 5,475,000 | |
Investing Activities, Cash Flows Provided By or Used In | ||||
Capital Expenditures | -4,589,000 | -4,893,000 | -3,444,000 | |
Investments | -1,066,000 | 807,000 | -520,000 | |
Other Cash flows from Investing Activities | -795,000 | -979,000 | -312,000 | |
Total Cash Flows From Investing Activities | -6,450,000 | -5,065,000 | -4,276,000 | |
Financing Activities, Cash Flows Provided By or Used In | ||||
Dividends Paid | - | - | - | |
Sale Purchase of Stock | - | - | - | |
Net Borrowings | -3,882,000 | 4,426,000 | -617,000 |
Table 3. Amazon Cash Flow Statement
Etsy - Balance Sheet All numbers are quoted in thousands Period Ending 31-Dec-15 31-Dec-14 31-Dec-13 Assets Current Assets Cash And Cash Equivalents 271,244 69,659 36,795 Short Term Investments 21,620 19,184 18,075 Net Receivables 56,669 25,977 18,194 Inventory - - - Other Current Assets 9,521 12,241 3,721 Total Current Assets 359,054 127,061 76,785 Long Term Investments - - - Property Plant and Equipment 105,021 75,538 23,107 Goodwill 27,752 30,831 5,346
Intangible Assets 2,871 5,410 493 Other Assets 6,967 7,363 428 Deferred Long Term Asset Charges 51,396 - - Total Assets 553,061 246,203 106,159 Current Liabilities Accounts Payable 45,635 21,083 10,389 Short/Current Long Term Debt 24,872 12,328 6,070 Other Current Liabilities 9,615 8,042 2,760 Total Current Liabilities 80,122 41,453 19,219 Long Term Debt 7,571 3,148 38 Other Liabilities 73,450 54,153 1,428 Deferred Long Term Liability Charges 61,420 149 1,259 Total Liabilities 222,563 98,903 21,944 Stockholders' Equity Misc Stocks Options Warrants - 80,212 80,212 Common Stock 113 44 33 Retained Earnings -86,440 -32,377 -17,134 Treasury Stock - - - Capital Surplus 406,020 103,355 20,944 Other Stockholder Equity 10,805 -3,934 160 Total Stockholder Equity 330,498 67,088 4,003 Net Tangible Assets 299,875 30,847 -1,836 Table 1. Etsy Balance Sheet Etsy - Income Statement All numbers are quoted in thousands Period Ending 31-Dec-15 31-Dec-14 31-Dec-13 Total Revenue 273,499 195,591 125,022
Cost of Revenue 96,979 73,633 47,779 Gross Profit 176,520 121,958 77,243 Operating Expenses Research Development 42,694 36,634 27,548 Selling General and Administrative 135,710 91,575 48,962 Total Operating Expenses 178,404 128,209 76,510 Operating Income or Loss -1,884 -6,251 733 Income from Continuing Operations Total Other Income/Expenses Net -24,584 -3,419 -373 Earnings Before Interest And Taxes -26,468 -9,670 360 Interest Expense 1,526 590 302 Income Before Tax -27,994 -10,260 58 Income Tax Expense 26,069 4,983 854 Net Income -54,063 -15,243 -796 Table 2. Etsy Income Statement Etsy - Cash Flow All numbers are quoted in thousands Period Ending 31-Dec-15 31-Dec-14 31-Dec-13 Net Income -54,063 -15,243 -796 Operating Activities, Cash Flows Provided By or Used In Depreciation 18,717 17,291 12,388 Adjustments To Net Income 55,236 10,593 5,910 Changes In Accounts Receivables -15,764 -10,172 -7,739
Changes In Liabilities 25,126 16,884 8,741 Changes In Inventories - - - Changes In Other Operating Activities -41 -7,266 -1,962 Total Cash Flow From Operating Activities 29,211 12,087 16,542 Investing Activities, Cash Flows Provided By or Used In Capital Expenditures -11,116 -1,304 -7,762 Investments -2,448 -1,110 2,722 Other Cash flows from Investing Activities -9,719 -18,309 -9,985 Total Cash Flows From Investing Activities -23,283 -20,723 -15,025 Financing Activities, Cash Flows Provided By or Used In Dividends Paid - - - Sale Purchase of Stock 199,041 41,915 1,140 Net Borrowings -3,377 -1,480 -1,265 Other Cash Flows from Financing Activities - -75 - Total Cash Flows From Financing Activities 199,608 45,237 -103 Effect Of Exchange Rate Changes -3,951 -3,737 446 Change In Cash and Cash Equivalents 201,585 32,864 1,860 Table 3. Etsy Cash Flow Statement
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