Referring to the cash flow statements from 1997 and 2005 in Exhibits 2 & 6, does the change in the balance sheet accounts (Exhibits 4 & 8) agree with what is reported in the statement of cash flows? Why do you think they do or do not articulate in each of these years? Be sure to explain your answers in summary form and list the additions/subtractions and where from the cash flows these numbers are being pulled from for your final calculation (explain your logic).

Exhibit 2: 1997 Statement of Cash Flows AMAZON.COM, INC. STATEMENTS OF CASH FLOWS (IN THOUSANDS) YEARS ENDED DECEMBER 31, 1997 1996 1995 $(27,590) $(5,777) $(303) 3,388 286 19 OPERATING ACTIVITIES Net los... Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization... Amortization of unearned compensation related to stock options... Changes in operating assets and liabilities: Inventories. Prepaid expenses and other. Deposits.. Accounts payable. Accrued advertising. Other liabilities and accrued expenses. 1,354 .. (17) (14) (8,400) (2,977) (20) 29, 845 2,856 5,066 (554) (307) (146) 2,753 598 1,412 99 (16) ---- 3,522 (1,735) (232) 5,198 (20, 454) (7,221) (1,214) (52) (22,477) (1,214) (52) Net cash provided by (used in) operating activities... INVESTING ACTIVITIES Maturities of short-term investments Purchases of short-term investments. Purchases of fixed assets.... Net cash used in investing activities. FINANCING ACTIVITIES Proceeds from initial public offering.. Proceeds from exercise of stock options and sale of common stock....... Proceeds from sale of preferred stock. Proceeds from (repayment of) notes payable and long-term debt....... Financing costs.. Net cash provided by financing activities. 49,103 518 200 1,272 231 7,970 75,000 (2,304) (44) :: 122,517 8, 201 1, 228 103,562 6,248 5, 252 996 Net increase in cash.... Cash and cash equivalents at beginning of period. Cash and cash equivalents at end of period.... 944 52 $109,810 $ 6,248 $ 996 ======== ====== ===== Exhibit 6: 2005 Statement of Cash Flows AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOW (in millions) Fiscal Years Ended Dec. 31, 2005 2004 2003 CASH, BEGINNING OF PERIOD $ 1,303 $ 1,102 $ 738 OPERATING ACTIVITIES: Net income (loss) 359 588 35 Adjustments to net income: Depreciation of fixed assets and other amortization 121 76 75 Stock-based compensation 87 58 88 Other operating expense (income) 7 (8) 3 Losses (gains) on sales of marketable securities, net (1) (1) (9) Remeasurements and other (42) 1 130 Non-cash interest expense and other 5 5 13 Deferred income taxes 70 (257) Cumulative effect of change in accounting principle (26) Changes in operating assets and liabilities: Inventories (104) (169) (76) Accounts receivable, net (84) (2) 2 Accounts payable 274 286 167 Accrued expenses and other current liabilities 60 (14) (27) Additions to unearned revenue 156 110 102 Amortization of previously unearned revenue (149) (107) (112) Net cash provided by (used in) operating activities 733 566 392 ww, 1 (45) (204) (24) 836 (1,386) (89) (71) 1,427 (1,584) 813 (536) 5 237 INVESTING ACTIVITIES: Purchases of fixed assets Acquisitions, net of cash acquired Sales and maturities of marketable securities Purchases of marketable securities Proceeds from sale of subsidiary Net cash provided by (used in) investing activities FINANCING ACTIVITIES: Proceeds from exercises of stock options Excess tax benefit on stock awards Proceeds from long-term debt and other Repayments of long-term debt, capital leases Net cash provided by (used in) financing activities (778) (317) 60 163 59 7 11 (270) (193) (157) (97) (495) (332) Foreign-currency effect on cash (52) 49 67 Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS, END OF PERIOD (290) $ 1,013 201 $ 1,303 364 $ 1,102 Exhibit 4: 1997 Balance Sheet AMAZON.COM, INC. BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) DECEMBER 31, 1997 1996 ASSETS $ 6,248 Current Assets: Cash and cash equivalents.. Short-term investments. Inventories.. Prepaid expenses and other. $109,810 15, 256 8,971 3,298 571 321 Total current assets Fixed assets, net.. Deposits... Deferred charges.. 137, 335 9,265 166 2,240 7,140 985 146 $149,006 $ 8,271 ===== ======= Total assets.. LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable... Accrued advertising.. Accrued product development. Other liabilities and accrued expenses Current portion of long-term debt.. $ 32,697 3,454 $ 2,852 598 500 920 6,167 1,500 4,870 43,818 76,521 181 Total current liabilities. Long-term portion of debt.... Long-term portion of capital lease obligation. Stockholders' Equity: Preferred stock, $0.01 par value: Authorized shares -- 10,000,000 Issued and outstanding shares -- none and 569, 396 shares in 1997 and 1996, respectively. Common stock, $0.01 par value: Authorized shares 100,000,000 Issued and outstanding shares 23,937, 169 and 15, 900, 229 shares in 1997 and 1996, respectively. Additional paid-in capital. Deferred compensation. Accumulated deficit. -- 6 239 63,792 (1,930) (33,615) 159 9,873 (612) (6,025) Total stockholders' equity. 28, 486 3, 401 Total liabilities and stockholders' equity..... $149,006 $ 8,271 EE ======= Exhibit 8: 2005 Balance Sheet AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in millions) Fiscal Years Ended Dec. 31, 2005 2004 ASSETS Current assets: Cash and cash equivalents $ 1,013 $ 1,303 Marketable securities 987 476 Cash, cash equivalents, and marketable securities 2,000 1,779 Inventories 566 480 Deferred tax assets, current portion 89 81 Accounts receivable, net 274 199 Total current assets 2,929 2,539 Fixed assets, net Deferred tax assets, long term portion Goodwill Other assets Total assets 348 223 159 37 3,696 $ 246 282 139 42 3,248 $ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses and other current liabilities Total current liabilities $ $ 1,366 563 1,929 1,142 478 1,620 Long-term debt and other 1,521 1,855 Commitments and contingencies -- none Stockholders' equity (deficit): Preferred stock, $0.01 par value: Authorized shares -- 500 Issued and outstanding shares Common stock, $0.01 par value: Authorized shares -- 5,000 Issued and outstanding shares Additional paid-in capital Accumulated other comprehensive income Accumulated deficit Total stockholders' equity (deficit) Total liabilities and stockholders' equity (deficit) 4 2,263 6 (2,027) 246 3,696 $ 4 2,123 32 (2,386) (227) 3,248