THE BASICS 1. Does the format of the statement more closely follow a single-step or a multiple-step format? How can you tell? 2. Calculate the following ratios for each of the three years presented. Show your computations. Current year Last year Two years ago 94,240,000/386,064,000 74,754,000/280,522,000- 24.41% 26.65% . Gross profit rate (%) . Ratio of operating expenses to sales (or operating revenue) (%) . Profit margin (%) Net income sales or operating revenues . Return on assets Net income/average total assets You will find prior years' assets in the Five-Year Summary of Selected Financial Data 3. Compare these ratios to industry averages. (Note: The gross profit rate may also be called the gross margin. The ratio of operating expenses to sales may also be called the op-erating margin. The profit margin percentage may also be called the net profit margin.) Your company Industry Gross profit rate 24.41 29.97 Operating margin 4.47 Profit margin 3.30 Return on assets 5.13 How do the results for your company compare to industry averages? 2018 2020 21,331 561 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Year Ended December 31, 2019 Net income $ 10.073 $ 11,588 S Other comprehensive income (loss): Net change in foreign currency translation adjustments: Foreign currency translation adjustments, net of tax of S6, S(5), and S(36) (538) 78 Reclassification adjustment for foreign currency translation included in "Other operating expense (income), net," net of tax of So, $29, and so (108) Net foreign currency translation adjustments (538) (30) Net change in unrealized gains (losses) on available-for-sale debt securities: Unrealized gains (losses), net of tax of S0, S(12), and $(83) (17) 83 Reclassification adjustment for losses (gains) included in "Other income (expense), net," net of tax of so, so, and $8 8 (4) Net unrealized gains (losses) on available-for-sale debt securities 79 Total other comprehensive income (loss) (547) 49 Comprehensive income 9,526 S 11,637 $ See accompanying notes to consolidated financial statements. 561 273 (28) 245 806 22,137 AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31. 2019 2020 ASSETS Current assets: s Cash and cash equivalents Marketable securities Inventories Accounts receivable, net and other Total current assets 36,092 S 18.929 20,497 20,816 96.334 72,705 25.141 14,754 16,314 225.248 $ 42,122 42.274 23,795 24.542 132.733 113.114 37,553 15.017 22,778 321.195 Property and equipment, net Operating leases Goodwill Other assets 47.183 S 32.439 8,190 87,812 39.791 23.414 12.171 72.539 44,138 9,708 126,385 52,573 31,816 17,017 1 Total assets s LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ Accrued expenses and other Uncarned revenue Total current liabilities Long-term lease liabilities 14 Long-term debt Other long-term liabilities Commitments and contingencies (Note 7) Stockholders' equity: Preferred stock, 30.01 par value: Authorized shares -- 500 Issued and outstanding shares -- none Common stock, S0.01 par value: Authorized shares - 5,000 Issued shares-521 and 527 Outstanding shares - 498 and 503 Treasury stock, at cost Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total stockholders' equity Total liabilities and stockholders' equity S See accompanying notes to consolidated financial statements. 5 (1.837) 33,658 (986) 31.220 62,060 225.248 S (1.837) 42.865 (180) 52,551 93,404 321,195 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) 2018 S Year Ended December 31. 2019 141,915 S 160,408 S 90.972 120.114 232,887 280,522 2020 215,915 170.149 386,064 Net product sales Net service sales Total net sales Operating expenses: Cost of sales Fulfillment Technology and content Marketing General and administrative Other operating expense (income), net Total operating expenses Operating income Interest income 139,156 34.027 28.837 13,814 4,336 296 220,466 12,421 440 (1,417) (183) (1.160) 11.261 (1.197) 9 10,073 $ 20.68 S 20.14 5 165,536 40.232 35,931 18,878 5,203 201 265,981 14,541 832 (1.600) 203 (565) 13,976 (2,374) (14) 11,588 S 23.46 $ 23.01 $ 233,307 58,517 42,740 22,008 6,668 (75) 363,165. 22.899 555 (1,647) 2.371 1,279 24,178 (2.863) 16 21,331 42.64 41.83 Interest expense Other income (expense), net Total non-operating income (expense) Income before income taxes Provision for income taxes Equity-method investment activity, net of tax Net income Basic earnings per share Diluted earnings per share Weighted average shares used in computation of earnings per share: Basic Diluted S S $ 487 494 500 510 500 504 See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31. 2019 2020 2018 32,173 S 36,410 S 21.856 S 11,588 21,331 10,073 15,341 5,418 274 219 441 21.789 6,864 164 (249) 796 25,251 9,208 (71) (2,582) (554) CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization of property and cquipment and capitalized content costs, operating lease assets, and other Stock-based compensation Other operating expense (income), net Other expense (income), net Deferred income taxes Changes in operating assets and liabilities: Inventories Accounts receivable, net and other Accounts payable Accrued expenses and other Unearned revenue Net cash provided by (used in) operating activities INVESTING ACTIVITIES: Purchases of property and equipment Proceeds from property and equipment sales and incentives Acquisitions, net of cash acquired, and other Sales and maturities of marketable securities (1,314) (4,615) 3,263 472 1.151 30,723 (3.278) (7.681) 8,193 (1,383) 1,711 38,514 (2.849) (8,169) 17.480 5.754 1.265 66,064 (13,427) 2,104 (2,186) 8,240 (16,861) 4,172 (2,461) 22,681 (31 812 (40,140) 5,096 (2.325) 50,237 (72.479 100 THE BASICS 1. Does the format of the statement more closely follow a single-step or a multiple-step format? How can you tell? 2. Calculate the following ratios for each of the three years presented. Show your computations. Current year Last year Two years ago 94,240,000/386,064,000 74,754,000/280,522,000- 24.41% 26.65% . Gross profit rate (%) . Ratio of operating expenses to sales (or operating revenue) (%) . Profit margin (%) Net income sales or operating revenues . Return on assets Net income/average total assets You will find prior years' assets in the Five-Year Summary of Selected Financial Data 3. Compare these ratios to industry averages. (Note: The gross profit rate may also be called the gross margin. The ratio of operating expenses to sales may also be called the op-erating margin. The profit margin percentage may also be called the net profit margin.) Your company Industry Gross profit rate 24.41 29.97 Operating margin 4.47 Profit margin 3.30 Return on assets 5.13 How do the results for your company compare to industry averages? 2018 2020 21,331 561 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Year Ended December 31, 2019 Net income $ 10.073 $ 11,588 S Other comprehensive income (loss): Net change in foreign currency translation adjustments: Foreign currency translation adjustments, net of tax of S6, S(5), and S(36) (538) 78 Reclassification adjustment for foreign currency translation included in "Other operating expense (income), net," net of tax of So, $29, and so (108) Net foreign currency translation adjustments (538) (30) Net change in unrealized gains (losses) on available-for-sale debt securities: Unrealized gains (losses), net of tax of S0, S(12), and $(83) (17) 83 Reclassification adjustment for losses (gains) included in "Other income (expense), net," net of tax of so, so, and $8 8 (4) Net unrealized gains (losses) on available-for-sale debt securities 79 Total other comprehensive income (loss) (547) 49 Comprehensive income 9,526 S 11,637 $ See accompanying notes to consolidated financial statements. 561 273 (28) 245 806 22,137 AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31. 2019 2020 ASSETS Current assets: s Cash and cash equivalents Marketable securities Inventories Accounts receivable, net and other Total current assets 36,092 S 18.929 20,497 20,816 96.334 72,705 25.141 14,754 16,314 225.248 $ 42,122 42.274 23,795 24.542 132.733 113.114 37,553 15.017 22,778 321.195 Property and equipment, net Operating leases Goodwill Other assets 47.183 S 32.439 8,190 87,812 39.791 23.414 12.171 72.539 44,138 9,708 126,385 52,573 31,816 17,017 1 Total assets s LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ Accrued expenses and other Uncarned revenue Total current liabilities Long-term lease liabilities 14 Long-term debt Other long-term liabilities Commitments and contingencies (Note 7) Stockholders' equity: Preferred stock, 30.01 par value: Authorized shares -- 500 Issued and outstanding shares -- none Common stock, S0.01 par value: Authorized shares - 5,000 Issued shares-521 and 527 Outstanding shares - 498 and 503 Treasury stock, at cost Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total stockholders' equity Total liabilities and stockholders' equity S See accompanying notes to consolidated financial statements. 5 (1.837) 33,658 (986) 31.220 62,060 225.248 S (1.837) 42.865 (180) 52,551 93,404 321,195 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) 2018 S Year Ended December 31. 2019 141,915 S 160,408 S 90.972 120.114 232,887 280,522 2020 215,915 170.149 386,064 Net product sales Net service sales Total net sales Operating expenses: Cost of sales Fulfillment Technology and content Marketing General and administrative Other operating expense (income), net Total operating expenses Operating income Interest income 139,156 34.027 28.837 13,814 4,336 296 220,466 12,421 440 (1,417) (183) (1.160) 11.261 (1.197) 9 10,073 $ 20.68 S 20.14 5 165,536 40.232 35,931 18,878 5,203 201 265,981 14,541 832 (1.600) 203 (565) 13,976 (2,374) (14) 11,588 S 23.46 $ 23.01 $ 233,307 58,517 42,740 22,008 6,668 (75) 363,165. 22.899 555 (1,647) 2.371 1,279 24,178 (2.863) 16 21,331 42.64 41.83 Interest expense Other income (expense), net Total non-operating income (expense) Income before income taxes Provision for income taxes Equity-method investment activity, net of tax Net income Basic earnings per share Diluted earnings per share Weighted average shares used in computation of earnings per share: Basic Diluted S S $ 487 494 500 510 500 504 See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31. 2019 2020 2018 32,173 S 36,410 S 21.856 S 11,588 21,331 10,073 15,341 5,418 274 219 441 21.789 6,864 164 (249) 796 25,251 9,208 (71) (2,582) (554) CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization of property and cquipment and capitalized content costs, operating lease assets, and other Stock-based compensation Other operating expense (income), net Other expense (income), net Deferred income taxes Changes in operating assets and liabilities: Inventories Accounts receivable, net and other Accounts payable Accrued expenses and other Unearned revenue Net cash provided by (used in) operating activities INVESTING ACTIVITIES: Purchases of property and equipment Proceeds from property and equipment sales and incentives Acquisitions, net of cash acquired, and other Sales and maturities of marketable securities (1,314) (4,615) 3,263 472 1.151 30,723 (3.278) (7.681) 8,193 (1,383) 1,711 38,514 (2.849) (8,169) 17.480 5.754 1.265 66,064 (13,427) 2,104 (2,186) 8,240 (16,861) 4,172 (2,461) 22,681 (31 812 (40,140) 5,096 (2.325) 50,237 (72.479 100