Tutorial - Statement of Cash Flows Amazon Corporation Income Statement for the Year ended December 31, 2020 Sales Cost of goods sold Gross profits Selling and administrative expense Depreciation expense Operating income (EBIT) Interest expense Earnings before tax (EBT) Taxes Earnings after tax (EAT) Preferred stock dividends Earnings available to common stockholders Shares outstanding Earnings per share RM 3,400,000 2.050,000 1,350,000 650,000 230,000 470,000 80,000 390,000 140,000 250,000 10,000 240,000 150,000 1.60

Amazon Corporation Statement of Retained Earnings for the Year ended December 31, 2020 RM Retained earnings, balance, January 1, 2020 800,000 Add: Earnings available to common stockholders, 2020 240.000 1,040,000 Deduct: Cash dividends declared and paid in 2020 (140,000) Retained earnings, balance, December 31, 2020 900,000 Amazon Corporation Comparative Balance Sheets for 2016 and 2020 Assets Year-End 2019 Year-End 2020 RM RM Current assets: Cash 100,000 120,000 Accounts receivable (net) 500,000 510,000 Inventory 610,000 640,000 Prepaid expenses 60,000 30,000

Total current assets 1,270,000 1,300,000 Investments (long-term securities) 90,000 80,000 Plant and equipment 2,000,000 2,600,000 Less: Accumulated depreciation (1,000,000) (1.230,000) Net plant and equipment 1,000,000 1,370,000 Total assets 2,360,000 2,750,000 Liabilities and Stockholders' Equity Current liabilities: Accounts payable 300,000 550,000 Notes payable 500,000 500,000 Accrued expenses 70,000 50.000 870,000 1,100,000 100,000 970,000 160,000 1,260,000 Total current liabilities Long-term liabilities: Bonds payable, 2020 Total liabilities Stockholders' equity: Preferred stock, RM100 par value Common stock, RM1 par value Capital paid in excess of par Retained earnings Total stockholder's equity Total liabilities and stockholders' equity 90,000 150,000 350,000 800,000 1,390,000 2,360,000 90,000 150,000 350,000 900,000 Total assets 2,750,000 Task: a) Comment on the working capital of Amazon Corporation. Justify your answer by the referring the cash flow statement. b) In your opinion, propose the best solution how to solve liquidity issues of the Amazon Corporation c) Amazon Corporation, anticipated cash flow from operating activities of RM9 million in 2021. It will need to spend RM2.5 million on capital investments in order to remain competitive within the industry. Common stock dividends are projected at RM0.6 million and preferred stock dividends at RM0.25 million. Based on the scenario assess the firm's ability to undertake new projects. Justify your answer based on the projected free cash flow for Amazon Corporation.