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Amazon Financial Report Memo
Amazon Financial Report Memo
TO: President
FROM: Controller
DATE: 5/11/2018
This memo is assessing the performance ratios of Amazon as well as comparing with
Alibaba’s financial performance. Amazon (AMZN) is a one of the largest online store. Amazon
is an online retail shopping services. It provides services to customers, sellers, enterprises, and
content creators. Alibaba (BABA) is another large e-commerce based in Chian. Just like
The five measurement categories to assess the financial ratios are profitability, balance
Amazon Alibaba
Profitability
Growth
Asset (ROA)
Based on the analysis of the performance ratios, Amazon has less financially stable
business compare to Alibaba. Amazon has a slightly higher a debt to equity ratio than Alibaba. It
means Amazon is more risky to creditors and investors than Alibaba. Amazon is not doing so
well under the cash flow performance ratio. Amazon’s ROA is lower than Alibaba. Amazon has a
hard time to manage its assets to generate net income. In the growth performance ratio,
Amazon’s EPS growth rate is higher that means Amazon’s products and services has a strong
demand than Alibaba. Alibaba has ability to generate cash flow in proportion to its sales compare
to Amazon. Amazon has a higher receivables turnover that means Amazon be able to collect cash
from customers faster. Amazon also has a high number in total asset turnover, which means
Recommendation
Overall Amazon is doing well so far, but there is some area Amazon needs to improve
such as cash flow ratio. It is recommendable to the CEO to improve cash flow ratio by take a
AMAZON FINANCIAL REPORT 4
closer look for sales both individual line products and products as a whole. Amazon should
reduce asset costs and expenses to improve the cash flow return on asset ratio. The percentage
cash flow to sale is very low. Management should take a closer look of actual cash flows to be
expected from operations. Controller can improve this ratio by moving some debt into operating
leases, which are not recorded on the balance sheet (Bragg 63).
References
AMAZON FINANCIAL REPORT 5
Bragg, Steven M. Controllership: The Work of the Managerial Accountant, 8th Edition. John
Long, G. B. (2017, August 18). Alibaba Vs. Amazon: Similarities And Differences. Retrieved
similarities-differences