Question:

Jason is comparing two companies in the information technology industry, Apple and
Amazon, to evaluate their relative financial position as reflected on their balance sheets. The
following data are based on the companies’ annual report in 2017.

Balance sheet extracts (in millions $)

Apple Amazon

Assets: 2017 2017

Current assets:

Cash and cash equivalents 20,289 20,522

Short-term marketable securities 53,892 10,464

Accounts receivables 17,874 13,164

Inventories 4,855 16,047

Vendor non-trade receivables 17,799 N/A

Other current assets 13,936 N/A

Total current assets 128,645 60,197

Long-term marketable securities 194,714 N/A

Property, plant and equipment, net 33,783 48,866

Goodwill 5,717 13,350

Acquired intangible assets, net 2,298 N/A

Other non-current assets 10,162 8,897

Total assets 375,319 131,310

LIABILITIES AND SHAREHOLDER EQUITY

Current liabilities:

Accounts payable 49,049 34,616

Short-term debt 11,977 N/A

Current portion of long-term debt 6,496 N/A

Accrued expenses 25,744 18,170

Deferred revenue 7,548 5,097

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 Total current liabilities 100,814 57,883

Long-term debt 97,207 24,743

Deferred revenue non-current 2,836 N/A

Other non-current liabilities 40,415 20,975

Total liabilities 241,272 103,601

Total shareholders’ equity 134,047 27,709

Total liabilities and shareholders’ equity 375,319 131,310

Source: Based on data from companies’ annual report

Note: N/A means there is no such account title in the company’s balance sheet.

Required:
1. Please transfer the original balance sheet into a common-size balance sheet for both
companies;
(25 marks)
2. Based on the above data and common-size balance sheet in question 1, please
prepare an analysis report covering the following aspects:
a. Brief background of the two companies and IT industry;
b. Liquidity analysis of the two companies;
c. Solvency analysis of the two companies;
d. Accounts receivable analysis: the industry average of accounts receivable is
11.8%, please explain possible reasons for the difference between the two
companies and industry average, and provide useful recommendations on
accounts receivables management.
e. Company strategy analysis (e.g., inventories, goodwill, accounts payable and
so on)
Hint: Notes to financial statements in the annual reports (attached on VLE) may provide
useful information for analysis.
(75 marks)

Note:

In terms of the structure of the report, please present your arguments and reflections in a
coherent, integrated form composed of full sentences and paragraphs and do NOT use
point form. You may wish to choose some useful sub-headings where you can organize
your thoughts on similar issues, and do not forget to include an introduction and
concluding section.

Key/suggested references (the list is not exhaustive)

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 ● McLaney, E., & Atrill, P. (2020). Accounting and finance: an introduction

● Elliot, B., and Elliot, J., (2015), Financial Accounting and Reporting, 7th edition,
Pearson : London
Please all feel free to cite other references as needed.

Word limit:
Your report should be 1,500 words in length (+/- 10%), excluding reference and tables
(common-size balance sheet is also excluded from word limit). The report should be
written in Microsoft Word and be double-spaced with a font size 12.

Referencing style (e.g., Harvard):

Please pay attention to the structure of the essay. Your assignment should include a title
page with your name, student number, module number, module title, the report itself,
followed by a list of references, which includes the full reference for all articles, books and
other sources you have cited in the body of the text.

Marking scheme:

1. Answer. (Does the coursework address the question/issue or meet the assigned aims and
keep on topic? Is there a comprehensive understanding of the topic?)
2. Structure. (Is the structure clear and material presented in a well argued, coherent and
synthesised manner?)
3. Writing Style. (Is the writing fluent and of a good standard with few errors in spelling,
punctuation or grammar?)
4. Level of Reading. (Is the topic well researched and supported? Is there evidence of using a
range of high quality sources?)
5. Quality of Referencing. (Is the work appropriately sourced? Are the references well
formatted and written up accurately and consistently?)