http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_AMZN_2016.pdf P
ID: 2517618 • Letter: H
Question
http://www.annualreports.com/HostedData/AnnualReports/PDF/NASDAQ_AMZN_2016.pdf
PLEASE ANSWER THE FOLLOWING QUESTIONS BY REFERING TO THE LINK ABOVE:
1. What percentage of Amazon.com, Inc. authorized stock was issued at December 31, 2016?
2. How does Amazon.com, Inc. report treasury stock? How does this differ from the presentation in the textbook?
3. What is the dividend policy for the company? How does the policy impact stockholders’ investment goals?
4. What is the net cost of Property and Equipment at December 31, 2016 and December 31, 2015? What is the trend in property and equipment for the past two years?
5. Calculate the current ratio for the past two years. Did the current ratio improve or weaken in the more recent years?
Explanation / Answer
All data are for 2016 (as it is 2016’s annual report)
1. No. of authorized shares = 5,000. No. of shares issued = 500. Thus % of Amazon’s authorized stock that was issued at December 31, 2016 = 500/5000 = 10%
2. Amazon reports its treasury stock at cost and the amount is deducted from total stockholder’s equity. Thus Amazon uses the cost method of reporting treasury stock.
3. Amazon has never declared and never paid cash dividends on its common stock. This has slightly derailed stockholder’s investment goals. The goal of a stockholder is to seek regular incomes in the form of dividends as well as appreciation in the stock price. While Amazon’s stock prices have appreciated on a regular basis investors have not been able to earn any dividends from the stock.
We know that total stock return = [(Ending stock price – Initial stock price)+dividends]/initial stock price.
The stockholders of Amazon will have nil value of dividends in the numerator of the above equation and hence for their investment goals they will be completely reliant on appreciation in Amazon’s share price.
4. Net cost of property and equipment on December 31, 2015 = $21,838 million.
Net cost of property and equipment on December 31, 2016 = $29,114 million.
Thus there is an increasing trend in property and equipment for the past two years and for 2016 the year on year increase was (29114-21838)/21838 = 33.32%
5. Current ratio = current assets/current liabilities
As we can see the current ratio declined in 2016 compared to 2015. Thus current ratio is weakening.
2015 2016 Total current assets 35,705.00 45,781.00 Total current liabilities 33,887.00 43,816.00 Current ratio 1.0536 1.0448Related Questions
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