Assignment Details
Understanding a company’s financial health is necessary for making informed business decisions. By examining financial statements and ratios and comparing a company’s performance to industry averages, one can understand how well an organization manages resources, controls costs, and generates profits. Analyzing financial data reveals a company’s strengths and weaknesses and highlights potential growth and improvement areas. It is also needed to support an organization’s long-term success.
For this assignment, you will conduct a financial analysis of the same company you selected for the Unit 2 Individual Project – AMAZON. This analysis will give you a better understanding of the company’s financial health and performance. Follow the steps below to complete this assignment. Locate and download the company’s two most recent annual reports. You will use these reports to find data for your financial analysis.
Finding the Annual Report
To find the company’s annual report, start by visiting the company’s official Web site. Look for a section labeled “Investor Relations” or “Investors,” often located at the bottom of the home page. In this section, you should find links to financial reports, including annual reports. The reports are typically organized by year and can be downloaded in PDF format.
Another option is to search the company’s name followed by “annual report” in a search engine. This often leads you directly to the report on their Web site. For U.S. public companies, you can also access annual reports (known as 10-K filings) through the U.S. Securities and Exchange Commission’s EDGAR database at this page: Search Filings. This provides free access to official filings.
Financial Ratios
You can review the following articles to help you with selecting your financial ratios:
- Financial Ratios
- What is Net Profit Margin? Formula and Examples
Now, follow the outline below and address the items in each section. Download the assignment template: Unit 3 IP Template
Company Overview: Provide a brief overview of 1–2 paragraphs of your chosen company. Include what it does, its main products or services, and any other relevant background information. This context will set the stage for your analysis.
- Financial Ratios: Select one financial ratio from each of the following categories for analysis:
- Liquidity ratios (such as current ratio or quick ratio)
- Leverage ratios (such as debt–equity ratio or debt ratio)
- Profitability ratios (such as gross margin or net profit margin)
After selecting your ratios, create a table that presents the chosen ratios for the company’s last 2 years. Your table should list the company name, the year, and the specific value of each ratio.
- Ratio Analysis: Write an analysis of these three ratios. Explain what each ratio measures and why it is significant in your analysis. Discuss how the company performed in each ratio over the past 2 years. Interpret what these results mean for its financial health.
- Income Statement Analysis: Conduct an income statement analysis by reviewing the income statements from the 2 most recent years of the annual reports. Focus on gross margin, operating margin, and net margin. Compare these margins to the industry average to determine whether the company is performing above or below the standard. Explain what these comparisons reveal about the company’s profitability and operational efficiency.
You can find industry information by reviewing the annual report, searching the Internet, and using Statista.
- Financial Health: Summarize the company’s overall financial condition. Use insights from your ratio analysis and income statement findings to assess its strengths, weaknesses, and potential areas for improvement. Make sure you provide at least one area for improvement and explain why.