Analysis and Valuation of Amazon Company - Case Study Example

Running Head: Analysis and valuation of Amazon Company Analysis and valuation of Amazon Company Name Course Tutor Date Analysis and valuation of Amazon Company Introduction The latest journals indicate that Amazon.com, Inc has improved its performances and it is forecasted that the future of the company is bright. The company deals with wide variety of products and services so that they can satisfy all customers regardless of their status or class. Some of the products and services provided by the company include wireless services, digital cameras, DVDs, computers and many others (Vulkan, 2003). Business Strategy The company has implemented effective strategies so that they can maintain their position in the market. The management found it necessary to come up with various strategies since Amazon.com, Inc faces stiff competition from competitors that are offering the same products and services. Some of the serious competitors in the market comprise of Bares & Noble, Inc., eBay Inc., Catalog & Mail Order House and finally Wal-Mart.com. Wal-Mart.com is privately owned company. Amazon.com, Inc has been able to survive high competition because of the effective strategies they have implemented. Some of the strategies include the well improve customer service i.e. the company has made it possible for the customers to review company’s product through the phone before making decision on which company to buy the products. Furthermore, the company has employed high skilled and knowledgeable employees so that they can handle customers professionally. Many customers are left satisfied with the products and services offered by the company making them to offer referrals to other potential customers. Apart from offering quality products, the company also serves international market thus increasing the number of customers targeted. These and other more strategies have enabled the company to generate more profit on every trading period. Accounting errors In the books of accounts for the Amazon.com, Inc. there are some common errors which may occur while preparing financial statement such as balance sheet, income statement and cash flows transaction. Some of these accounting errors comprise of errors of omission, errors of principals, errors of commission, etc. such errors are easily corrected within the trading period or even in the following trading period. For example, in Amazon Com, Inc. the accountant normally opens suspend account whenever she or he realizes that the trial balance is not balancing as it should be (Kranacher, 2010). Other expenses such as research and development expense should not be considered as accounting errors because they are part of marketing expenses. Every business must incur expenses of R&D because it will help the management of the company to know how the market is operating. Through research and development the company is in a position to know the customer’s purchasing process, strategies used by the competitors in the market and the situation of the economy. Financial Analysis The latest ratio analysis for 1st quarter of this year (2011/03) has shown variations as compared with other trading quarters. These financial ratios are not up to the required accounting standards. The books of account indicate a current ratio of 1.5:1 which is below the required level. This ratio indicates that the company is not in apposition to settle its short and long term liabilities incase of an emergency. The standard ratio as required by GAAP (generally accepted accounting principles) rule is 2:1 which is not the case in Amazon.com, Inc. in analyzing quick ratio, it indicates that the ratio was fairly good because the records show a ratio of 1.1:1. According to GAAP, this ratio is acceptable because it mean that the company is in apposition to settle its debt without the need of disposing the stocks. After careful analysis of cash flow for the 1st quarter of this year, it shows that the company had improved on the movement of cash. From the records show in the cash flow (appendix 4) below, it indicates that the company had a total cash of $2,641,000 at the end of the 1st quarter (2011/03). This was a great improvement because the company was able to pay its debtors without the need of disposing available inventories and at the same time increasing it sales value. Read More