Question

Visit the EDGAR database. Review the 10-K report for Amazon.com filed on February 2, 2018. You will also want to review its financial statements reported for years ended 2017, 2016, and 2015. Any sources used to support your answers below should be cited using APA Style.

To access this information:

• Search SEC.gov Company Filings for Amazon by entering the ticker information, AMZN in the Fast Search box

After reviewing the above information, answer the following question:

• If Amazon has a 2017 net income of more than $3 billion and 2017 operating cash flows of over $18 billion, how is it possible that its cash balance at December 31, 2017, increases by less than $1.2 billion relative to its balance at December 31, 2016?

I am having difficulty finding where the 1.2 billion relative to its balance is coming from.

Answer 1

The required information to answer this question can be found by going through the company's consolidated statements of cash flows for the year ended December 31, 2017.

During 2017, the company generated $18,434 million (over $18 billion) operating cash flows (see net cash provided by operating activities). However, in the same year it used $27,819 million (close to $28 billion) for investments (see net cash provided by investing activities). If there was no other activity, the company's cash would have reduced by $10 billion ($28 billion - $18 billion) during the same year. But the company generated $9,860 million (close to 10 billion) from financing activities (see net cash provided by financing activities). Also, the value of the company's cash and cash equivalents increased by $713 million (close to $0.8 billion) due to foreign currency effect.

The overall effect of the three activities (operating, investing, and financing) over the company's cash and cash equivalents was an increase by $1,188 million ($18,434 million - $27,819 million + $9,860 million + $713 million) that is less than 1.2 billion.