Requirement 1. Review Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations) included in the 2015 Annual Report. What does Amazon.com, Inc. state is the company's financial focus? What are free cash flows and how does Amazon.com plan to increase its free cash flows?
Amazon.com, Inc. states their financial focus is on
long-term, sustainable growth in free cash flows per share.
Free cash flows are the amount of
cash available from operating activities after paying for planned investments in long-term assets and dividends.
Amazon.com plans to increase its free cash flows by
increasing operating income and efficiently managing working capital and cash capital expenditures.
Requirement 2. Review the statement of cash flows for Amazon.com, Inc. What type of noncash adjustments to net income did Amazon.com report in 2015? (Select the six correct answers.)
A.
Deferred income taxes
Your answer is correct.
B.
Losses (gains) on sales of marketable securities
This is the correct answer.
C.
Impairments
Your answer is not correct.
D.
Depreciation and amortization
This is the correct answer.
E.
Lease abandonment
Your answer is not correct.
F.
Stock-based compensation
Your answer is correct.
G.
Excess tax benefits from stock-based compensation
Your answer is correct.
H.
Other operating expense (income)
This is the correct answer.
I.
Gain on divestiture of business
Requirement 3. Review the 2015 statement of cash flows for Amazon.com, Inc. What was the net cash provided (used) for investing activities? What were the cash inflows and outflows related to this section? (Complete all answer boxes. Enter the net cash amount in millions as shown in Amazon.com's 2015 statement of cash flows. Use a minus sign or parentheses for a net cash outflow.)
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Homework Answers
Requirement 3:
Investing activities in a company indicate the cash spent on capital asset such as plant and equipment etc.
Cash flows from investing activities involve cash spent on purchasing those fixed assets, gains or losses involved and other changes that contribute to the change in the cash position of the company.
Cash flows used in investing activities with cash capital
expenditures including lease hold inmprovemnts, internal-us
software and website development costs, cash outlays for
acquisitions, investments in other complanies, marketable
securities etc, are $6,450 Million in year 2015.
Additional investments in technology infrastructure (Majority to
support AWS)
and additional capacity to support fulfillment operations = $4,600
Million
Internal software and website development charges = $528
million
Acquisition and other investment activity = $795 Milion
Total break up available = $4,600Mn + $528Mn + $795Mn = $5,923 Mn
which is 92% (5923 / 6450 * 100 = 92%) which is sufficient as per the accounting standards
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