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Microsoft Excel LibreOffice Calc

Amazon.com Inc. (AMZN)


Analysis of Investments

Difficulty: Advanced


Investment Accounting Policy

Amazon.com generally invests the excess cash in AAA-rated money market funds and investment grade short- to intermediate-term fixed income securities. Such investments are included in “Cash and cash equivalents” or “Marketable securities” on the accompanying consolidated balance sheets. Marketable debt securities are classified as available-for-sale and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive loss.”

Equity investments are accounted for using the equity method of accounting if the investment gives Amazon.com the ability to exercise significant influence, but not control, over an investee. Equity-method investments are included within “Other assets” on Amazon.com’s consolidated balance sheets. Amazon.com’s share of the earnings or losses as reported by equity-method investees, amortization of basis differences, and related gains or losses, if any, are classified as “Equity-method investment activity, net of tax” on the consolidated statements of operations.

Equity investments without readily determinable fair values and for which Amazon.com does not have the ability to exercise significant influence are accounted for at cost with adjustments for observable changes in prices or impairments and are classified as “Other assets” on the consolidated balance sheets.

Equity investments that have readily determinable fair values are included in “Marketable securities” on Amazon.com’s consolidated balance sheets and measured at fair value with changes recognized in “Other income (expense), net” on the consolidated statement of operations.

Amazon.com periodically evaluates whether declines in fair values of the investments indicate impairment. For debt securities and equity method investments, Amazon.com also evaluates whether declines in fair value of the investments below their book value are other-than-temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as Amazon.com’s ability and intent to hold the investment until a forecasted recovery occurs. Additionally, Amazon.com assesses whether Amazon.com has plans to sell the security or it is more likely than not Amazon.com will be required to sell any investment before recovery of its amortized cost basis. Factors considered include: quoted market prices; recent financial results and operating trends; implied values from any recent transactions or offers of investee securities; credit quality of debt instrument issuers; other publicly available information that may affect the value of Amazon.com’s investments; duration and severity of the decline in value; and Amazon.com’s strategy and intentions for holding the investment.

Source: 10-K (filing date: 2019-02-01).


Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Amazon.com Inc., adjustment to Net Income (loss)

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income (loss) (as reported) hidden hidden hidden hidden hidden
Add: Net change in unrealized gains (losses) on available-for-sale debt securities hidden hidden hidden hidden hidden
Net income (loss) (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-01), 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30).


Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Amazon.com Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden
Adjusted net profit margin hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-01), 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Amazon.com Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Amazon.com Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Amazon.com Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Amazon.com Inc., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income (loss) hidden hidden hidden hidden hidden
Net sales hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-01), 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30).

2018 Calculations

1 Net profit margin = 100 × Net income (loss) ÷ Net sales
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Net sales
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Amazon.com Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) hidden hidden hidden hidden hidden
Stockholders’ equity hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income (loss) hidden hidden hidden hidden hidden
Stockholders’ equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-01), 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30).

2018 Calculations

1 ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income (loss) ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Amazon.com Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income (loss) hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (US$ in millions)
Adjusted net income (loss) hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-01), 10-K (filing date: 2018-02-02), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-01-29), 10-K (filing date: 2015-01-30).

2018 Calculations

1 ROA = 100 × Net income (loss) ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income (loss) ÷ Total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Amazon.com Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.