PROJECT REPORT

(SUBMITTED FOR THE DEGREE OF B.COM.HONOURS IN ACCOUNTING AND

FINANCE UNDER THE UNIVERSITY OF CALCUTTA)

Title of the Project Financial statement analysis(Comparative study of Netflix

and Amazon)

Submitted by:
Name of the candidate : Zubin Barman

Registration number: 017-1112-2615-18

CU Roll no.: 181017-21-1921

Name of the college: THE BHAWANIPUR EDUCATION SOCIETY COLLEGE

College UID: 0103183313

Supervised by:
Name of the professor: Prof. Kushal Majumdar

Month& Year of submission:

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 SUPERVISOR’S CERTIFICATE

This is to certify that Mr.Zubin Barman a student of B.Com. Honours in Accounting

& Finance of The Bhawanipur Education Society College under The University of
Calcutta has worked under my supervision and guidance for His Project Work and
prepared a project Report with the title Financial Statement Analysis (
Comparative study of Netflix and Amazon ).

The project which he is submitting, is his genuine and orginal work to the best of
my knowledge.

Place: Signature:
Date: Name:
Designation:
Name of the College: The Bhawanipur
Education Society College

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 STUDENTS DECLARATION
hereby declare that the project work with the title FINANCIAL STATEMENT
ANALYSIS (COMAPARATIVE STUDY OF NETFLIX AND AMAZON) submitted by me
for the partial fulfillment of the degree B.Com. Honours in Accounting & Finance
under the University of Calcutta is my original work and has not been submitted
earlier to any other University/Institution for the fulfillment of the requirement
for any course of study.

I also declare that no chapter of this manuscript in or in part has been

incorporated in this report from any earlier work done by others or by me.
However, extracts of any literature which has been used for this report has been
duly acknowledged providing details of such literature in the reference.

Place: Signature:

Date: Name:

Address:

Registration No.

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 Acknowledgement

I respect and thank my supervisor for providing me an opportunity to do the Commerce project
And giving me all the support guidance which made me complete the project duly. This project
has helped me in doing lot of research. I would also like to thank my parents and friends who
have helped me with their valuable suggestion and guidance, which has been very helpful in
completion of the project. All that I have done is only due to such supervision and assistance for
which I would not forget to thank all of them.

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Index

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Chapter 1
Introduction

1.1 Background of the study

Financial statement analysis is the process of examining a company’s performance in the context of its
industry and economic environment in order to arrive at a decision or recommendation. Often, the
decision and recommendations addressed by financial analyst pertain to providing capital to companies
specially, whether to invest in company’s or equity securities and at what price. An investor in debt
securities is concerned about the company’s ability to pay interest and to repay the principal lent. An
investor in equity securities is an owner with a residual interest in the company and is concerned about
the company’s ability to pay dividends and the likelihood that its share price will increase.

Overall, a central focus of financial analysis is evaluating company’s ability to earn a return on its capital
that is at least equal to the cost of capital, to profitably grow its operations, and to generate cash to
meet obligation and pursue opportunities.

Fundamental financial analysts starts with the information found in a company’s financial reports.
These financial reports include audited financial statements, additional disclosure required b y regularly
authorities, and any accompanying (unaudited) commentary by management. Basic financial statement
analysis as presented in this reading provides a foundation that enables the analyst to better understand
other information gathered from research beyond the financial reports.

The reading is organized as follows: section 2 discusses the scope of financial statement analysis. Section
3 describes the sources of information used in financial statement analysis, including the primary
financial statements ( statement of financial position or balance sheet, statement of comprehensive
income, statement of changes in equity, cash flow statement) section 4 provides a framework for
guiding the financial statement analysis process.

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1.2 Need of the study:

Financial statement analysis is used to identify the trends and relationships between financial
statement items. Both internal management and external users (such as creditor, analysts and
investors) of the financial statements need to evaluate company’s profitability, liquidity, and
solvency. the most common methods used for financial statement analysis are trend analysis,
common size statements, and ratio analysis. These methods include calculations and
comparisons of the results to historical company data competitors, or industry average to
determine the relative strength and performance of the company being analyzed.

1.Profit and loss Account & balance sheet.

2.To know financial conditions.

3.To know profitability position.

4.To know operating efficiency of the firm.

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1.3 Literature review:

The literature review of the study will emphasis on the related studies on comparing and
analyzing financial statements to make an investment. The basis of financial planning analysis of
decision making is the financial information (statements) financial statements are needed to
predict, compare and evaluate a firm’s earning ability. It is also required to aid in economic
decision making investment and financing decision making. The financial information of an
enterprise contained financial statements. The use of financial statement analysis in
investment

Decision has been addressed by a series of authors. according to Gautam U.S(2005)

accountancy (P#215) Financial statement is generally is explained as financial information which
is the information relating to financial position of any firm in a capsule form. Financial according
to J.A Obison (1999)was defined as a written report that summarizes the financial statement of
an organization for stated period of time. It include income statement and balance sheet or
statement of the financial position describing the flow of resources, profit and loss and the
distribution or retention of profit.

According Pandey I.m(2005 Financial management) profitability is the ability of an entity to

earn income. It can be addressed by by computing various relevant measures including the
ratio of net sales to assets, the rate earned on total assets etc.

According to Meigns et al (2001) Financial statement simply means a declaration of what is

believed to be true and which is communicated in terms of monetary unit. It describes certain
attribute of company this considered to fairly represent its financial activities.

Meigs and Meigs (2003) stated the rate of return of on investment (ROI) is a test management’s
efficiency in using available resources. The review is organized under the following sub-heads
for ease of comprehension.

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1.4 Objective of the study:

The main objective of my study as follows:

1.To make financial statement analysis of two companies for last three years ( 2017,2018,2019)

2.To show Current ratio ,Quick Ratio & Cash Ratio of both Netflix And Amazon of (2019,2018,2017)

3.To give a overview of

1.5 METHODOLOGY:

My project is based on following basis:

Descriptive type research has used to complete the project. This research is based on fact finding
enquires and the variable are totally independent and uncontrollable.

Source of data collection:

Secondary Data:

Secondary Data is used which are used to research to know the history scope of Retail industry are
collected from already available are resources like net and other sources.

Data representation technique and tools:

Tables, Columns chart and line chart has used for representation.

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1.6 Limitations
1. Since the research had time constraints thus the research had to depend on a secondary data whose
reliability may be doubtful.

2. Accuracy of the secondary of the is not known.

3. The way things are measured may change over time, making historical comparisons difficult.

4. As the data is collected through secondary method the information on the topic might be incomplete.

5. Some information are insufficient.

1.7 Chapter planning:

My chapter has been divided into the following categories:

1. Introduction

2.Conceptual framework/National /International scenario.

3.Presentation of Data, Analysis and Findings.

4.Conclusion and Recommendations.

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 Chapter 2

2.Conceptual Framework/ National/ International Scenario.

2.1 DEFNITION of Financial statement:

Financial statements are reports are prepared by a companys management to present the financial
performance and position at a point in time. A general purpose set of financial statement usually
includes a balance sheet, income statements, Statement of owner’s equity, and statement of cash flows.
These statements are prepared to give users outside of the company, like investors and creditor, more
information about the company’s financial positions. Publicly traded companies are also required to
present these statements along with others regulator agencies in a timely manner.

Financial statement include:

1. Balance sheet 2.Income statement 3.Cash flow statement

Understanding Balance Sheets:

The balance sheet provides an overview of a company’s assets, liabilities, and stockholders equity as a
snapshot in time.The data at the top of the balance sheet tells you when the snapshot was take, which
is generally the end of the fiscal year.

The Balance Sheet Formula: Assets = ( Liabilities + Owner’s Equity )

Data From the Balance Sheet:

The balance sheet identifies how assets are funded, either with liabilities, such as debt, stockholders
equity, such as retained earnings and additional paid in capital. Assets are listed on the balance sheet in
order of liquidity. Liabilities are listed in the order in which they will be paid. Short term or current
liabilities are expected to be paid within the year,while long term or non-current liabilites are debts
expected to be paid in over one year.

Items include in the balance sheet:

ASSETS:

 Cash and cash equivalents are liquid assets, which may include treasury bills and certificate of
deposit.
 Accounts receivable are the amount of money owed to the company by its customer for the
sale of its product and services.

LIABILITIES:

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  Debt including long-term debt
 Wages payable
 Dividends payable

SHAREHOLDER’S EQUITY
 Shareholder’s equity is a company’s total assets minus its total liabilites.Shareholder’s equity
represents the amount of money that would be returned to shareholders if all of the assets
were liquidated and all of the company's debt was paid off.
 Retained earnings are part of shareholders' equity and are the amount of net earnings that
were not paid to shareholders as dividends.

Income Statements
Unlike the balance sheet, the income statement covers a range of time, which is a year for annual
financial statements and a quarter for quarterly financial statements. The income statement provides an
overview of revenues, expenses, net income and earnings per share. It usually provides two to three
years of data for comparison.

Income Statement Formula and Calculation

Net Income=(Revenue−Expenses)

1. Total all revenue or sales for the period.

2. Total all expenses and costs of operating the business.

3. Subtract total expenses from revenue to achieve net income or the profit for the period.

Data From Income Statements

An income statement is one of the three important financial statements used for reporting a
company's financial performance over a specific accounting period. Also known as the profit and loss
statement or the statement of revenue and expense, the income statement primarily focuses on a
company’s revenues and expenses during a particular period.

Once expenses are subtracted from revenues, the statement produces a company's profit figure called
net income.

The Cash Flow Statement

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 The cash flow statement (CFS) measures how well a company generates cash to pay its debt
obligations, fund its operating expenses, and fund investments. The cash flow statement
complements the balance sheet and income statement.

Data From the Cash Flow Statement

The CFS allows investors to understand how a company's operations are running, where its money is
coming from, and how money is being spent. The CFS also provides insight as to whether a company
is on a solid financial footing.

There is no formula, per se, for calculating a cash flow statement. Instead, it contains three sections
that report cash flow for the various activities for which a company uses its cash. Those three
components of the CFS are listed below.

Operating Activities
The operating activities on the CFS include any sources and uses of cash from running the business
and selling its products or services. Cash from operations includes any changes made in
cash, accounts receivable, depreciation, inventory, and accounts payable. These transactions also
include wages, income tax payments, interest payments, rent, and cash receipts from the sale of a
product or service.

Investing Activities
Investing activities include any sources and uses of cash from a company's investments into the
long-term future of the company. A purchase or sale of an asset, loans made to vendors or received
from customers or any payments related to a merger or acquisition is included in this category.

Financing Activities
Cash from financing activities include the sources of cash from investors or banks, as well as the uses
of cash paid to shareholders. Financing activities include debt issuance, equity issuance, stock
repurchases, loans, dividends paid, and repayments of debt.

The cash flow statement reconciles the income statement with the balance sheet in three major
business activities.

2.2 National Scenario of Netflix and Amazon

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As far as Netflix’s India foray—around five years ago— is concerned, Hastings says the timing of its entry
was “fortunate”. Thanks to Reliance Jio and its cheap data plans, India went from being one of the
world’s most expensive data regimes to the most inexpensive in just four years. “The transformation of
the Indian Internet is phenomenal. In hindsight, our business probably could not have worked five years
ago,” he says.

Another learning for Netflix was that unlike Americans and Europeans, a large chunk of Indians consume
content on mobile devices. To reach these consumers, Netflix launched a mobile-only subscription plan
at ₹199 a month, far cheaper than its standard plan, in 2019. On the back end, it had to adjust the bit
rate of videos based on factors such as the speed of the Internet connection and the device to ensure a
seamless experience, says Abhishek Nag, director-business development, Netflix India.

Amazon also says that it's the biggest online store in India with more than 25 million products for sale.

That's about 5 million more than the most recent numbers from one of its biggest local competitors,
Flipkart.

Interestingly, Flipkart's founders actually both worked at Amazon before leaving in 2007 to build their
own company. Exactly one day after Flipkart raised a mammoth $1 billion funding round in June 2014,
Amazon said it planned to pour $2 billion into its own Indian operations. On Amazon's earnings call, CFO
Brian Olsavsky hinted that that investment continues to grow.

When one analyst asked about India, he said the company was "super excited" about opportunities in
the region. "When we see a positive surprise we double-down on it - that's kind of our policy - and India
is that kind of surprise," Olsavsky said. "We're very happy, very encouraged early on about what we've
seen so far with the ramping up of the business, the level of innovation going on for both customers and
sellers."

2.3 International scenario on Netflix and Amazon

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Netflix’s global growth is a big factor in the company’s success. By 2017 it was operating in and today
close to 73 million of its some 130 million subscribers are outside the U.S. In the second quarter of 2018, its
international streaming revenues exceeded domestic streaming revenues for the first time. This is a
remarkable achievement for a company that was only in the U.S. before 2010, and in only 50 countries by
2015.

Other U.S. internet companies have scaled internationally, of course (Facebook and Google are two obvious
examples). But Netflix’s globalization strategy, and many of the challenges it’s had to overcome, are
unique. Netflix must secure content deals region by region, and sometimes country by country. It also must
face a diverse set of national regulatory restrictions, such as those that limit what content can be made
available in local markets. International subscribers, many of whom are not fluent in English, often prefer
local-language programming. And many potential subscribers.

Amazon dominates the US ecommerce landscape, but it’s a very different story overseas. In an
effort to duplicate its domestic success, Amazon has doubled down on its international efforts, with
Prime membership at the core of its expansion strategy.

 What percent of worldwide retail ecommerce sales are attributed to Amazon? We forecast
that Amazon will account for 48.0% of US retail ecommerce sales in 2018, making it the largest
ecommerce platform in the country. It will make up 13.3% of worldwide retail ecommerce sales
this year and just 5.6% when the US is excluded.

 How many Amazon Prime members are outside the US? The number of international Amazon
Prime subscribers (59.5 million) will surpass that of US subscribers (58.5 million) for the first
time in 2018, according to J.P Morgan. Prime memberships are currently available in 17
countries: Austria, Australia, Belgium, Canada, China, France, Germany, India, Italy, Japan,
Luxembourg, Mexico, the Netherlands, Singapore, Spain, the UK and the US.

 What is Amazon’s largest market outside the US? Germany is Amazon’s largest foreign market,
accounting for nearly one-third of its international net sales in 2017, according to the firm. Much
of its success has to do with its wide-ranging product offering, low prices and a high degree of
cross-border shopping from neighboring countries.

 Which markets outside the US are being targeted by Amazon? Amazon continues to place its
bets on India, a fast-growing ecommerce market where the firm has already had considerable
success. It’s also one of the few countries where Prime Video is more popular than Netflix.
Amazon also has a big opportunity with logistics in Latin America and recently established a local
platform in Turkey.

Chapter 3

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3.Presentation of Data, Analysis And Findings

3.1 An Introduction of Netflix and Amazon.

Netflix is a streaming service that provides movies and TV shows just with a touch of a button,
it was established in 1997 and operates today as the biggest streaming platform in the world with over
125 million subscribers around the world . Netflix saw an opportunity in the 1990s of a change in the
way people watch movies and TV shows, Netflix realized that the people don’t want to go to the store,
look for a DVD player, and purchase it. They knew that the people would rather sit at home and watch
their movies from the comfort of their couch, something that Blockbuster did not agree with.
Blockbuster was Netflix’s competition in the 1990s, they believed that Netflix’s theory is wrong and that
people still preferred to go to the store and purchase their movies, which later lead to the bankruptcy
of Blockbuster and their extinction. Streaming Platforms is the way to go nowadays and everybody
kind of ditched traditional broadcasting Companies such as Disney and Amazon have immensely
benefited from having a streaming platform and Netflix tops that list. Ratio analyses could be
defined as the process of evaluating and interpreting the operating and financial status of a company
with the use of annual reports and financial statements.

Amazon has been synonymous with. e-commerce from the get-go. The company originated
from Seattle Washington started as a bookseller but throughout the time it grew out to be the most
popular web-based service in the world. Amazon was created by Jeff Bezos, with the internet becoming
more accessible in the 90s, Bezos believed that there is a gigantic market to capitalize on, even though
he didn’t have any prior experience or knowledge about the internet. But upon learning, Bezos had
a vision that saw the world interacting, shopping, and doing transactions virtually through E-
Commerce Bezos’s Amazon went online in 1995, the company marches to focus on the online market
turned out to be a huge success. A consistent incline in revenue, going from $150 million in 1997 to $3.1
Billion in 2001.The high percentage of revenue and growth is due to the company innovation with their
services, and their ever wide expansion of subsidiaries platforms. Amazon continues to adapt
and evolve till this day. Henceforward in this report, we will discuss in detail how did Amazon
tackled the e-commerce initially and what was their business strategy that led to their success.
Then we will look at Amazon's financial statement; their mergers and acquisitions, and the
ratio analysis. Ratio analysis is critical in determining company liquidity and profitability (Al Ahbabi and
Nobanee 2020).

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What a difference a year makes. We learned how to launder money (Ozark) and profile serial killers
(MINDHUNTER). That life is better with wrestling (GLOW) and just as crazy without Pablo (Narcos). And
once again, that Eleven is not to be messed with (Stranger Things). The only thing we didn’t learn... who
drew the dicks (American Vandal). 2017 brought a lot of learning and also, A LOT of watching. Netflix
members around the world watched more than 140 million hours per day (that’s a little more one billion
hours per week in case you were wondering). The most popular of which fell on Sunday, January 1 - one
day in and we already needed a comfort binge. Even Antarctica got in on the watching action, where
someone (a penguin) binged through Shameless (talk about Netflix and chill). Not to be outdone, Mexico
takes the top spot for having the most members to watch Netflix every-single-day (#goals). The one
we’re still scratching our heads about, the person who watched Pirates of the Caribbean: The Curse of
the Black Pearl 365 days in a row (streamin’ me timbers?). An impressive feat, especially as the average
member watched around 60 movies on Netflix this year. There’s much to say about what we watched,
but how we watched was also intriguing. Though bingeing was standard in 2017, not all series were
enjoyed in the same way - there were those we devoured, those we savored, those we cheated on, and
those that brought us together.

FINANCIAL STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 6, 2018

INFORMATION CONCERNING SOLICITATION AND VOTING General The attached proxy is solicited on
behalf of the Board of Directors (the “Board”) of Netflix, Inc., a Delaware corporation (the “Company”),
for use at the Annual Meeting of Stockholders to be held on June 6, 2018, at 3:00 p.m. Pacific Time (the
“Annual Meeting”), or at any adjournment or postponement of this meeting, for the purposes set forth
in this Proxy Statement and in the accompanying Notice of Annual Meeting of Stockholders and form of
proxy. This year’s annual meeting will be held entirely via the internet. Stockholders may participate in
the annual meeting by visiting the following website: nflx.onlineshareholdermeeting.com. To participate
in the annual meeting, you will need the 16-digit control number included on your Notice, on your proxy
card or on the instructions that accompanied your proxy materials. Pursuant to rules promulgated by
the Securities and Exchange Commission (“SEC”), we have elected to provide access to our proxy
materials over the internet. Accordingly, the Company will mail, on or about April 23, 2018, a Notice of
Internet Availability of Proxy Materials to stockholders of record and beneficial owners as of the close of
business on April 9, 2018, referred to as the Record Date. On the date of mailing of the Notice of
Internet Availability of Proxy Materials, all stockholders will have the ability to access all of the proxy
materials at http://ir.netflix.com/annuals.cfm. Should you request it, we will make paper copies of these
proxy materials available free of charge. To request a copy, please send your request to the Company’s
Secretary at the address listed below. Our principal executive offices are located at 100 Winchester
Circle, Los Gatos, California 95032, and our telephone number is (408) 540-3700. Our internet website
address is www.netflix.com. You may find our SEC filings, including our annual reports on Form 10-K, on
our Investor Relations website at http://ir.netflix.com/sec.cfm. Revocability of Proxies You may change
your vote at any time prior to the vote at the Annual Meeting. If you are a stockholder of record as of
the Record Date, you may change your vote by granting a new proxy bearing a later date (which
Secretary at the address above prior to your shares being voted, or by attending the Annual Meeting
and voting via the internet. Attendance at the meeting will not cause your previously

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3.3 Analysis and interpretation Findings
Management’s Discussion and Analysis of Financial Condition and Results of Operations

This section of this Form 10-K generally discusses 2019 and 2018 items and year-to-year comparisons
between 2019 and 2018. Discussions of 2017 items and year-to-year comparisons between 2018 and
2017 that are not included in this Form 10-K can be found in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 2018.

As of/ Year Ended December 31 Change

(in thousands, except revenue per membership and percentages)

2019 2018 2017 2019 vs. 2018 2018 vs. 2017

Global Streaming
Memberships:
Paid net membership 27,831 28,615 21,554 ( 3)% 33 %
additions
Paid memberships at 167,090 139,259 110,644 20 % 26 %
end of period
Average paying 152,984 124,658 99,323 23 % 26 %
memberships
Average monthly $ 10.82 $ 10.31 $ 9.43 5% 9%
revenue per paying
membership

Financial Results
Streaming revenues $ 19,859,230 $ 15,428,752 $11,242,216 29 % 37 %
DVD revenues 297,217 365,589 450,497 (19)% (19)%
Total revenues

Operating income $ 2,604,254 $ 1,605,226 $ 838,679 62 % 91 %

Operating margin 13% 10% 7% 30 % 43 %

Consolidated revenues for the year ended December 31, 2019 increased 28% as compared to the year
ended December 31, 2018. The increase in our consolidated revenues was due to the 23% growth in
average paying memberships and a 5% increase in average monthly revenue per paying membership.
The increase in average monthly revenue per paying membership resulted from our price changes and
plan mix, partially offset by unfavorable fluctuations in foreign exchange rates.

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Results and discussion

Current Ratio

Year/Item 2019 2018 2017

Current assets 6,178,504 9,694,135 7,669,974
Current liabilities 6,855,696 6,487,320 5,466,312
Total 0.90 1.49 1.40

Current ratio of Netflix

1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2019 2018 2017

Comment: Netflix had a healthy current ratio analysis in 2017 that continued going through next one
year and until it drastically fell in 2019.

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Quick acid test Ratio.

Year/Item 2019 2018 2017

Current Asset 6,178,504 9,694,135 7,669,974
Inventory 1,160,067 5,899,652 4,847,179
Current Liabilities 6,855,696 6,487,320 5,466,312
Total 73.2% 58.4% 51.6%

Quick Ratio of Netflix

80.00%

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%
2019 2018 2017

Comment: Netflix managed to grow their Quick ratio year on year, jumping an impressive 35.4%
between 2017 and 2019.

Cash Ratio:

Year/item 2019 2018 2017

Cash 5,018,437 3,794,483 2,822,,795
Current liabilities 6,855,696 6,487,320 5,466,312
Total 73.2% 58.4% 51.6%

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 Cash ratio of Netflix

80.00%
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2019 2018 2017

Comment: The cash ratio of Netflix keeps on growing through the duration of the 3 years, reaching its
highest numbers in 2019.

AMAZON
Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact,
including statements regarding guidance, industry prospects, or future results of operations or financial
position, made in this Annual Report on Form 10-K are forward-looking. We use words such as
anticipates, believes, expects, future, intends, and similar expressions to identify forward-looking
statements. Forward-looking statements reflect management’s current expectations and are inherently
uncertain. Actual results could differ materially for a variety of reasons, including, among others,
fluctuations in foreign exchange rates, changes in global economic conditions and customer spending,
world events, the rate of growth of the Internet, online commerce, and cloud services, the amount that
Amazon.com invests in new business opportunities and the timing of those investments, the mix of
products and services sold to customers, the mix of net sales derived from products as compared with
services, the extent to which we owe income or other taxes, competition, management of growth,
potential fluctuations in operating results, international growth and expansion, the outcomes of claims,
litigation, government investigations, and other proceedings, fulfillment, sortation, delivery, and data
center optimization, risks of inventory management, seasonality, the degree to which we enter into,
maintain, and develop commercial agreements, proposed and completed acquisitions and strategic
transactions, payments risks, and risks of fulfillment throughput and productivity. In addition, the global
economic climate amplifies many of these risks. These risks and uncertainties, as well as other risks and
uncertainties that could cause our actual results to differ significantly from management’s expectations,
are described in greater detail in Item 1A of Part I, “Risk Factors.”

Page 21
Overview

Our primary source of revenue is the sale of a wide range of products and services to customers. The
products offered through our stores include merchandise and content we have purchased for resale and
products offered by third-party sellers, and we also manufacture and sell electronic devices and produce
media content. Generally, we recognize gross revenue from items we sell from our inventory as product
sales and recognize our net share of revenue of items sold by third-party sellers as service sales. We seek
to increase unit sales across our stores, through increased product selection, across numerous product
categories. We also offer other services such as compute, storage, and database offerings, fulfillment,
advertising, publishing, and digital content subscriptions.

Our financial focus is on long-term, sustainable growth in free cash flows 1. Free cash flows are
driven primarily by increasing operating income and efficiently managing working capital2 and cash
capital expenditures, including our decision to purchase or lease property and equipment. Increases in
operating income primarily result from increases in sales of products and services and efficiently
managing our operating costs, partially offset by investments we make in longer-term strategic initiatives,
including capital expenditures focused on improving the customer experience. To increase sales of
products and services, we focus on improving all aspects of the customer experience, including lowering
prices, improving availability, offering faster delivery and performance times, increasing selection,
producing original content, increasing product categories and service offerings, expanding product
information, improving ease of use, improving reliability, and earning customer trust.

We seek to reduce our variable costs per unit and work to leverage our fixed costs. Our variable
costs include product and content costs, payment processing and related transaction costs, picking,
packaging, and preparing orders for shipment, transportation, customer service support, costs necessary to
run AWS, and a portion of our marketing costs. Our fixed costs include the costs necessary to build and
run our technology infrastructure; to build, enhance, and add features to our online stores, web services,
electronic devices, and digital offerings; and to build and optimize our fulfillment and delivery networks
and related facilities. Variable costs generally change directly with sales volume, while fixed costs
generally are dependent on the timing of capacity needs, geographic expansion, category expansion, and
other factors. To decrease our variable costs on a per unit basis and enable us to lower prices for
customers, we seek to increase our direct sourcing, increase discounts from suppliers, and reduce defects
in our processes. To minimize unnecessary growth in fixed costs, we seek to improve process efficiencies
and maintain a lean culture.

Amazon Business and Marketing Strategy

With the Amazon initiative of e-commerce, Amazon took on losses in the late ’90s. But Jeff Bezos
always knew that would be the case in the short term. Amazon played the long run, in the beginning, they
invested heavily on building the brand equity and branding the site. Stating that “This is an investment
phase for Amazon.com. We've been straightforward with everybody from the beginning that that's our
strategy” Bezos also doubled down on this strategy, suggesting if people don’t agree with this approach,
then they should not bother investing in Amazon stock. Because that is how Amazon will always
approach things, by willing to take risks in their business decision.

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 Financial Data (Amazon)

Item/Year 2019 2018 2017

Current Assets 96,334,000 75,101,000 60,197,000
Current liabilities 87,812,000 68,391,000 57,883,000
Inventories 20,497,000 17, 174,000 16,047,000
Cash 55,021,000 41,250,000 30,986,000
Receivables 20,816,000 16,677,000 13,164,000
Total Assets 225,248,000 162,648,000 131,310,000
Total Liabilities 163,188,000 119,099,000 103,601,000
Total Equity 62,060,000 43,549,000 27,709,000
Sales 280,522,000 232,887,000 177,866,000
Cost of Goods sold 205,768,000 173,183,000 137,183,000
EBIT 14,541,000 12,421,000 4,106,000
Interest 1,600,000 1,417,000 848,000
Net Income 11,588,000 10,073,000 3,033,000

We collected the data here from Yahoo Finance from 2017 till 2019. All items in Table 1 were available in the
Income statement and the balance sheet. As you can see every factor and item shows an increase from one year
to another. The figure illustrates the growth Amazon displayed from year to year. However, one can’t
help but notice even though the asset in every year is high, the net income is shockingly low. Amazon has
a low net income because they have a lot of debt and liability collected. They also spent a lot of
their money on acquiring companies and manufacturing big productions. This made a lot of people
debate whether or not Amazon is profitable.

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1.Current Ratio of Amazon:

Current Ratio of Amazon

1.12
1.1
1.08
1.06
1.04
1.02
1
2019 2018 2017

2.Quick Ratio of Amazon

Quick Ratio of Amazon

0.88
0.86
0.84
0.82
0.8
0.78 Series 2
0.76
0.74
0.72
0.7
2019 2018 2017

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3. Cash Ratio of Amazon:

Cash Ratio of Amazon

0.64
0.62
0.6
0.58
0.56
0.54
0.52
0.5
0.48

2019 Series 2
2018
2017

As discussed above, these graphs are associated with the ratios. All current ratios above 1
indicate the company is in good condition to pay out its debts. The ideal quick ratio should be 1:1,
unfortunately, Amazon in every year is less than 1. Indicating Amazon couldn’t be able to pay out its full
liabilities in the short term. Whereas they are in good condition in Cash ratio, placed between 0.5 and. 0.6.

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Context Netflix Amazon Prime Consumer perception
basics Netflix is a California Amazon prime video is
based entertainment a subscription is based
company founded by streaming service
Reed Hastings and Marc offered by e-commerce
Randolph as a video on giant Amazon.
demand service for
home television
audience.
Pricing Netflix give you a free Amazon offers a free 30 Amazon prime wins in
month before they start day trial period of its terms pricing with 70%
charging for the prime membership consumer voting in
subscription. Netflix on while. Amazon prime favour of Amazon
the other hand, offer membership cost Rs129 prime.
three different plan per month or Rs999 per
Basic, standard and year for the prime
premium. The basic membership. You can
plan cost Rs500 per sign up for monthly or
month and increases one year prime
incrementally, bringing membership.
the standard and
premium subscription to
Rs650 And Rs800
respectively.
Content Netflix has been for Amazon prime video Netflix wins in terms of
quite some time so it offers a myriad of good content with 83.5%
has the most extensive content too including consumer voting in
selection of digital some of the same titles favour of Netflix.
content with thousand of Netflix. As its fairy
of titles to choose from new service compared
including its in house to Netflix, the library is
shows such as stranger not as extensive yet .
things, house of cards,
fuller house, Narcos,
greenhouse academy
and more.
Video Quality Netflix has been the Amazon prime video Netflix wins in terms of
prior of entertainment which fails to play high- video quality with
industry which offers its resolution HD content 57.5% consumer voting
viewers the best on low speed in favour of Netflix.
possible viewing connection. However
experience in Amazon stays a little
mainstream streaming ahead when it comes to
on top of the best HDR content.
display resolution
possible in line with
your plan and intend
speed. Netflix has been
broadcasting $k and
HDR content for

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 sometime now and
Netflix excel in video
and sound quality. Even
the best of streaming
services lags behind
physical media and this
is where Netflix stands
out.
Device accessibility Netflix offers it Amazon prime video Netflix wins in terms
dedicated Netflix app does not have that device accessibility
which can be accessed extensive device 72.1% consumer voting
from almost any internet support of the Netflix in favour of Netflix.
connected device but its slowly growing
including web, its network of
Windows 10 (UWP) , compatible devices. It is
Android , IOS, Xbox, available through web
play station, personal browsers as well as
computer, smartphones, hundreds of other media
tablets. streaming devices web,
Android, IOS, Xbox ,
play Station Fire TV etc
Internationalization and Netflix is available in Amazon has now
localization strategy more than 190 officially launched its
countries. The company video on demand
is able to reach its service prime video in
online based global more than 200
target audience through countries.
the use of servers
strategically in different
region of the world.

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