Amazon.com: The Brink of Bankruptcy Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Amazon.com: The Brink of Bankruptcy Case Solution

Introduction

Amazon.com is considered as a largest online. The company started its operations in the year 1994 as an online book store. With the passage of time, company achieves significant success and now Amazon is famous for providing each type of products at door step and it provides ease to the customers by creating greater value in term of quality products, on time services and with having diversified portfolio of quality products and services.

Amazon is also considered as a market leader as it provides a bust to the dot.com by creating strong customer base through providing customer satisfaction and developing trust among the internet users. The company archives significant growth through its operations and through strategic decision such as fund raising through IPO to support the current and future cash need of the business. The business model of the Amazon is unique which plays a critical role towards the success of the company by increasing number of users and marketplace which also increases the brand value as well.

Problem Statement

It is expected that dot.com crash affects many online businesses and many online retail partners declared bankrupt as dot.com crash resulted in decreased share prices and reserves. This dot.com crash creates serious threats and challenges for the company. In addition to this the company is operating in a competitive industry and competitive market in which each player is in a race to attract greater market share and greater number of customers therefore the management of the company is concerned about the current competitive conditions and global economic crisis.

Financial Analysis and Risk analysis

Principles of financial accounting

Financial accounting is focus on the financial statements of the company. There are many user of the financial statements, investor use the financial statement of the company in order to find out that company is profitable so that he can make decision should he invest or not. Creditor use the financial statement of the company so that he identifies the creditability of the company does company will be able to pay their loan or not. According to the Amazon Company the management has to identify their previous financial records and try to more focus on enhancing the profitability of the company. If the financial statement shows the good profitability the investor creditors and many other users of the financial statement become more attractive.

Financial Analysis

The following analysis shows that how certain performance of Amazon would impact the financial operations under the selected years. It also indicates that the IT industry has been boosted since the end of dot-com bubble in the late 1990s, so the company would again recover to the profit level and tended to increase its performance in the future.Amazon.com The Brink of Bankruptcy Case Solution

Income Statement

The historical data shows that the sale of Amazon is increased in a huge margin over the years due to the demand of IT industry in the modern era. The current analysis also indicates that over 100% of average sales has been boosted over the year and thus tended to increase by the same margin according to the market analyst.

The cost of sales is the major factor to analyze the performance of an IT company because the cost in IT industry has experienced the huge margin of sales that had decreased the net earnings of the company. Therefore after deducting the cost of sales, Amazon generated the low gross profits each year. The net earnings of Amazon indicate that it had suffered the loss in all the selected years during the event of dot-com bubble and is expected to incur in the same ratio.

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