Amazon Financial Analysis

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Introduction Amazon was incorporated in 1994 and became a publicly traded company in 1997. Amazon completed the year with a combined total of $125 million in cash and investments (Amazon.com Inc., 1997). From the beginning Amazon encouraged employee ownership by offering stock-based compensation. Amazon did not have taxable income in 1997 as it finished the year at a net loss which resulted in an operating loss carry forward to be realized in 2011 (Amazon.com Inc., 1997). An analysis of Amazon’s current taxes and pension plans will give a reference to the amount of growth the company has experienced in the last 18 years.
Income Taxes Corporations benefit from their ability to raise large amounts of capital by issuing shares of stock. However
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Disclosures to the financial notes state, Amazon includes interest and penalties related to tax contingencies into the income tax provision (Amazon.com Inc., 2015, p. 46). With an effective interest rate as high as Amazon’s, an increase in income will result in a significant increase in the tax provision. To illustrate, take a $2 million dollar increase to income from operations. This increase would result in a new taxable income of $1.570 billion and an income tax provision of $951.42 million. Consequently, an increase of $2 million would result in an increase to the tax expense of $1.2 …show more content…
For one, the plan falls in line with Amazon’s vision for employee ownership. Another benefit is that it avoids cash bonuses, which provides transparency to the controversy and corruption surrounding corporate executives. Amazon also prefers stock-based compensation plans as they are considered non-cash and are excluded from the internal operating plans and measurement of financial performance, with the exception of affecting diluted EPS (Amazon.com Inc., 2015, p. 32). Another benefit of the contributory stock-based compensation plan is related tax deductions. Stock-based compensation maintains a lower cash salary expense in the line items of fulfillment, marketing, technology and content (Amazon.com Inc., 2015, p. 33).
What was the effect of the pension plan on Amazon’s financial statements? According to the notes to the financial statements, Amazon’s matching contributions to the 401(k) resulted in granting .2 million shares of common stock in 2015 and 2014, and common stock available for issuance to employees in 130 million shares (Amazon.com Inc., 2015, p. 63). The consolidated statement of cash flows demonstrates an expense of $2.1 billion in stock based compensation with and excess tax benefit (deduction) from stock-based compensation of $119 million. Amazon intends to provide $600 million for stock based compensation and other operating expenses for the first quarter of

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