Question

Expand Your Critical Thinking 12-03 a Amazon.com, Inc.’s financial statements are presented in Appendix D. Click here to view Appendix D. Financial statements of Wal-Mart Stores, Inc. are presented in Appendix E. Click here to view Appendix E. (a) Based on the information contained in these financial statements, compute free cash flow for Amazon at December 31, 2016 and Wal-Mart for January 31, 2017. (Show a negative free cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000). Enter amounts in millions.) Amazon.com, Inc. Wal-Mart Stores, Inc. Free cash flow $Enter the amount in millions of dollars $Enter the amount in millions of dollars

AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2014 2015 8,658 $ 14.557 $ 2016 15,890 (241) 596 2,371 6,281 2.119 4.746 1,497 129 59 (316) 155 8,116 2.975 160 (20) (246) (829) 250 81 (119) (1,193) (1,039) 1,759 706 4,433 (3,692) 6,842 (2,187) (1.755) 4,294 913 7,401 (6,109) 11,920 (1,426) (3.367) 5,030 1.724 11,931 (9,976) 16,443 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD OPERATING ACTIVITIES: Net income (loss) Adjustments to reconcile net income (loss) to net cash from operating activities: Depreciation of property and equipment, including internal-use software and website development, and other amortization, including capitalized content costs Stock-based compensation Other operating expense, net Other expense (income), net Deferred income taxes Excess tax benefits from stock-based compensation Changes in operating assets and liabilities: Inventories Accounts receivable, net and other Accounts payable Accrued expenses and other Additions to unearned revenue Amortization of previously unearned revenue Net cash provided by (used in) operating activities INVESTING ACTIVITIES: Purchases of property and equipment, including internal-use software and website development, net Acquisitions, net of cash acquired, and other Sales and maturities of marketable securities Purchases of marketable securities Net cash provided by (used in) investing activities FINANCING ACTIVITIES: Excess tax benefits from stock-based compensation Proceeds from long-term debt and other Repayments of long-term debt and other Principal repayments of capital lease obligations Principal repayments of finance lease obligations Net cash provided by (used in) financing activities Foreign currency effect on cash and cash equivalents Net increase (decrease) in cash and cash equivalents CASH AND CASH EQUIVALENTS, END OF PERIOD SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest on long-term debt Cash paid for interest on capital and finance lease obligations Cash paid for income taxes, net of refunds Property and equipment acquired under capital leases Property and equipment acquired under build-to-suit leases (4,893) (979) 3,349 (2,542) (5,065) (4.589) (795) 3,025 (4.091) (6,450) (6,737) (116) 4,733 (7.756) (9.876) 6,359 (513) (1.285) (135) 4,432 (310) 5.899 14.557 $ 119 353 (1,652) (2.462) (121) (3.763) (374) 1,333 15,890 $ 829 621 (354) (3.860) (147) (2.911) (212) 3.444 19,334 91 $ 177 325 $ 153 273 4.717 544 290 206 412 5,704 1,209 4,008 920 See accompanying notes to consolidated financial statements.

Answer 1

A)Free Cash Flow of the  Amazon at December 31, 2016 is calculated by using the following formula:

Free Cash Flow(FCF) = Operating Cash Flow - Capital Expenditure

Operating Cash Flow = $16,443

Capital Expenditure (Purchase of Property and Equipment) = $6,737

Free Cash Flow of the  Amazon at December 31, 2016 = $16,443 - $6,737 = $9,706

B)Free Cash Flow of the Wal-Mart for January 31, 2017 is calculated by using the following formula:

Free Cash Flow(FCF) = Operating Cash Flow - Capital Expenditure

Operating Cash Flow = $31,530

Capital Expenditure (Purchase of Property and Equipment) = $10,619

Free Cash Flow of the Wal-Mart for January 31, 2017 = $31,530 - $10,619 = $20,911

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