Question

Review the three sections of the Statement of Cash Flows. Describe the normal pattern of cash activity in the first two sections.

AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 14.557 5 2017 19,334 1 5,890 $ 596 2,371 3,033 6,281 2.119 155 250 8116 2.975 11.478 4,215 202 160 (1.426) (2,187) (1.755) 4,294 5,030 1,724 1,955 17.272 (3,583) (4.786) 7,175 283 738 18,434 1,292 12,039 (5.387) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD OPERATING ACTIVITIES: Net income Adjustments to reconcile net income 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 Changes in operating awets and abilities: Inventories Accounts receivable, net and other Accounts payable Accrued expenses and other Uneamed revenue Net cash provided by (used in) operating activities INVESTING ACTIVITIES: Purchases of property and equipment, including internal use software and website development Proceeds from property and equipment incentives Acquisitions, set 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 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, set of refunds Property and equipment acquired under capital cases Property and equipment acquired under build-to-suit leases 798 (7,804) 1,067 (116) (799 (11,955) 1.897 (13,972) 9,988 (13.777) (27,819) 3,025 (4,091) (6.450) (9,876) 621 353 (1,652) (3.860) 16,231 (1,372) (4,799) (200) 9,860 (121) (3,740) (212) (374) 1.333 15,890 LIBE S 19,3445 20.322 325 s $ 153 290 205 319 273 5,704 9,637 1,209 3,541 See accompanying notes to consolidated financial statements.

Answer 1

Section 31^st Dec 2016:

• Considering the base of 31^st Dec 2015, the company seems to be investing more in its Fixed Assets and Marketable Securities by releasing cash and through other activities.
• This Can be understood as follow :

1. Purchase of property and equipment’s including intangible assets has been increased by $ 2417 which results in investment in Non-Current Asset i.e. Fixed Assets.
2. The effect of Purchase of property and equipment’s can also be seen in increase of Depreciation by $ 1835.
3. It is also seen that the company had also extended its working capital cycle due to which its Accounts Receivables and Payable had increased by $ 1612 and $ 736 respectively.
4. The company had also re-organized its portfolio of marketable securities by investing more in these securities by $ 3665.
5. More or less the remaining cash flow activities are in the line of base year only.

Section 31^st Dec 2017:

• Considering the base of 31^st Dec 2016, the company seems to be moving a step ahead by investing more in its Fixed Assets and Marketable Securities by Borrowing Debt and releasing cash and through other activities.
• This Can be understood as follow :

1. Purchase of property and equipment’s including intangible assets has been increased by $ 4151 which results in investment in Non-Current Asset i.e. Fixed Assets.
2. The effect of Purchase of property and equipment’s can also be seen in increase of Depreciation by $ 3362.
3. It is also seen that the company had also extended its working capital cycle due to which its Accounts Receivables and Payable had increased by $ 1419 and $ 2145 respectively.
4. The company had also re-organized its portfolio of marketable securities by investing more in these securities by $ 6021.
5. If we consider the three year span, the company had made a total sale and purchase of marketable securities by $ 17746 and $ 25624 respectively which shows how much aggressively company is investing its funds in marketable securities.
6. Another point which requires consideration is that the company’s proceed from long term debt had increased by $ 15610 as compared to last year. This depicts majority of company’s borrowing are being invested in Fixed Assets and Marketable Securities and it require attention that marketable securities are subject to market risk which are highly volatile in nature and could be highly risky to the company.