Amazon working capital and valuation data
For my professional assignment purpose, my choice of the
company would be Amazon Company.
Amazon’s current working capital ratio is 1.11. Its WC ratio
in the past five years is as follows; In Dec2014 WC=1.12, in Dec2015 WC=1.05,
in Dec2016 WC=1.04, in Dec2017 WC=1.04, and Dec2018 WC=1.10. Amazon's current
ratio gives a sense of effectiveness for the operating cycle of any company.
Firms that can run into liquidity problems due to the inability to alleviate
their obligations are those that have high inventory turnovers or have trouble
getting paid off on their receivables. It is always good to make comparisons
for companies within the same industry since operations of businesses differ in
each sector. Working capital ratios range from 1, and 3 for good businesses
hence vary from industry to industry.
Amazon’s stock value: the market value of Amazon as of 30th
September 2019 is $1738.30, and real value per share alternates. When high is
$1753.70 and when low is $1722.71. Combining the discounted terminal value with
the cash flows for the next ten years that result in Total Equity Value gives
us the total stock value. Intrinsic value per share = total equity value
divided by several shares outstanding.
Conclusion
Working capital helps in measuring the financial health
status of businesses by companies. Organizations will run smoothly with regular
checks of the WC every business cycle. Also, firms with policies on working
capital always have good operational performances compared to those that don’t
have. Continuous operations of business require enough money in place hence the
need for periodic assessments of working capital value over time to ensure no
occurrence of devaluation. Amazon's current ratio gives a sense of effectiveness
for the operating cycle of any company. A company can fund its daily operations
more efficiently with a higher market capital ratio. That means a company may
subsidize the growth of its business without taking any debts. Firms that can
run into liquidity problems due to the inability to alleviate their obligations
are those that have high inventory turnovers or have trouble getting paid off
on their receivables. It is always good to make comparisons for companies
within the same industry since operations of businesses differ in each sector.
Working capital ratios range from 1, and 3 for good businesses hence vary from
industry to industry.
