discuss any potential implications of the change in amazon rsquo s cash provided by 644439

Case: Amazon.com

The incredible growth of Amazon.com has put fear into the hearts of traditional retailers. Amazon’s stock price has soared to amazing levels. However, it is often pointed out in the financial press that it took the company several years to report its first profit. The following financial information is taken from Amazon’s recent annual report.

($ in   millions)	Current   Year	Prior   Year
Current   assets	$3,373	$2,929
Total   assets	4,363	3,696
Current liabilities	2,532	1,899
Total   liabilities	3,932	3,450
Cash   provided by operations	702	733
Capital   expenditures	216	204
Dividends   paid	0	0
Net   income(loss)	190	359
Sales	10,711	8,490

Instructions

(a) Calculate free cash flow for Amazon for the current and prior years, and discuss its ability to finance expansion from internally generated cash. Thus far Amazon has avoided purchasing large warehouses. Instead, it has used those of others. It is possible, however, that
in order to increase customer satisfaction the company may have to build its own warehouses. If this happens, how might your impression of its ability to finance expansion change?

(b) Discuss any potential implications of the change in Amazon’s cash provided by operations from the prior year to the current year.