Amazon Inventory Evaluation Method Essay Sample

points sold may be the first nutrient points sold. Additionally, when prices are rising, using the FIFO method will lead to lower costs and higher profits compared to using the LIFO method. The LIFO method is described as "the cost flow assumption that assumes the most recent costs into inventory are the first costs out for cost of goods sold," according to Mc-Graw-Hill.

p. 152 ). When costs increase over time, businesses commonly employ the LIFO method in periods of high inflation. Consequently, businesses often resort to the LIFO approach for tax breaks during periods of high inflation. The third method is the weighted average.

According to Marshall et al. (2004), the weighted average method known as "lead norm" is based on the cost of beginning inventory plus the cost of purchases during the year, weighted by the quantity of items at each cost. To calculate lead norm, an average is taken and weighted by the number of units in the beginning inventory and each purchase.

The leaden mean attack is suitable for homogenous items like paper goods. The 4th attack is called "the cost flow premise that matches cost flow with the physical flow" (Marshall et al.2004). This attack is commonly used for houses that have specific merchandise, such as cars.

The impracticality of using this premise applies to households that have a large number of inventory items that are not easily identifiable individually. Amazon.com utilizes the LIFO method to record inventory value, which is typically employed by certain companies to save money on taxes.

LIFO commonly defers the recognition of net income to future periods, resulting in a temporary tax savings and consequently higher cash flow. The amount

of adjustment and its disclosure, as mentioned earlier, is affirmed by Amazon.com as they are an internet-based company utilizing the last in method.

According to Amazon.com's 2004 annual report, they utilize a last out (LIFO) attack for their stock list rating method. The company's ultimate objective is to achieve long-term growth in free cash flow per share.

Amazon.com achieved their goals by focusing on two key elements: increasing operating net income and effectively managing their capital. They believe that the success of their company depends on these factors. By employing a last in, last out approach, Amazon.com is able to achieve financial success. Additionally, Amazon.com makes adjustments as necessary.

com has utilized the LIFO attack, resulting in a net increase in net income from 2000 to 2004, according to the financial report. In the year 2000, the company incurred a loss of $1,411,273, whereas by 2004, they achieved a positive income of $588,451.

Like any other company, Amazon.com experiences times of both loss and growth due to its ability to respond effectively to consumer demands and preferences. Being an internet-based and engineering-driven company, Amazon.com can easily make adjustments to its products and services.

When it comes to the company's stock list, another important factor was the "diluted net incomes per portion made prior to the cumulative consequence of alteration in accounting principles." In the year 2000, the per portion net incomes were at a loss of $4.02 whereas in 2004.

Amazon's price increased by $1.39 in just 4 years.

The growth of com has been significant due to their effective response to both internal and external changes, which is evident in their overall numbers. The firm's current patio amazon reports its gross

through three key divisions: media (73.7% of total gross in financial year 2004), electronics and other general ware (24.4%), and other (1%).

9%).(Amazon.com.hypertext transfer protocol://www.mergentonline.

During the financial year of December 2004, Amazon achieved a gross of $6921.1 million, reflecting a 31.5% increase from 2003 (com.).

According to Amazon.com, it accounted for 55.6% of the total revenues in North America during fiscal year 2004, solidifying its position as the largest geographical market for the company.

The financial year 2004 revenues for different divisions were reported on mergentonline.com. Among these, the media division generated $5102 in revenue.

In 2004, the electronics and general ware division recorded grosses of $1686.2 million, representing an increase of 52% over the previous financial year. Overall, the total grosses for the company reached $4 million, marking a growth of 26.0% compared to the financial year 2003.

In financial 2004, one division saw a 9% increase in gross, while the other division witnessed an 18.7% decrease compared to financial 2003. Consequently, the total gross reached $132.5 million (Source: Amazon.com).

According to Mergentonline.com, North America accounted for 55.6% of Amazon's total gross in the financial year 2004, making it their largest geographical market.

In the financial year of 2004, gross revenues from North America amounted to $3847.3 million, reflecting an increase of 18.1% compared to 2003.

The international segment accounted for 44.4% of the total gross revenues in 2004, generating $3073.8 million and reflecting a revenue growth of 53%.

In 2003, Amazon.com experienced a 3% growth in its financial performance.

Amazon.com has the potential to attract investors and accumulate more debt. Additionally, the company's financial report indicates its ability to pursue different investment or business prospects if desired. The decision made by

Amazon in 2002 to eliminate pro forma accounting has proven highly profitable for the internet company. Internet companies contend that excluding extraordinary charges like layoffs and restructuring from pro forma results can lead to unfavorable investments.

The inclusion of acquisition costs and other expenses allows investors to gain a comprehensive insight into the company's performance, with these particular charges excluded (Lorek, 2001). Amazon recorded an operating cash flow of $4.6 million in 2002, alongside a net loss of $94 million.

CEO Jeff Bezo has chosen to abandon pro forma accounting and adopt generally accepted accounting principles (GAAP), leading to the company's net income of $35 million in 2003. The current market skepticism towards online stocks has prompted internet companies to seek credibility, and this shift away from pro forma accounting supports that endeavor.

According to investors, it is uncommon for a web company to succeed globally. Currently, around 50 out of the roughly 200 public Internet companies generate positive GAAP net incomes. It is anticipated that more companies will achieve this benchmark in the near future (Mullaney).

Web companies are beginning to realize that trust in their stability will lead to higher profits. Excluding the regulatory charges caused by pro forma reduces investors' confidence in the company. Lyn Turner discussed this in a speech.

The head adviser of the Securities and Exchange Commission criticized company disclosures that seemed to manipulate information to create a positive image. He referred to some pro forma net income reports as "EBS," which stands for everything but the negative aspects.

In 2001, both Travelocity.com and Expedia.com transitioned from pro forma to GAAP accounting. The decision to abandon pro forma accounting, which eliminates certain charges such as

layoffs and restructuring costs, was also made by Amazon in 2002. As a result, Amazon has seen significant net income growth. Many internet companies believe that pro forma results can be misleading and lead to poor investments.

Acquisition costs etc offer investors a better understanding of how the company is performing, excluding specific charges (Lorek, 2001). In 2002, when Amazon's running hard currency flow was recorded at $4.6 million and its net loss was reported at $94 million, CEO Jeff Bezo discontinued the use of pro forma accounting (Lorek, 2001).

The company achieved a net income of $35 million in 2003, thanks to generally accepted accounting rules (GAAP). However, internet companies are currently facing challenges as they try to gain credibility from cautious investors, who are skeptical about online stocks. This skepticism is partly due to pro forma accounting, which leads investors to believe that profitable web companies are uncommon.

Over 50 out of around 200 public Internet companies worldwide currently generate GAAP net incomes, with more expected to do so soon (Mullaney, 2002). It is becoming increasingly clear to web companies that gaining investor trust in their company's stability will lead to greater profits. Excluding regulatory charges resulting from pro forma methods undermines investor confidence in the company.

In a speech, Lyn Turner, the head adviser of the Securities and Exchange Commission, criticized company disclosures that seemed to manipulate facts and make them appear more favorable. Turner referred to these misleading reports as "EBS" or "everything but the bad material" (Lorek).

Travelocity.com and Expedia.com have transitioned from pro forma to GAAP accounting in 2001. This decision was made based on the previous analysis of Amazon.

Regarding the fiscal statement

of Amazon.com in 2004, Learning Team D determined that using the LIFO cost-flow method for inventory can result in write-offs and a tax benefit. Additionally,

Amazon.com is able to reduce income taxes and increase cash flow by using the LIFO method due to the rising costs of its stock. This allows the company to achieve its long-term goal of growth in free cash flow.
References: Amazon.com (2004).

Annual Report. Website: hypertext transfer protocol: //library.corporateir. net/library/97/976/97664/items/144853/2004_Annual_report. pdf, written by Marshall, D.

H. . McManus. W.

W.; A; Viele. D. F. (2004).

The authors of this text are W., A, and Viele, D.F., and it was published in 2004.

The book titled "Accounting: What the Numbers Mean (6th edition)" was written by Mullaney, T. in 2002 and published by McGraw-Hill in New York.

Amazon is now mature in every way, except for its accounting, as reported by Business Weekly (3794, 74) and retrieved on 11/17/2005 from the EBSCOhost database by Lorek.

L. (2001). Pro forma: simply the good news. Interactive Week. 8 (24) 13.

Retrieved from EBSCOhost database on 11/17/2005.