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Introduction
In current economic conditions, the issues of accounting and economic analysis of the financial results of the organizations activities are of great importance. The main advantage of accounting can and should be considered that only thanks to its data is it possible to determine the indicators of profitability and profitability of the enterprise and thereby assess the effectiveness of decisions made by its management. It is important to analyze not only the dynamics, structure, factors, and reserves of profit growth but also the ratio of the effect of profit with the available or used resources, as well as with the income of the enterprise from its ordinary and other economic activities, studying the final financial results of the enterprise. The need for this comparison can also be explained by the fact that many enterprises that have received the same amount of profit have different volumes of turnover, different costs, and resources. In general, the economic and financial analysis of the results of the economic activity of the organization allows developing a specific strategy and tactics for its development, the identification and assessment of reserves for the growth of profits and profitability, and ways to mobilize them.
Amazon, Google, and Microsoft are the most prominent players in their marketplace, spanning multiple industries. Over the years, Amazon has shown successful growth in its gross income, net and operating income, and total equity (Wells, Danskin & Ellsworth, 2018). Amazon is also famous for its recommendation systems and personalization, becoming research by scientists (Smith & Linden, 2017). However, Amazons reputation, despite its success, has not always been clean. First, there is the potential for the Matthew effect and the Ratchet effect, which in this context implies support for successful stores and a lack of support for small ones (Chua & Banerjee, 2017). Second, Amazons exit prevents affected third-party sellers from continuing to grow on the platform, increasing product demand and lowering shipping costs for consumers (Zhu & Liu, 2018). However, this did not stop Amazon from maintaining a steady growth in financial performance. This paper compares these indicators with those from Google and Microsoft to determine which company and why growth was more stable, more noticeable, or vice versa.
Microsoft is only partly a competitor to Amazon. This company has almost the same market capitalization with a lower annual turnover (Hazlett, 2020). The company is engaged in online sales, creates equipment but does not provide its streaming video and audio services and third-party marketplace (Wegman et al., 2018). Google, in turn, has all of these industries: streaming services, and the ability to place on the marketplace, and online sales, and even its own payment system (Kim & Choi, 2019). As of 2018, Google had a lower turnover than Amazon, with almost the same market capitalization (Sadq, Sabir & Saeed, 2018). Amazon also has amazon music, prime, marketplace, and payments; it creates its technique based on online sales.
Financial Analysis
For financial analysis, five different financial indicators were selected, which generally show the efficiency and profitability of the company. Among them is the current liquidity ratio, which shows its ability to pay off its short-term liabilities without attracting additional income (Bogdan, Bareaa & Ivanovi, 2012). This indicator was chosen since Amazon is relatively low compared to Google or Microsoft, demonstrated in tables 1, 6, and 11. However, with constantly growing profits, as shown from table 2, Amazon can slow down investments if necessary, save a certain amount of money from increasing this indicator.
The net profit margin was chosen as an indicator of profitability for a reason. Firstly, this indicator is the main one when evaluating a company, and best reflects its profitability (Nariswari & Nugraha, 2020). Secondly, for ten years at Amazon, it even went into the negative, an incredible difference compared to Microsoft and Google. However, upon deep examination of the company, this only indicates that Amazon has been pursuing a course of continuous development, having incurred many expenses over the past decade, investing almost all of its profits back into the company (Hahn, Kim & Youn, 2018). This approach promises significant profits over the long term.
Amazon has the best asset turnover ratio over its other two competitors due to its large profit injection. However, Amazons inventory turnover is relatively low due to a large number of various goods with different restock periods. Finally, Amazons high receivable turnover ratio, the latter, suggests that the company operates on a cash basis and has a conservative view of lending to its suppliers or customers (Al-Marzooqi & Nobanee, 2020). Microsoft and Google are likely to have more recent approaches in this regard, as shown by the lower scores in Tables 8 and 13 compared to Table 3.
ROE, ROA, and ROI indicators show the companys attractiveness for investment. Amazon has seen leaps and bounds over the past decade, but the steady, high growth creates the edge over Microsoft and Google. The latter two companies perform well in general but lack stability, which is essential in this regard. In addition, Amazons sharp jump in ROE is partly due to rising debt, which means that investors should focus more on other profit margins. Reflection and comparison can be seen in tables 4, 9, and 14 below. Tables 5, 10, and 15 show leverage ratios that are low enough for all three companies. It means they are not pursuing aggressive debt financing strategies, as evidenced by their debt obligations.
Table 1. Amazon Liquidity Ratio
Table 2. Amazon Profitability Net Margin Ratio
Table 3. Amazon Efficiency Ratios
Table 4. Amazon Investment Ratios
Table 5. Amazon Gearing Ratios
Table 6. Microsoft Liquidity Ratio
Table 7. Microsoft Profitability Net Margin Ratio
Table 8. Microsoft Efficiency Ratios
Table 9. Microsoft Investment Ratios
Table 10. Microsoft Gearing Ratios
Table 11. Google Liquidity Ratio
Table 12. Google Profitability Net Margin Ratio
Table 13. Google Efficiency Ratios
Table 14. Google Investment Ratios
Table 15. Google Gearing Ratios
Conclusion
In comparison, the three companies generally have positive dynamics of financial indicators, taking into account even some drops in 2012-2015. Constantly growing profits and attractiveness for investors, independence from debts compared to other competing companies distinguish these companies on the market. Amazon, however, differs from Microsoft and Google by small indicators of net profit margins, which in the long term can bring certain benefits that will leave competitors far behind. Amazon, with a vast range of products and services sold, has pretty good asset turnover indicators. This work does not consider 2021 and the impact of the pandemic since there is still no available information on these companies. Given the pandemic, the analysis would have included many more factors that had to be taken into account in assessing the data of the three companies.
Reference List
Al-Marzooqi, M. B., & Nobanee, H. (2020). Financial Analysis of Amazon. Available at SSRN 3647442.
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Bogdan, S., Bareaa, S., & Ivanovi, S. (2012) Measuring liquidity on stock market: Impact on liquidity ratio, Tourism and Hospitality Management, vol. 18, no. 2, pp. 183-193. Web.
Chua, A. Y., & Banerjee, S. (2017) Analyzing review efficacy on Amazon. com: Does the rich grow richer?, Computers in Human Behavior, vol. 75, pp. 501-509. Web.
Hahn, Y., Kim, D., & Youn, M. K. (2018) A Brief Analysis of Amazon and Distribution Strategy, The Journal of Distribution Science, vol. 16, no. 4, pp. 17-20. Web.
Hazlett, T. W. (2020) US Antitrust Policy in the Age of Amazon, Google, Microsoft, Apple, Netflix and Facebook, Google, Microsoft, Apple, Netflix and Facebook.
Kim, D. I., & Choi, S. I. (2019) The Analysis of the Relationship between the Review Scale and Posting Information of Company and Purchasing Patterns-Focusing on Amazon and Google Users, Journal of the Korea Convergence Society, vol. 10, no. 10, pp. 153-160. Web.
Microsoft Financial Ratios for Analysis 2005-2021 | MSFT. Web.
Nariswari, T. N., & Nugraha, N. M. (2020) Profit Growth: Impact of Net Profit Margin, Gross Profit Margin and Total Assests Turnover, International Journal of Finance & Banking Studies (2147-4486), vol. 9, no. 4, pp. 87-96. Web.
Sadq, Z. M., Sabir, H. N., & Saeed, V. S. H. (2018) Analyzing the Amazon success strategies, Journal of process management. New Technologies, vol. 6, no. 4. Web.
Smith, B., & Linden, G. (2017) Two decades of recommender systems at Amazon. Com, IEEE Internet Computing, vol. 21, no. 3, pp. 12-18.
Wegmann, A., et al. (2018). Coopetition and ecosystems: case of amazon.com. London: The Routledge Companion to Coopetition Strategies.
Wells, J. R., Danskin, G., & Ellsworth, G. (2018) Amazon. com, 2018, Harvard Business School Case Study, vol. 716, pp. 316-402.
Zhu, F., & Liu, Q. (2018) Competing with complementors: An empirical look at Amazon.com, Strategic Management Journal, vol. 39, no. 10, pp. 2618-2642. Web.
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