ACC 345 Mod 5 Discussion

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Economics

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Feb 20, 2024

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Hey class, 1. Provide the name of the company and a link to the financial statements.  I used Amazon for my company, and you can find the financial statements at the following link, Amazon.com, Inc. (AMZN) Income Statement - Yahoo Finance . You can also use the 10-K Filings found at amzn-20201231 (sec.gov) and amzn-20221231 (sec.gov) . 2. Project the future revenue growth rate for the next three years of the company.  Using the revenue growth rate formula, Revenue Growth Percentage, or YoY Percentage = (Most recent time period revenue - prior time period revenue) / prior time period revenue * 100) , we can determine the the growth rate for Amazon from 2020 to 2023 (Ward, 2023). We will also use the average annual growth rate (AAGR) formula to give the average growth rate percentage over the past 3 years to help estimate the next 3 years revenue growth (CFI Team, 2024). Year Revenue % Growth 2020 386,064,00 0 X 2021 469,822,00 0 21.70 % 2022 513,983,00 0 9.40% 2023 574,785,00 0 11.83 %

 Amazon’s Average Growth % = 21.70+9.40+11.83= 42.92/3= 14.31 %  Projected Future Revenue = Previous years revenue multiplied by the average growth percentage, and added to previous years revenue to give estimated/projected following years revenue  2024 = (574,785,000 * .1431) + 574,785,000 = $657,036,734  2025 = (657,036,734 * .1431) + 657,036,734 = $751,058,690  2026 = (751,058,690 *.1431) + 751,058,690 = $858,535,189 3. Explain the assumptions you used to predict the company's revenue growth rate(s) for the next three years.  To predict the company’s revenue growth, you need the financial statements to provide the previous year’s revenue to complete any calculations. I assumed that Amazon was going to have steady growth as seen in the past 3 years revenue and based my calculations off that. I saw the trends were showing a steady increase each year which is why my future projections also show an increase each year. 4. Project the future gross profit margin(s) for the next three years of the company.  The gross profit margin percentage is found at Gross Profit Margin For Amazon.com, Inc. (AMZN) | finbox.com . It can be calculated by subtracting cost of goods sold from net sales, and then dividing that amount by the net sales and multiplying it by 100 to get a percentage. Year GPM % Inc. or Dec.

2019 41.0% X 2020 39.6% -1.4% 2021 42.0% +2.4% 2022 43.8% +1.8% 2023 47.0% +3.2%  Average Annual GPM Increase per year = (-1.4+2.4+1.8+3.2)/4 = 1.5%  2024 = 47.0 + 1.5 = 48.5%  2025 = 48.5 + 1.5 = 50%  2026 = 50 + 1.5 = 51.5% 5. Explain the assumptions you used to predict the company's gross profit margin(s) for the next three years.  I used the gross profit margin for the past 4 years to visualize the trend and increase or decrease for each year. Once I calculated the increase or decrease, I calculated the average increase/decrease over the 4 years and used that amount to calculate future GPM for Amazon and the next 3 years. I figured using the trends I could see if there was any fluctuation or if it was a steady increase or decrease, therefore allowing me to estimate whether the GPM could continue to increase or decrease over the following 3 years. You can also see in the income statement from the link above that Amazon’s revenue has increased each year, as well as the cost of goods sold which is seen at Amazon Cost of Goods Sold 2010-2023 | AMZN | MacroTrends . These trends furthered the fact that I would expect to see an increase in GPM for Amazon over the next 3 years. References

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CFI Team. (2024). Average Annual Growth Rate. Average Annual Growth Rate - Overview, Uses, Formula (corporatefinanceinstitute.com) Ward, P. (2023). How to Calculate and Project Revenue Growth. How to Calculate and Project Revenue Growth (nanoglobals.com)

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