group assignment financial statements of alibaba

It explains to investors and analysts how an organization can utilize itscurrent assets on its balance sheet to pay down its current debt and other payables.The higherthe current ratio,

GROUP ASSIGNMENT

2020 & 2021 FINANCIAL STATEMENTS OF ALIBABA

Lecturer: Trần Ngọc Châu Group: TieuTruc Class: MKT1707 Group member

Lý Hoàng Duy SS170988

Đặng Nam Cường SS170925

Lý Quốc Thái SS171043 Trương Tiểu Trúc SS170928

ACC101: Principles of Accounting FPT University HCM, November 9, 2022

I Introduction.

1 About Alibaba………

2 History………

3 Strengths and weaknesses of the company………

II Analysis sections

1 Qualitative analysis of the business………

2 Quantitative analysis of the business……… (Analyze ratios of the Alibaba)

III Conclusion and recommendations……….

1 Conclusion………

2 Recommendations………

What is Alibaba ?

Alibaba is an online platform that connects manufacturers and wholesalers in China with individuals and businesses around the world who want to trade or resell Users who buy products for their business and then use or resell them or register as a supplier are looking to use Alibaba as a sales platform

History

On 28 June 1999, Jack Ma, with 17 friends and students founded Alibaba.com, a China-based B2B marketplace site, in his Hangzhou apartment In October 1999, Alibaba received a 25$ million investment from Goldman Sachs and SoftBank

Strengths

1 Size And Scale

One of Alibaba's most important strengths is its size and scale The company has a wide range of activities, which is difficult for competitors to imitate The market in which it operates also strengthens Alibaba's position The company has more than 750 million active users, more than the population of the United States

2 Market Share

Alibaba is one of the oldest companies in the online retail market and holds a large market share Currently, the company holds nearly 58% market share in China Its closest competitor, on the other hand, retains only 22% of the market share This shows that Alibaba has a competitive advantage over other companies based on a percentage of the market

One of the factors that differentiates Alibaba from its rivals is its strong leadership From the founder, Jack Ma, to the current leadership, the company enjoys strong leadership Acquiring these key people into leadership positions has helped the company multiply successfully

Weaknesses

1 Crowded Marketplace

The company and its platform have compensated its partners However, it also built a crowded market place There are a large number of sellers who use this platform to sell their products For customers,

it is difficult to choose the best suppliers Some well-known brands also stopped working on the platform due to this condensation Overall, this is one of Alibaba's weak points

2 Research And Development

Although Alibaba has spent on its research and development, Alibaba has lagged behind its competitors The company has not maintained the same standards as other big names in the industry This leads to failure for the company while competitors gain a competitive advantageS

Dependence On A Single Market

As mentioned above, Alibaba derives a significant portion of its revenue from the Chinese market The company was overly dependent on the market for its profits Its competitors found better alternatives to reduce this dependence increase

• Provide a quantitative and qualitative analysis of the business

o Analyze any ratios of the company spread over those related to profitability, liquidity, solvency and market tests (The more ratios you analyze the higher grade you will get)

II QUANTIATIVE & QUALITATIVE

Ratios of the Alibaba company 2020-2021

1.70

7 Solvency Ratio Debt-To-Equity Ratio 0.49 0.55

Ratios of the Amazon company 2020-2021

1.1.1 Current Ratio

The current ratio is the liquidity ratio that evaluates a company's capacity to pay short-term or one-year obligations It explains to investors and analysts how an organization can utilize its current assets on its balance sheet to pay down its current debt and other payables.The higher the current ratio, the greater the debt repayment capacity of the business

Formula: 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝑅𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

CURRENT RATIO OF ALIBABA 2020-2021

Annual Current Assets Current Liabilities Current Ratio

CURRENT RATIO OF AMAZON 2020-2021

Annual Current Assets Current Liabilities Current Ratio

According to the table, we can see that the current ratios of Alibaba in both years are larger than 1 But when we compared to Amazon Inc, Alibaba's index is on a downward trend (unable to pay short-term debt) In 2020, Alibaba had almost the current ratio 1.05 (can pay shori-term debt) In

2021, it dropped to 1.14 compared to Amazon Company In 2021, the current ratio shows that the company has sufficient short-term assets to pay short-term debts

Quick ratio: The quick ratio measures a company's ability to pay current creditors without selling inventory or obtaining extra financing

Formula: 𝑄𝑢𝑖𝑐𝑘 𝑟𝑎𝑡𝑖𝑜 = 𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐴𝑠𝑠𝑒𝑡𝑠−𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 =𝐶𝑎𝑠ℎ & 𝑆𝑇 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡𝑠 + 𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒

𝐶𝑢𝑟𝑟𝑒𝑛𝑡 𝐿𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠

QUICK RATIO (ACID-TEST RATIO) OF ALIBABA 2020-2021

Annual Current Assets - Inventory Current Liabilities Quick Ratio

(Acid-Test Ratio)

QUICK RATIO (ACID-TEST RATIO) OF AMAZON 2020-2021

Annual Current Assets - Inventory Current Liabilities Quick Ratio

(Acid-Test Ratio)

As we can see, the Quick Ratio in both years are high (0.73 in 2020 and 0.64 in 2021) The higher the Quick Ratio, the larger the business needs to recover the working cash This is not a good sign because the company's ability to pay on time is not high However, there is a downward trend of Quick ratio from 2020-2021

1.2 Efficiency Ratio

1.2.1 Inventory Turnover

Inventory turnover: Inventory turnover is a ratio used to determine how many times a company sells its inventory during a period Indicator of how well management is controlling the amount of inventory available

Formula: 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒𝑟 =𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑

𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦

INVENTORY TURNOVER OF ALIBABA 2020-2021

Annual Cost of goods sold Inventory Inventory turnover

Alibaba’s inventory turnover from 2020-2021 is facing a downward trend (19.46→16.73) The reason

to this may be because Alibaba has gone through severe COVID-19

INVENTORY TURNOVER OF AMAZON 2020-2021

Annual Cost of goods sold Inventory Inventory turnover

In general, this index is on a decreasing trend in the period of 2020-2021 of Alibaba and Amazon (Alibaba in 2020 it will decrease by 2.73 compared to 2021, Amazon in 2021 it will decrease by 0.8 compared to 2020) The main reason is the high inventory turnover held by companies Due to industry characteristics and fierce price competition, the inventory turnover rate of Alibaba and Amazon companies is very low This proves the stagnant inventory management capabilities of both companies

1.2.2 Day's Sales in Inventory

Day’s sale in inventory: Days’ Sales in Inventory is a ratio that reveals how much inventory is available in terms of the number of days’ sales

Formula: 𝐷𝑎𝑦'𝑠 𝑠𝑎𝑙𝑒 𝑖𝑛 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 = 𝐶𝑜𝑠𝑡 𝑜𝑓 𝑔𝑜𝑜𝑑𝑠 𝑠𝑜𝑙𝑑× 365 𝑜𝑟 = 𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑇𝑢𝑟𝑛𝑜𝑣𝑒𝑟

DAY’S SALE IN INVENTORY OF ALIBABA 2020-2021

inventory

DAY’S SALE IN INVENTORY OF AMAZON 2020-2021

inventory

There is an increasing trend in DSI of Alibaba from 2020-2021 Therefore, the company may be struggling with large inventory, high volume and may have overinvested Besides, the company may keep high inventory levels to achieve high order fulfilment rates, for example because the company predicts strong sales during the upcoming holiday season

However, when we compare Amazon and Alibaba, we can see that DSI of Amazon is higher than DSI

of Alibaba And the smaller the DSI, it might shows that the company operate more efficiently and regularly sell off inventory, which means quick turnover leads to higher profit potential

1.2.3 Accounts Receivable Turnover

- Account Receivable Turnover Ratio or Debtor's Turnover Ratio is an accounting measure used to measure how effective a company is in extending credit as well as collecting debts The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets

- Formula=𝐴𝑐𝑐𝑜𝑢𝑛𝑡𝑠 𝑅𝑒𝑐𝑒𝑖𝑣𝑎𝑏𝑙𝑒 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠

ACCOUNTS RECEIVABLE TURNOVER OF ALIBABA 2020-2021

Annual Net sales Account Receivable Account Receivable

Turnover

ACCOUNTS RECEIVABLE TURNOVER OF AMAZON 2020-2021

Annual Net sales Account Receivable Account Receivable

Turnover

A higher number is better Based on the increasing of Alibaba’s ratio, it shows the ability to effectively collect receivables and debts from customers of Alibaba It also shows that the company is cautious in granting credit to customers A prudent credit policy can be beneficial because it helps a company to somewhat prevent bad debt risk

Account receivable turnover ratio of 2020 is quite low in comparison with the one of 2021 The proportion slightly increase in 2021, with the rate being 26.5

+ Overall, Alibaba's and Amazon’s quality and liquidity were so good that the company was well received and collected by consumers

+ However, an overrall conservative credit policy can deter potential customers

+ Therefore, although accounts receivable turnover may be lower, it may be better to relax credit policies to improve sales

1.2.4 Total asset turnover

- Total asset turnover is the ratio of net sales or revenue to average total assets This ratio determines the ability to generate sales and earn income, and helps investors understand how effectively and efficiently companies are using their assets to operate The higher ratio indicates the more efficient in using the assets

- Formula = 𝑁𝑒𝑡 𝑠𝑎𝑙𝑒𝑠

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑡𝑜𝑡𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠

TOTAL ASSET TURNOVER OF ALIBABA 2020-2021

turnover

With Alibaba- a company in e-commerce sector, the increasing trend of total asset turnover is positive Moreover, the company is generating a lot of revenue per unit of asset value

TOTAL ASSET TURNOVER OF AMAZON 2020-2021

turnover

According to the table, Alibaba's total asset turnover slightly increased over the course of a year, but

it still lower than Amazon.In general, Alibaba still has its own stability but has not yet surpassed the number 1, lower than what Amazon is doing But overall, Alibaba's operations are still effective from

2020 to 2021

IV Conclusion and recommendatio

1 Conclusion

Based on the results of the literature review and the survey of our team The research team reached a number of conclusions regarding Alibaba company:

In 2021, almost all radios are lower than the previous year This shows the more it shows that the company is able to pay its debts

After Covid 19 most of the Efficiency Ratios quite fluctuations, this can be seen in the Inventory Turnover Ratio which has decreased from the previous year and the company's product is in decreased demand Whereas, the DSI radio had higher than in 2020, indicating the liquidity of the inventory, the figure represents how many days a company's current inventory stock will last a large DSI ratio suggests that the company may be struggling with obsolete or they are holding stock

2 Recommendations

Current ratio:

Evaluate the overall costs of the business and see if there are opportunities to cut them Cutting unnecessary costs will have a direct impact on profits Operating expenses, such as hiring, advertising, indirect labor or office costs To accomplish this task, enterprises need to develop an effective management mechanism for capital and production and business costs in the direction of a revenue and expenditure structure suitable to cutting input costs Not only that, the spending management system gradually automates and promotes decentralization in order to balance the spending ratio and

in line with business development goals in each period and ensure financial safety enterprise Inventory Turnover

One of the key factors for success is a superior inventory management method, which helps promote business growth That's also the key to Amazon's unique value: wide selection, low prices, fast and convenient delivery

● Applying technology to goods management and storage

● Simplify the warehouse import and export process

● Robot application in inventory management operation

Day’s sales in inventory

Managing inventory levels is vital for most businesses, and it is especially important for retail companies or those selling physical goods

● Demand planning

On the other hand, storing too many items will increase storage and transportation costs It also increases your risk because demand for those items may drop before you sell them It's important to anticipate and carefully plan demand levels to keep enough supplies in stock without ever falling too low or overstocking any given item

Total assert turnover

Price decreases led to increased consumer traffic, which fostered an increase in revenue and attracted more third-party sellers to the site Amazon could then better leverage its fixed assets like their fulfillment centers and servers This increase is asset utilization enabled Amazon to further decrease prices Make improvements at any juncture, Bezos reasoned, and it should enhance the entire process

In the early 2000s, we can see this strategy play out in Amazon’s asset turnover ratio, which measures revenue divided by assets The ratio shows how much revenue a company can generate with each dollar of assets and is therefore an optimal benchmark for efficiency and productivity Amazon destroyed competitors like Barnes & Noble and Borders with dramatic increases in asset turnover

Amazon Financial Ratios for Analysis 2009-2022 | AMZN | MacroTrends (n.d.)

https://www.macrotrends.net/stocks/charts/AMZN/amazon/financial-ratios

SWOT Analysis of Amazon | Amazon Strengths & Weaknesses 2021 (n.d.) Swot Analysis

https://www.swotanalysistemplate.com/swot-analysis-of-amazon/

Bellucco, A (n.d.) Profitability Ratios Definition Investopedia Retrieved August 9, 2022, fromhttps://www.investopedia.com/terms/p/profitabilityratios.asp\

Amazon Financial Statements 2009-2022 | AMZN | MacroTrends (n.d.) Macrotrends

https://www.macrotrends.net/stocks/charts/AMZN/amazon/financial-statements

Liquidity Ratio Definition (n.d.) Investopedia Retrieved August 9, 2022, from

https://www.investopedia.com/terms/l/liquidityratios.asp

Alibaba SWOT

https://www.bstrategyinsights.com/alibaba-swot-analysis/#Alibabas_Strengths

https://finance.yahoo.com/quote/AMZN/balance-sheet?p=AMZN

https://www.investopedia.com/terms/d/days-sales-inventory-dsi.asp

https://finance.yahoo.com/quote/BABA/