Project.docx - Michael Robicheaux I Stockholders’ Equity...

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Michael Robicheaux 9/1/2019 I. Stockholders’ Equity A. Determine how your company got its initial financial start in terms of debt (liabilities) or equity (capital). Support your response. According to Jeff Bezos, CEO and founder of Amazon.com, Inc., the corporation’s business plan was developed in 1995 as he and his wife drove a borrowed car from a family member’s home in Texas to Seattle, Washington, where Bezos had determined would be the best location for starting his internet book selling business. The initial business plan centered on the sale of books through a website on the very new-to-the-public internet. With initial start-up funds of $245,000 from his parent’s savings, funds from family and friends, and some personal capital from his own savings, Bezos and his wife purchased a small home in the Seattle suburbs and set up their garage as the initial office and distribution center of Amazon. Amazon opened their virtual doors in July 1995. Within two months, Bezos and Amazon were realizing $20,000 a week in sales . The initial financing of Amazon could not keep up with the growth of the company and by the end of 1995, Bezos set out to find additional funding. In June 1996, Bezos raised $8,000,000 cash with the issue of 569,396 Series A convertible preferred stock to Kleiner Perkins Caufield & Byers VIII (KPCB), a California venture capital company. The Series A financing gave Bezos the cash he needed to invest in Amazon’s growth. And KPCB had a sizable share of convertible stock in a company that was just beginning to become a household name. In 1997, after less than two years of operations, Bezos took Amazon public with an initial public offering of three million shares of common stock at $18 a share, raising $54,000,000. In less than three years, Bezos parent’s initial investment of $245,000 turned them into multi-millionaires. And Bezos vision for Amazon was just beginning.
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Michael Robicheaux 9/1/2019 As of the close of business on April 20, 2017 Amazon stock was trading at $902.06 per share. Initial investors took a chance on a man who had a vision for capitalizing on a little-known technology and realized a 6443% gain for that investment. B. Analyze the equity section of your company’s balance sheet as compared to your company’s industry average. Rate the company’s performance against its competitors. Two ways to measure a company’s performance via equity analysis are the price-to earnings ratio (PE ratio) and the return on equity (ROE) ratio. The PE ratio measures the share price of common stock to the earnings per share. The PE ratio represents the amount of money an investor can expect to invest in a company in order to receive one dollar of that company’s earnings. ROE is a profitability ratio that measures the ability of a company to generate profits from its shareholders’ equity investments. ROE shows how much profit each dollar of common stockholders' equity generates.
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