Question

26) Even though Amazon and Wal-Mart are both retailers, Amazon’s Free Cash Flow profile looks significantly different from Wal-Mart’s. Amazon’s FCF is not shown here, but based on your knowledge of the business models and this lesson in the course, why might you expect the Free Cash Flows to differ so much?

a) Because Amazon is spending far less on Inventory than Wal-Mart since it’s an online retailer.

b) Because Amazon is a high-growth company, whereas Wal-Mart is a mature, stable company.

c) Because Amazon is re-investing in its business more aggressively with higher CapEx as a percentage of revenue, whereas Wal-Mart is spending less as a percentage of revenue and is keeping its spending in about the same range.

d) Because Amazon requires upfront payment for 100% of products’ prices, whereas Wal-Mart allows for installment payments.

e) Because Amazon tends to delay payments to suppliers for as long as possible, whereas Wal-Mart pays suppliers more quickly.

Answer 1

Answer-

The correct Options are a and b.
Because Amazon is spending far less on Inventory than Wal-Mart since it’s an online retailer and Amazon is a high-growth company, whereas Wal-Mart is a mature, stable company.
Walmart has entered into online sales in 2015 and has Physical stores whereas Amazon sells online.

The Options c, d ane e are incorrect.

Amazon does not delay the payments to the suppliers and both allow for installments for sales and both reinvests in the business.