Week 7 -Module Project: Final Submission Until next Wednesday (10 May 2017): This week you will complete and submit your Module Project. The target length for your final Week 7 Module Project is 5,000 words for the main body of your submission (Chapters 1–5). This excludes your front page, executive summary, indices, any appendices and your end references list. Please ensure you include the following in your Module Project report: A single A4 page (250-word) executive summary at the start Title page, containing: Title of the paper Organisation that you have researched Author’s name Word count for the main body of your submission Page numbers Comprehensive index Separate indices of tables and figures All appropriate in-text references Final references list To prepare for this Module Project: Read over the Module Project Overview and make sure to address each of the items listed, plus in the reminder message below. Remember to double check your grammar and spelling for errors. Review the Grading Form that your Instructor will be using for the final Week 7 submission Read over your past Module project submissions and feedback. Consider the items you might now need to change and add based upon previous feedback and the new weeks’ materials. Use your Week 5 Outline as a guide and foundation to help you to fill in the remaining sections and to bring your final submission together. Reminders for Final Module Project Here are a few general points and further suggestions: Since this Module Project is to be submitted as Microsoft Word, you can use font size 12 and double-spacing. please remember that the maximum word count for the main body of your final submission is 5,000 words, so judicious use of appendices is a very good idea. Any pictures/charts/diagrams, etc. (which are always helpful and a good idea—if big put them in your appendices) need a title, e.g., Table 1. These then also need to be included in their indices at the front, for the final submission. If you produce a diagram yourself, you should also then label it Source: Author. If it is referenced from a book or article, the author and date need to be included, in just the same way that you would for other assignments. It is a very good idea to: Break down your narrative in each chapter by using numbered subparagraphs which then need to be included (listed) in your index; Use bullet points if providing a ‘list’ of whatever description. Please don’t forget to define or explain any ‘technical’ terminology. Remember that these Module Project submissions are aimed at a non-expert audience in terms of their accounting and finance knowledge, not your Instructor. A glossary of terms, built up as you go through your chapters, is a great idea, as are the use of footnotes/endnotes. The paper should be written in the ‘third person’, so if you want to express your own opinion, use ‘the author’, not ‘I’. Remember that we are looking for: Links to what we have been discussing in class and what is in your readings; Additional journal references to back up your arguments. It will save time if you build up your executive summary/indices as you progress through the coming weeks, plus add in your front page, etc. Also, please don’t forget to include suitable cross references between chapters, where appropriate.



Name of student




Executive Summary

American Express Company (AMEX) is the world’s largest provider of travel services best known for its charge cards as well as revolving credit cards. The company has a travel agency operation that has thousands of locations globally together with its traveler’s cheque Group which is the leading global issuer of traveler’s checks. AMEX has a total of $161 billion of assets with more than $1 trillion in annual billed business with more than 118 million cards circulated globally in approximately 140 countries. The company is headquartered in the city of New York and was founded in the year 1850. AMEX is considered the third component of Down Jones industrial average and was ranked to be the 25th most valuable organization in the year 2016 being worth $14.4 billion.

The firm was founded as a joint stock corporation through the merger of express firms whose owner were Henry Wells who was the owner of Well and company, William Fargo who was the owner of Fargo and Company and lastly John Warren who was the owner of Well, Butterfield and company The American Express if widely known for its credit card, charge card as well as travelers cheque businesses. In regard to financial position, the company had a total of $32.1 billion as revenue in 2016. The firm recorded a total of $.5.4 billion in net income with a total asset pool of $58.9 billion in the same year (American express company. 2015). Besides, the firm had a total equity of $20.5 billion with a total number of employees standing at 56,000 globally.


Amex has various types of stakeholders that drive the effective performance of the company. Considering that the firm is a highly ranked organization globally appearing in top 100 fortune 500 companies, there are four type of stakeholders that are recognized by the company and these include; Shareholder.  The company is publicly traded and there are various shareholders that provide investment capital for the company some of who come from other private companies, public companies, the public and lastly the government. The company struggles to ensure that its shareholders get good returns from the dividends and hence making the value of the company to rise. Since the merging of three companies to form AMEX, the returns from dividends has been attractive which has facilitated consistency in growth of the company hence increasing its market share and revenues?

The second type of stockholders includes customers and community. In this regard, the company cherishes its customers who are issued with cards all over the world. The company has been able to increase its customer base to more than 118 million in more than 140 countries. This in turn resulted to more transactions and cross- border charges that resulted to high revenues. Besides, the company views its customers and community in which it operates as the drivers of its business viability and long term profitability.  The firm practices ethical responsibility to its customers and it also gives back to the community through community involvement as well as charitable donations. The successful performance of the company is based on straightforwardness, honest communication as well as transparent accounting to its customers as well as communities.

The other type of stockholder includes the employees and the company through its corporate social responsibility ideology facilitates a changing viewpoint of employees which creates commitment, trust and focus to the organizational mission and vision. The company treats its employees as the most valuable assets through provision of fail working condition as well as non-discriminatory work environment and employee involvement in its section making process. The last stockholder include business partners and in this case, the company due to its great profit making strategies, it has many business partners ranging from banking institutions globally, to traveling companies, airline firm among other corporations who drive it operation. Besides, its  key resources include; committed bank credit facilities that is which it extends to its customers, cash and marketable securities, readily available loan from other financial institutions that the company outsources through secured borrowing and lastly federal reserve discount window.

Based on the company’s corporate governance, Amex has the following framework; Board independence which is made up of  ten directors out of its 13 directors are independent while its chief executive officer is the only member of management who serve as director; Board composition whereby the directors have no right to stand for reelection after they turn 72 years directors have the mandate to review and assess the performance of the board and based on the skills, experience and gaps of the board. There are also five board committees that include the audit and risk, compensation and benefit, nominating and governance, public responsibility and lastly innovation and technology. The framework also has independent leads director who chairs regular schedule executive sessions where directors deliberate matters without the presence of management and lastly boards oversight of risk and strategy whereby risk management is overseen by its audit as well as risk committee while the compensation and benefit committee review the company’s compensation practices.

In regard to the role of accounting in AMEX company, the firm provides a separation between financial and management accounting functions. For instance, considering that there are five board committees that are mandated with various functions, the company top management facilitate provision of accounting and financial records to relevant parties within and outside the organization.  In this case, firm put into operation various management strategies to ensure that financial accounting is strictly focused on the financial statements that provide to stockholder, lenders, and financial analysts among other parties outside the company. All these are facilitated by strict measures put in place to ensure that all accounting principles are adhered to when the reports of the company are provided in regard to its past transactions on balance sheets, income statements, cash flow statements and changes in the stockholders equity.

Furthermore, in regard to managerial accounting, there are measures put in place by the company’s top management to ensure that information within the company is gathered, analyzed and availed in time within various organs in the company in order to facilitate effective operations. Through separation of the two, with managerial accounting and cost accounting, the company is able to get information on how cost of its product and services are computed and used in financial accounting with external financial statements. Last but not least, role of accounting within has changed recently and this is evident by separation  of Financial and management accounting to ensure that, some of the managerial accounting principles that include breakeven point, profit planning, operation budgeting, capital budgeting as well as standard costing are executed effectively. Finally, the accounting software used by AMEX include; Intacct which is build on oracle data base, Multiview Enterprise .NET n10 and NetSuit and these software were chosen by the organization due to the provision of cloud computing capabilities and security that is provided especially to the company’s financial information.

    AMEX Financial accounting Analysis

The company depicts a health growth which is attributed by its financial information. By analyzing its financial statements, some significant factors that determine the growth of company are evident and these include, its total assets is the same as the sum of its liabilities and total equity which is an effective balance  that provide the company with the ability to cover up its long term and short term obligations comfortably. In the year 2016, the company recorded a decrease in its total revenues by $32,119 compared to 2015 which recorded $32,818 but on the contrary, in the same period, the company had an increase in its net income by $5,408 in 2016 unlike in 2015w when it had $5163 (American express company. 2015). This represented a 5% growth in net income. This growth is seen to be small but the low growth might be attributed by market saturation since the travelling industry has attracted new competitors with attractive products that have eaten into the market share of the company. Another factor that facilitated low growth in revenue is an increase in operation cost due to massive expansion strategies that the company implemented to provide services to more customers and countries.

In consideration to its financing, the company gets its capital from various sources which are management by Asset liabilities committee and some of the sources include; bank credit facilities, cash and marketable securities, borrowing from other financial institution through secured lending and accessibility to Federal Reserve discount window.  These five sources have formed the pillar that has facilitated the survival of the company. Furthermore, the company considered secured borrowing since it provided the scalability of borrowing large amount of money that can be used to invest in as many projects as possible. Another reason as to why AMEX considered secured borrowing is that it offers lower rates and longer repayment terms that makes the company utilize effectively its borrowed capital. Some of the loan securities that the company uses as collateral to access loans from other financial institution include bonds and stock. Besides, the company provides effective management of its cash requirements that entail discretionary investments, share purchases, management of liquidity through its funding programs and through quality as well as liquidity of its funded assets. The company focuses mostly on liquidity to ensure that it is able to access various categories of cash, marketable securities and contingent sources of liquidity to enable it to consistently meet required future financing obligation as well as annual business requirements. All these plans are put in place to ensure that  in an event the company become unable to raise more capital due to weakening in the economy, the firm will be able to meet its financial obligation both in the short run and long-run.

Furthermore, in regard to determination of how sound is the working capital of the company, there is need to focus on various financial ratios that include; liquidity ratios.  These types of ratios measure how sound the company is considered to be financially by providing an overview on how the company is able to take care of its short term obligations. Some of the liquidity ratios include; current ratio which measures the firm’s ability to pay its short term as well as long term obligations found by considering the current assets of company relative to its current liabilities. Another liquidity ratio is quick ratio which is a measure of how well a company can meet its short term financial liabilities calculated by dividing the sun of cash, marketable securities, account receivables by current liabilities and lastly is the cash ratio that compares the firms total cash equivalents to its current assets.

In regard to AMEX, the firm had a current ratio of 1.03 in the year 2015 which then increased to 2.19 in the year 2016 which depicts that the company was able to use its assets to generate income that could cover its obligations. Apart from its liquidity ratio, the company recorded effective performance in other areas as depicted by the debt to assets ratio which though remained unchanged at 0.87 in the year 2015 and 2016, this was an indication that the firm was able to use its assets to generate revenue that was used to pay back its debt.  Another critical consideration is the solvency ratio which measures the ability of the company to meet its long-term obligation such as long term loans which are mostly preferred by the company and the same ratio provide a reflection on the capital structure of the hence the higher the solvency ratio the more risky the company is in meeting its long term obligation. In this case, it’s advised that companies should try as much as possible to keep low the solvency ratio for effective financial health.

In consideration to its profitability, AMEX had a net income of $5,408 in 2016 from $5,163 in 2015. The company made low profits but this was not the main issues since finically health companies would at times make little profit but the main issue is that if the company has catered for its financial obligations, then it will form a good avenue for investment.  Other key ratios that help to establish the profitability of the company include; gross profit ration that reflects the pricing decisions as well as product costing of the company thus the higher the gross profit margin the better the organization in terms competitive advantage for the quality of the product among other factors.

The other profitability ratio is the operating profit margin which determines the relationship between sales as well as management controlled costs hence the higher the ratio the more advantageous for the company. Another profitability ratio is the profit margin ratio that provides comparison the firm’s net income to net revenue. The other one is return on asst that provide the effectiveness of how the firm utilizes its assets to generate revenues. Another important ratio is the return on equity that measures how the firm utilizes the amount invested as equity in order to generate more sales as well as earnings from the capital invested.

For a non-profit or government sector, their operation can be measured based on statistical outcome that are related to their programs. The data that is collected from their operation is analyzed to provide a clear overview of their operation and success. Besides, the comparison of an organization in regards to competitors industry is based on a number of factors that include; the product the organization is offering, the uniqueness of the product and services provide by the organization, the rate of productivity and quality of the products offered by the company which has high ranking and preference than other competitor’s products. The interesting issued that show up in the notes include; firm values and its ending inventory, accounting for income taxes information about the staff and the accountancy for intangibles.

There are two parties who require the financial statements and include the external users use them to make decision on the anticipated investment opportunity or how the firm should take care of its obligation while the other user is internal users like the managers who use the statement for effective decision making for the company. Nevertheless the financial statements are considered complete and therefore, the issue is not about factors not reflected in to the statement but how effective the management can enhance consistency and high performance rating that cannot compromise the financial information. For Amex, the accounts have been audited hence the provision of more additional information in order to ensure that all financial information for the company is featured in the report. Finally, the only ethical issues in relation to the organizational resources management are cyber crime activities that target sabotaging and stealing of capital from the company’s online systems.

A management accounting analysis

Managerial accounting entail the use of accounting information by the management in order for them to get informed first before they decide other matter within the firm that facilitate control of functions related to management and performance. In regard to American Express company, the firm has a structured management system that is helps to achieve the following; first, the system provide regulations in regard to how accounting information in the company is outsourced and analyzed first within and the one that should be provide to external users is availed in time and also the upholding of integrity and trust between the management and other users. Secondly, the system provides guidelines on how the company should invest its resource and the limit of borrowing that is acceptable considering the financial position of the company. Thirdly, the structure facilitate effective interrelationship between the company and other partner organizations within the country and outside the United States which facilitate expansion of its operation. Lastly, the company implements structured management system to ensure that there is consistency in regard to the accounting information that vital for decision making process by management. This is aided by provision of regular budgets that are needed in determining various costing of investment projects that are carried out throughout the year and also provision of regular budgets helps to monitor the company’s cash flow throughout the year.

Besides, in consideration to how the budgeting system works, the firm makes use of two types of budgeting system and these include, static budgets which contain numbers based on the company’s planned input and outputs for each division. Another type of budget used by the company is the flexible budget that entails budgeted dollar value or cost or the products and services for the company multiplied by actual units to determine what specific numbers will be given to each level of output or sales. Again, within the process of making the budget, the company implements participative budgeting process and this is whereby each committee is granted the mandate to participate in the budgeting process by providing information within their area of specialization. For example, the auditing, social responsibility and investment committees meet their respective workers who provide information that the committees uses to plan for the budgeting process. In AMEX, variances are identified based on the tasks and budgets provided to each department to establish the differences between actual as well as planned behaviors in order to maintain control over the entire business. some of the variance that are identified  within the company include; purchase price variance which depict the actual cost for material used in the production process minus the standard price then multiplied by the number of units used. Another variance is labor rate variance which is the actual cost of direct labor that is used in the production say of cards and other products and services. Another variance is selling price variance which is the actual selling price minus the standard selling price then multiplied by the number of sold units and lastly the material yield variance.

In regard to cost structures, the American Express company puts into  operation two main structure that include; process origination and this structure entails all systems that lead to designing of its products and services like cards that are tailored made to address the needs of the  customers. The second structure is the purchasing structure that entails all external operation of the company like accessibility to loan facilities, expansion to new market segments and partnership with other organizations. At some point, the company uses activity based costing (ABC) which enables it to assign indirect cost to various identified projects depending on their respective urgency and demands. Besides, break even analysis is used to determine when the business will be able to cover all of its costs and begin to make profit, a principle that Amex implements and in order to have a clear understanding of break even analysis, the breakeven point must be determined by dividing fixed cost of production by the price per unit and this is the point whereby the company would have covered all of its costs and then begin to make profit based on any given new product or service introduced in the market. On the other hand, the prices for the products provided by the company are calculated by making estimation of the number of units of the cards that the company provides and expected to sell over the coming year then divide the revenue by the number of units that are expected to be sold to arrive at the price that every card should cost

In regard to how well the management accounting information is disseminated and communicated in order to facilitate management of resources, American Express Company internal organization structure is made up of three subsidiaries comprising of 61 executives. The first subsidiary is the board headed by the chairman, the second one is headed by the vice chairman and the third is led by the CIO. Apart from the three subsidiaries, there are employees who are managed by the executives in the third subsidiary. The division of the organization into three subsidiaries facilitates easy and effective management of accounting information and management of resources effectively. For instance, the employees outsources for information which is then analyzed and presented to the executives in the third subsidiary who then assess the credibility of the information and the expert in this subsidiary performs required analysis to the information before handed to the second subsidiary and then the executives in the second subsidiary after assessing the viability of the information they present to the fist subsidiary made of the board directors for the final decision making.

This flow of information facilitates vertical communication system between the top management and the workforce in the organization and nay accounting information required within the organization is required to follow the subsidiary channels to ensure that targeted user have the access to the information. Furthermore, the employees in AMEX have all the information requiring them to perform their work effectively and this is due to the fact that they form the larger group of users of internal information in the organization and therefore, before the information is provide to the top management for verification and decision making, the employees are the ones mandated to collect the information and analyze it before it is relayed to the executives in the third subsidiary. For example, the employees are the ones gathering sales information from the market and customers, and then using the information, they prepare financial statements to establish the financial position of the company.

Lastly, the company utilizes its accounting and finance software and this can be attributed by the firma success in the generation of high returns from its investments both in the global and local markets. The increase in its customer base is a clear indication that many customers have build trust in the company based on its financial and accounting software that makes it possible for the customers to access the financial information that they need at any given time.  The effectiveness of the company is using its accounting and financial software is evident by consistency in its growth and especially in investment activities. Unlike other firms that flout accounting financial software that lead to bankruptcy of the companies, with AMEX, the reinforcement of effective financial and accounting software has facilitated sealing of vulnerabilities that could lead to underperformance collapse of the firm.

Besides, over the years, management accounting in AMEX has changed significantly which has led to the distinction of financial accounting to managerial accounting. Separating the two plays a significant role in ensuring the information from the company is relayed to the required users and limitations are provide to restrict external users from using information meant for internal users.  Furthermore, some of the changes that are still in pipeline are the outsourcing of accounting services from other regions like Australia firms that would aid in cloud services for customers in the Far East and security of customer details which are intending to improve the overall management accounting system for the company.

Financial management analysis

AMEX uses various financial management strategies to management its huge capital base and some of the strategies that the firm use include; Cash flow management and with this strategy, the company implements measures that helps to identify the amount that should be remain in its reserve and how major expenses will be taken care of (Leigh, n.d). The firm lays out financial cash strategies a head of time to facilitate easier decision making in regard to financial planning which help to know when checks should be written and a line of credit should be accessed. Another financial management strategy involves purchases and in this case, whereby all purchases made through the business that involve huge sums of capital are required to have detailed guidelines in the business plan in order to establish which type of purchase should be funded by cash or through a line of credit. This strategy also provide guidelines on how the company should take advantage of its suppliers  especially the days that suppliers take to deliver purchases and when the company should pay the suppliers.

The other strategy is collection and in this case, facilitates strategic management of its receivables by dedicating in-house staff to making follow-ups with overdue customers to incorporate other external agencies that have the rights from the company. The collection strategy also specifies the late fees and in case deposits are due before various products and services is delivered for its new customers (Leigh, n.d). The other strategy if investments and in this case, the investment strategy provide the company management with guidelines on various investment projects and market segments that would impact the return on any given investment. This entails determination of the percentage of the amount of money the company invest in high risk portfolios to that invested in low risk portfolios. The investment strategy for the company also provide guidelines on when approval is needed to make possible changes to the existing investments or to pursue liquidation of some investments in Oder to cover up business obligations.

Besides, these strategies have long been used by the company to facilitate effective financial management within its local market and external markets. However, the only changing strategy is based on how the company outsources for its credit facilities. For instance, America Express Company has shifted from the conventional way of borrowing that is used by many companies to a system that entails having secured borrowing. Pursuant to secured borrowing, the company is able to plan for the amount of money to spend on its investment activities versus the doe to use in paying back the loans. Since all of the loans that the company has are secured, the firm enjoys a long period of repayment period that does not interfere with its operation. Again with secured loans, the company is subjected to low interest rates and therefore this explains the fact that firm expenditures are less that its earnings since the long-terms debt is secured.

In regard to capital budgeting, the company focuses on three main capital budgeting tools to provide an assessment of its profitability. First, payback period whereby the tools helps the company to determine how long it will take to pay back the initial investment and the payback period is determined by dividing total cost of the project by how much cash inflow is expected to be generated annually. For AMEX, the company has shortest payback period considering its investment projects that have the capability to generate high income within the shortest time like the issuance of cards that are used on daily basis. Another capital budgeting tool that the company uses is the Net Present Value (NPV) which uses the discounted cash flow analysis where any future cash flow is discounted at a discount rate to cover for any uncertainties of those future cash flows, hence the project with the highest NPV is considered viable and acceptable for investment. The last capital budgeting tool that the company uses is the Internal Rate of Return which is a discount rate that determines how much of a return the company can anticipate to realize from a specific project. According to Gad (n.d) “the IRR is considered in case the project that the company is investing in is break even or when the Net Present Value is zero.” In this case, the company opts for projects that have higher IRR due to their high returns. Therefore, these three tools used in capital budgeting are executed by the company based on the following factors; first, in case the company plans to invest in a new product like anew credit card with specific features or targeting specific class of customers and if the project would have a viable return.

The second factor is when the company wants to establish operation in a new market segment that requires assessment to establish is the market would be able to generate the desired returns and lastly is when the company wants to face off a specific product the is already in the market to establish if it is still profitable or there is need to replace it with another product. On the other hand, capital projects within AMEX are financed through borrowing and by use of reserved capital.  Considering the fact that the company invests not only in one market and product segment but in a verity, there are cases of capital rationing and this happens based on the following considerations first, the profitability of the projects; those projects that are perceived to be more profitable have high ratio of capital allocation than others. Secondly is the sustainability of the project whereby project that are expensive to sustain but with low returns have low capital ratio while those with either expensive sustainability or less costly in sustainability but with high returns are most preferred. Lastly is the cost and demand of the projects whereby high cost but highly demanded projects have higher rating in capital allocation compared to the rest. Therefore, the combination of all these factors forms the foundation that drives the success of the company’s financial management system.

Conclusions and SWOT analysis

In regard to the SWOT analysis for AMEX, the company has the following strengths; Brand strength and in this case, the company is considered to be one of the most valuable brands globally which helps it’s to respond greatly o its new initiatives. There is employee strength whereby the company has more than 60,000 employees with high levels of employee’s satisfaction. There is market capital whereby the company has the highest market capital amounting to $60 billion and making it to be one of the largest players globally in the financial services sector (Bhasin, 2016). The company enjoys credit card schemes and international usage whereby its card schemes are recognized internationally with high usage and it partners with others companies to provide loyalty and credit card programs that make it more popular internationally.

Some of the weaknesses within AMEX include; traveler’s cheque business which is drastically declining; lock of debit cards just like the way the company provides credit cards in order to seal the gap between the credit and debit cards; lack of product variety  since the company is only focused on credit cards and traveling services.

Some of the opportunities within for the company include; innovative schemes within the existing products to attract customers. Another opportunity is the increase in usage of debit cards in emerging economies which have more debit cards users who mostly use debit cash to withdraw cash and lastly is leveraging financial brand equity by offering more financial products to increase its turnover.

In regard to threats, there is consideration for  its nature of business that is affected by volatiles economic conditions as well as other financial uncertainties that subject the system to be susceptible to failures and regulations from the government also might hinder its performance as well as becoming more profitable becomes another challenge. Another threat entails the competitors such as visa and MasterCard who are the key competitors of AMEX and they are also very popular hence eating into its market share (Bhasin, 2016). The last threat is exposure to bad debts due to the fact that the company considers borrowing huge loans that at some point might affects its ability to cover up its short term and other long-term obligations.

To conclude with, AMEX is one of the greatest global brands that are most admired and generate more profit than other renewed brands. Besides, the success of AMEX can only attributed by its corporate governance structure that is divided into three segments comprising of the board of directors and other executives. The third segment is the one that manages the operation of all 60,000 employees globally to bring the success evident in its financial records. The company’s top management has a right attitude towards corporate governance and this can be evident by the growing number of employees and customers globally.  Besides the corporate governance structure employed by the company appear to be working effectively since for approximately two centuries the company has remained profitable this implementing massive expansion strategies that have never failed.

Besides, regardless the stiff competition from other firms like VISA and MasterCard, the company has remained competitive and profitable which is an indication of how effective the corporate governance that is used. Furthermore, to ensure effective financial accounting and performance, the company has implemented various actions in line with corporate social responsibilities and these include; provision of safety measures to its employees in every area of operation. Another one is provision of reliable compensation plans to employees which help to retain reliable talents and lastly employee involvement especially in decision making process that gives them a sense of ownership of the company. Lastly, at the moment the such actions are adequate for the company but in case of future strategy, and market dynamics, the company would consider coming up with other action plans to ensure that it copes with future market dynamics that might affect its competitive and revenue generation. Besides, there are more opportunities for change and improvement considering that the company is global brand, it would focus on utilizing digital platform to decentralize its employees so that they can execute their tasks from any location, furthermore, the company could consider how to enforce the right organizational ethical conduct to ensure that all operations in the company are executed with highest integrity more so the provision of financial and accounting information is done within the company’s regulation and accounting profession.










American express company. (2015). American express company annual report 2015.

Bhasin, H. (2016).  SWOT analysis of American Express – AMEX SWOT analysis

Gad, S. (n.d). Capital Budgeting: Capital Budgeting Decision Tools

Leigh, A. (n.d). Financial Strategies in a Business Plan














Activity ratio 2016 2015
Receivable turn over (net revenue/ average receivable) 0.71 0.62
Asset turn over (net revenue/ average total assets) 0.20 0.21
Liquidity ratio
Current ratio (current assets over current liabilities) 2.19 1.03
Solvency ratios
Debt to asset ratio (Total liabilities over total assets) 0.87 0.87
Debt to capital ratio (total debt/(total debt+ total shareholders equity) 0.72 0.72
Debt to equity ratio (total debt/ total shareholders’ equity) 2.56 2.56
Profitability ratios
Gross profit margin (gross income/ net revenue) 0.24 0.23
operating profit margin(operating income/net revenue) 0.32 0.31
Net profit margin (net income / net revenue) 0.23 0.17
Return on Assets % 3.3 3.16
Return on Equity % 25.67 24.49
Asset Turnover (Average) 0.2 0.2
Financial Leverage (Average) 7.75 7.8



Income Statement (As-reported) 2016 Y 2015 Y
As Of Date 12/31/2016 12/31/2015
Source Document 12/31/2016 10-K 12/31/2016 10-K
Currency Code USD USD
(in millions)
Revenues Vertical analysis
  Non-interest revenues 2016 2015
    Discount revenue 18,680 19,297 71% 72%
    Net card fees 2,886 2,700 11% 10%
    Other fees and commissions 2,753 2,866 10% 11%
    Other 2,029 2,033 8% 8%
    Total non-interest revenues 26,348 26,896 100% 100%
  Interest income 0%
    Interest on loans 7,205 7,309 27% 27%
    Interest and dividends on investment securities 131 157 0% 1%
    Deposits with banks and other 139 79 1% 0%
    Total interest income 7,475 7,545 28% 28%
Interest expense 0% 0%
  Deposits 598 475 2% 2%
  Long-term debt and other 1,106 1,148 4% 4%
  Total interest expense 1,704 1,623 6% 6%
Net interest income 5,771 5,922 22% 22%
Total revenues net of interest expense 32,119 32,818 122% 122%
Provisions for losses 0% 0%
  Charge card 696 737 3% 3%
  Card Member loans 1,235 1,190 5% 4%
  Other 95 61 0% 0%
  Total provisions for losses 2,026 1,988 8% 7%
Total revenues net of interest expense after provisions for losses 30,093 30,830 114% 115%
Expenses 0% 0%
  Marketing and promotion 3,650 3,109 14% 12%
  Card Member rewards 6,793 6,996 26% 26%
  Card Member services and other 1,133 1,018 4% 4%
  Salaries and employee benefits 5,259 4,976 20% 19%
  Other, net 5,162 6,793 20% 25%
  Total expenses 21,997 22,892 83% 85%
Pretax income 8,096 7,938 31% 30%
Income tax provision 2,688 2,775 10% 10%
Net income 5,408 5,163 21% 19%
Earnings per Common Share 0% 0%
  Basic (actual) 5.67 5.07 0% 0%
  Diluted (actual) 5.65 5.05 0% 0%
Average common shares outstanding for earnings per common share 0% 0%
  Basic (#) 933 999 4% 4%
  Diluted (#) 935 1,003 4% 4%
  Net income 5,408 5,163 21% 19%
  Other comprehensive loss 0% 0%
    Net unrealized securities (losses) gains, net of tax (51) (38) 0% 0%
    Foreign currency translation adjustments, net of tax (218) (545) -1% -2%
    Net unrealized pension and other postretirement benefit (losses) gains, net of tax 19 (32) 0% 0%
    Total Other comprehensive loss (250) (615) -1% -2%
  Comprehensive income 5,158 4,548 20% 17%




Cash Flow (As-reported) 2016 Y 2015 Y
As Of Date 12/31/2016 12/31/2015
Source Document 12/31/2016 10-K 12/31/2016 10-K
Currency Code USD USD
(in millions)
Cash Flows from Operating Activities Increase or decrease %
  Net income 5,408 5,163 5%
  Adjustments to reconcile net income to net cash provided by operating activities
    Provisions for losses 2,026 1,988 2%
    Depreciation and amortization 1,095 1,043 5%
    Deferred taxes and other (1,132) 507 -323%
    Stock-based compensation 254 234 9%
    Changes in operating assets and liabilities, net of effects of acquisitions and dispositions
      Other receivables (281) (714) -61%
      Other assets 192 2,058 -91%
      Accounts payable and other liabilities 1,072 699 53%
      Travelers Cheques and other prepaid products (410) (367) 12%
  Net cash provided by operating activities 8,224 10,611 -22%
Cash Flows from Investing Activities
  Sales of available-for-sale investment securities 88 12 633%
  Maturities and redemptions of available-for-sale investment securities 2,429 2,091 16%
  Sales of other investments 10 0
  Purchase of investments (2,162) (1,713) 26%
  Net decrease (increase) in Card Member receivables and loans, including held for sale 3,220 (6,967) -146%
  Purchase of premises and equipment, net of sales (1,375) (1,341) 3%
  Acquisitions/dispositions, net of cash acquired (487) (155) 214%
  Net decrease (increase) in restricted cash 145 (120) -221%
  Net cash provided by (used in) investing activities 1,868 (8,193) -123%
Cash Flows from Financing Activities
  Net (decrease) increase in customer deposits (1,935) 10,878 -118%
  Net increase (decrease) in short-term borrowings 888 1,395 -36%
  Issuance of long-term debt 8,824 9,923 -11%
  Principal payments on long-term debt (9,848) (19,246) -49%
  Issuance of American Express preferred shares 0 841 -100%
  Issuance of American Express common shares 177 193 -8%
  Repurchase of American Express common shares (4,431) (4,480) -1%
  Dividends paid (1,207) (1,172) 3%
  Net cash (used in) provided by financing activities (7,532) (1,668) 352%
Effect of foreign currency exchange rates on cash and cash equivalents (114) (276) -59%
Net increase in cash and cash equivalents 2,446 474 416%
Cash and cash equivalents at beginning of year 22,762 22,288 2%
Cash and cash equivalents at end of year 25,208 22,762 11%
Supplemental cash flow information
  Non-cash investing activities
    Transfer of Card Member loans and receivables 0 14,524 -100%




Balance Sheet (As-reported) 2016 Y 2015 Y
As Of Date 12/31/2016 12/31/2015
Source Document 12/31/2016 10-K 12/31/2016 10-K
Currency Code USD USD
(in millions)
  Cash and cash equivalents Increase or decrease %
    Cash and due from banks 3,278 2,935 12%
    Interest-bearing deposits in other banks (includes securities purchased under resale agreements) 20,779 19,569 6%
    Short-term investment securities 1,151 258 346%
    Total cash and cash equivalents 25,208 22,762 11%
  Card Member loans and receivables held for sale (includes gross loans and receivables available to settle obligations of consolidated variable interest entities) 0 14,992 -100%
  Accounts receivable
    Card Member receivables (includes gross receivables available to settle obligations of a consolidated variable interest entity) 46,841 43,671 7%
    Other receivables, less reserves 3,232 3,024 7%
    Card Member loans (includes gross loans available to settle obligations of a consolidated variable interest entity) 64,042 57,545 11%
    Other loans, less reserves 1,419 1,254 13%
  Investment securities 3,157 3,759 -16%
  Premises and equipment, less accumulated depreciation and amortization 4,433 4,108 8%
  Other assets (includes restricted cash of consolidated variable interest entities) 10,561 10,069 5%
current assets 84,143 76,758
  Total assets 158,893 161,184 -1%
Liabilities and Shareholders’ Equity
    Customer deposits 53,042 54,997 -4%
    Travelers Cheques and other prepaid products 2,812 3,247 -13%
    Accounts payable 11,190 11,822 -5%
    Short-term borrowings (includes debt issued by a consolidated variable interest entity) 5,581 4,812 16%
    Long-term debt (includes debt issued by consolidated variable interest entities) 46,990 48,061 -2%
    Other liabilities 18,777 17,572 7%
72,625 74,878
    Total liabilities 138,392 140,511 -2%
  Shareholders’ Equity
    Preferred shares 0 0
    Common shares 181 194 -7%
    Additional paid-in capital 12,733 13,348 -5%
    Retained earnings 10,371 9,665 7%
    Accumulated other comprehensive loss
      Net unrealized securities gains 7 58 -88%
      Foreign currency translation adjustments (2,262) (2,044) 11%
      Net unrealized pension and other postretirement benefit losses (529) (548) -3%
      Total accumulated other comprehensive loss (2,784) (2,534) 10%
    Total shareholders’ equity 20,501 20,673 -1%
  Total liabilities and shareholders’ equity 158,893 161,184 -1%


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