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RATIO ANALYSIS

RATIO ANALYSIS
AMAZON INC.
Name of Ratio Formula
Ratio for
2015
Ratio for
2016
change
Industry
Average
1 Cu
ent Ratio Cu
ent Assets / Cu
ent Liabilities 1.0536 1.0448
-0.84%
1.5
2 Quick Ratio
(Cash Assets - Inventory) / Cu
ent
Liabilities 0.7514 0.7833
4.25%
1.3
3 Total Debt Ratio Total Debt / Total Assets 0.2189 0.2321
6.03%
0.5
4
Debt/Equity
Ratio Total Debt / Total Equity 1.0591 1.0036
-5.24%
1
5
Inventory
Turnover
Cost of Goods Sold / Average
Inventory 7.7285 8.1335
5.24%
7x
6
Receivable
Turnover
Sales / Average Account
Receivable 18.9963 19.4364
2.32%
8x
7
Capital Intensity
Ratio 1 / Total assets Turnover 0.6051 0.6133
1.36%
0.5
8 Profit Margin Net Income / Sales 0.5570% 1.7435%
213.04%
10%
9 ROA Net Income / Total Assets 0.9205% 2.8429%
208.84%
15%
10 ROE
Net Income / Total Shareholders'
Equity 4.4531% 12.2945%
176.09%
20%
11 Market Price
Last trading day's stock closing
price 675.8900 749.8700
10.95%
12
Number of
Shares
Outstanding
Total common shares outstanding
as mentioned in Balance Sheet 471 477
1.27%
13
Book Value per
Share
Total Equity / Number of shares
outstanding 28.4161 40.4298
42.28%
14
Market to Book
Ratio
Year-closing stock price / Book
Value per share 23.7854 18.5475
-22.02%
5x
15 EPS
Net Income / Number of shares
outstanding $1.27 $4.97
292.81%
$2.00
16 P/E Ratio Year-closing stock price / EPS 534.1346 150.8595
-71.76%
3x
17
Enterprise Value
to EBITDA Ratio Enterprise Value / EBITDA 97.9018 68.1923
-30.35%
5x
LIQUIDITY RATIOS
These ratios measure the solvency of the business, which means it provides information on the firm’s
ability to pay its debts in the short run without undue stress.
1. Cu
ent Ratio- measures the ability of firm to pay its cu
ent obligations and debts.
Amazon had a cu
ent ratio of 1.0536 in the year 2015. This meant that for every dollar of cu
ent liability
that the company had they had 1.0536 dollars in cu
ent assets. Since the ratio is more than, it signifies
that the company has more assents than liabilities. But in 2016 this ratio decreased by 0.84%, which
shows that the company has comparatively fewer cu
ent assets than cu
ent liabilities than it did in the
previous year. The industry average is 1.5 and which is approximately equal to that of Amazon, hence we
can say that its cu
ent ratio is at par with the industry.
2. Quick Ratio- this ratio shows the liquidity of the business, but it excludes inventory from cu
ent assets to
etter depict the firm’s ability to pat its cu
ent obligations, this is because inventory is considered less
liquid.
Amazon had a quick ratio of 0.7514 in year 2015 when compared to the cu
ent ratio of 1.0536 we can
say that the company has a decent amount of inventory, which is not necessarily desirable because it is
not as liquid. The company’s quick ratio did increase in 2016 by 4.25% to 0.7833, which shows that they
are better off than the previous year. They still had around the same amount of inventory though. The
industry average was 1.3 and Amazon at 0.78 is quite below the industry average which is not a good sign
for company’s liquidity.
Long Term Solvency (Financial Leverage) Ratios
These ratios measure the firm’s ability to pay off its long-term obligations. It can also be stated as its
financial leverage.
3. Total Debt Ratio- This ratio shows how much the company’s total assets are worth in money compared
to how much its total debt is worth.
Amazon had a total debt ratio of 0.2189 in 2015 and 0.2321 in 2016. The ratio has increased by 6% over
the year. The ratio is lower than 1, which means company has more assets to repay its long term and
short term debts. The firm was doing slightly better in 2015 than it was in 2016 because it had less
liabilities and more equity. The industry average was 0.5; Amazon has a much lower total debt ratio than
this and therefore has less debt than...