WORKSHEET D: RATIO ANALYSIS Company Name: Amazon Industry Name: Consumer Service
ID: 2526417 • Letter: W
Question
WORKSHEET D: RATIO ANALYSIS
Company Name: Amazon
Industry Name: Consumer Services
What information does each ratio reveal about Amazon?
Look at your company’s profitability, efficiency, liquidity, and solvency, note whether they are improving or deteriorating.
Look at your company’s profitability, efficiency, liquidity, and solvency, note whether they are better than or worse than its peers.
1. Indicate whether the overall profitability, efficiency, liquidity, and solvency of the company are strong, average, or weak. Briefly explain why you came to this conclusion.
2. Prepare the DuPont Analysis of ROE for your company and its industry. Indicate the primary driver of ROA and ROE for your company.
3. Summarize current events and other items of importance.
4. Indicate whether you would invest in your company, identifying three to five significant points that justify your conclusion.
Find the missing data for Amazon (AMZN), and answer the below questions.What information does each ratio reveal about Amazon?
Look at your company’s profitability, efficiency, liquidity, and solvency, note whether they are improving or deteriorating.
Look at your company’s profitability, efficiency, liquidity, and solvency, note whether they are better than or worse than its peers.
1. Indicate whether the overall profitability, efficiency, liquidity, and solvency of the company are strong, average, or weak. Briefly explain why you came to this conclusion.
2. Prepare the DuPont Analysis of ROE for your company and its industry. Indicate the primary driver of ROA and ROE for your company.
3. Summarize current events and other items of importance.
4. Indicate whether you would invest in your company, identifying three to five significant points that justify your conclusion.
WORKSHEET D: RATIO ANALYSIS Company Name: Amazon Industry Name: Consumer Services Title of Ratio Industry Ratios Change Company Ratios 2017 Company Ratios 2016 Average Profitability Ratios 32796 | Stronger / 1.71% 1.74% Return on sales (ROS) Weaker 6.49% | Stronger / 2.31% 2.84% Return on assets (ROA) Weaker Return on equity (ROE) 22.69% Stronger 10.95% 12.29% Weaker 34.36% | Stronger, 37.0796 35.09% Gross profit margin Weaker Efficiency Ratios Quicker Slower 13.51 16.31 Accounts receivable turnover Quicker /Slower 6.98 7.70 Inventory turnover Quicker Slower 1.35 1.63 Asset turnover1.98 Liquidity Ratios Current ratio 1.03 More / Less 1.04 1.04 Liquid Solvency Ratios 61% 5296 | More / Less Risk Debt ratio 51%Explanation / Answer
What information does each ratio reveal about Amazon?
Look at your company’s profitability, efficiency, liquidity, and solvency, note whether they are improving or deteriorating.
Look at your company’s profitability, efficiency, liquidity, and solvency, note whether they are better than or worse than its peers.
1. Indicate whether the overall profitability, efficiency, liquidity, and solvency of the company are strong, average, or weak. Briefly explain why you came to this conclusion.
2. Prepare the DuPont Analysis of ROE for your company and its industry. Indicate the primary driver of ROA and ROE for your company.
3. Summarize current events and other items of importance.
4. Indicate whether you would invest in your company, identifying three to five significant points that justify your conclusion.
Look at your company’s profitability, efficiency, liquidity, and solvency, note whether they are better than or worse than its peers.
1. Indicate whether the overall profitability, efficiency, liquidity, and solvency of the company are strong, average, or weak. Briefly explain why you came to this conclusion.
Profitability ratios are financial metrics used by businesses to measure and evaluate their ability to generate income (profit) relative to revenue, balance sheet assets, operating costs, and compare income statement accounts and to show a companys ability to generate profit profility ratio, break-even analysis, return on assets and return on investment. profitability ratios used in analyzing a company's performance include gross profit margin (GPM), operating margin (OM), return on assets (ROA) , return on equity (ROE), return on sales (ROS) and return on investment (ROI).
Return on sales 3.27% and company ratio in 2016 the ratio was 1.74% show a company ability it is reduced current year 2017 the return on sales was company ration is 1.71% it is not so much good change compare than the last year. It should be increased. Return on asset is also reduced as compared than the last year return on equity is good 22.69% gross profit margin is company performance is better.
calculate efficiency ratios evaluate how well a company uses its assets and liabilities to generate sales and maximize profits. Key efficiency ratios are the asset turnover ratio, inventory turnover, and days' sales in inventory.
Accounts receivable turnover inventory turnover assets turnover is good sign of good efficiency Assets turnover is company ability is better to pay payable.
Liquidity ratios measure a company's ability to pay debt obligations and its margin of safety through the calculation current ratio, quick ratio and operating cash flow ratio. Current liabilities are analyzed in relation to liquid assets to evaluate the coverage of short-term debts liquidity ratio is an indicator of whether a company's current assets will be sufficient to meet the company's obligations when they become due. The liquidity ratios include the current ratio and the acid test or quick ratio. The current ratio and quick ratio are also referred to as solvency ratios.current ration is better 1.03
The solvency ratio is the ratio between two capital components, namely equity and total balance sheet:Solvency ratio = equity / balance sheet total This ratio indicates whether the providers of loan capital can be repaid in the event of liquidation. A solvency ratio of at least 25% . solvency ratio is much better ratio 52%. debt-to-equity or gearing ratio can be defined as the inverse of the solvency ratio minus one. Thesolvency ratio addresses a firm's longer-term solvency (and thus its capital structure) and is concerned with its ability to meet its longer-term financial commitments.
Indicate whether the overall profitability, efficiency, liquidity, and solvency of the company are strong, average, or weak. Briefly explain why you came to this conclusion.
Ratio analysis involves evaluating the performance and financial health of a company The data from the statements is used to - compare a company's performance over time to assess whether the company is improving or deteriorating; compare a company's financial standing with the industry average; or compare a company to one or more other companies operating in its sector to see how the company stacks up investors are familiar with a few key ratios, particularly the ones that are relatively easy to calculate. Some of these ratios include the current ratio, return on equity (ROE), the debt-equity (D/E) ratio, the dividend payout ratio, and the price/earnings (P/E) ratio. Ratio analysis can be categorized into six main groups:
1. Liquidity Ratios: liquidity ratios measure a company's ability to pay off its short-term debts as they come due using the company's current or quick assets. Liquidity ratios include current ratio, quick ratio, and working capital ratio.
2. Solvency Ratios: also called financial leverage ratios, solvency ratios compare a company's debt levels with its assets, equity, and earnings to evaluate whether a company can stay afloat in the long-term by paying its long-term debt and interest on the debt. Examples of solvency ratios include debt-equity ratio, debt-assets ratio, and interest coverage ratio.
3. Profitability Ratios: these ratios show how well a company can generate profits from its operations. Profit margin, return on assets, return on equity, return on capital employed, and gross margin ratio are examples of profitability ratios.
4. Efficiency Ratios: also called activity ratios, efficiency ratios evaluate how well a company uses its assets and liabilities to generate sales and maximize profits. Key efficiency ratios are the asset turnover ratio, inventory turnover, and days' sales in inventory.
These ratios measure a company's ability to make the interest payments and other obligations associated with its debts. These are the most commonly used ratios in fundamental analysis. Investors use these ratios to determine what they may receive in earnings from their investments and to predict what the trend of a stock will be in the future.
Ratio analysis can provide an early warning of a potential improvement or deterioration in a company’s financial situation or performance. Analysts engage in extensive number-crunching of the financial data in a company’s quarterly financial reports for any such hints. Successful companies generally have solid ratios in all areas, and any hints of weakness in one area may spark a significant sell-off in the stock. Certain ratios are closely scrutinized because of their relevance to a certain sector, as for instance inventory turnover for the retail sector and days sales outstanding (DSOs) for technology companies.
DuPont analysis, ROE is affected by three things: operating efficiency, which is measured by profit margin; asset use efficiency, which is measured by total asset turnover; and financial leverage, which is measured by the equity multiplier.
Therefore, DuPont analysis is represented in mathematical form by the following calculation: ROE = Profit Margin x Asset Turnover Ratio x Equity Multiplier.
DuPont the DuPont Analysis of ROE for your company and its industry. Indicate the primary driver of ROA and ROE for your company.
DuPont analysis breaks ROE into its determine which of these components is most responsible for changes in ROE.Net margin: Expressed as a percentage, net margin is the revenue that remains after subtracting all operating expenses, taxes, interest and preferred stock dividends from a company's total revenue.
Asset turnover ratio: This ratio is an efficiency measurement used to determine how effectively a company uses its assets to generate revenue. The formula for calculating asset turnover ratio is total revenue divided by total assets. As a general rule, the higher the resulting number, the better the company is performing.
Equity multiplier: This ratio is to be known as financial leverage. The total assets to total stockholders' equity, the equity multiplier indicates whether a company finances the purchase of assets primarily through debt or equity. The higher the equity multiplier, the more leveraged the company, or the more debt it has in relation to its total assets.
DuPont analysis involves examining changes in these figures over time and matching them to corresponding changes in ROE. By doing so, analysts can determine whether operating efficiency, asset use efficiency or leverage is most responsible for ROE variations.
Summarize current events and other items of importance.
4. Indicate whether you would invest in your company, identifying three to five significant points that justify your conclusion.
The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business. Base all of your observations on reliable data and be sure to footnote sources of information as appropriate. This is important if you're seeking funding; the investor will want to know just how dependable your information is, and won't risk money on assumptions or conjecture.When describing your business, the first thing you need to concentrate on is its structure. By structure we mean the type of operation, i.e. wholesale, retail, food service, manufacturing or service-oriented. Also state whether the business is new or already established. Expressed as a percentage, net margin is the revenue that remains after subtracting all operating expenses, taxes, interest and preferred stock dividends from a company's total revenue
In addition to structure, legal form should be reiterated once again. Detail whether the business is a sole proprietorship, partnership or corporation, who its principals are, and what they will bring to the business.
This ratio is an efficiency measurement used to determine how effectively a company uses its assets to generate revenue. Once you've described the business, you need to describe the products or services you intend to market. The product description statement should be complete enough to give the reader a clear idea of your intentions. You solvency ratios compare a company's debt levels with its assets, equity, and earnings to evaluate whether a company can stay afloat in the long-term by paying its long-term debt and interest on the debt. competitor A doesn't have a full line. You're going to provide service after the sale.
What information does each ratio reveal about Amazon?
Look at your company’s profitability, efficiency, liquidity, and solvency, note whether they are improving or deteriorating.
Look at your company’s profitability, efficiency, liquidity, and solvency, note whether they are better than or worse than its peers.
1. Indicate whether the overall profitability, efficiency, liquidity, and solvency of the company are strong, average, or weak. Briefly explain why you came to this conclusion.
2. Prepare the DuPont Analysis of ROE for your company and its industry. Indicate the primary driver of ROA and ROE for your company.
3. Summarize current events and other items of importance.
4. Indicate whether you would invest in your company, identifying three to five significant points that justify your conclusion.
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