ontinuing Company Analysis—Amazon: Times interest earned Amazon.com, Inc. is one

Question

ontinuing Company Analysis—Amazon: Times interest earned

Amazon.com, Inc. is one of the largest Internet retailers in the world. Walmart Stores, Inc. is the largest retailer in the United States. Amazon and Walmart compete in similar markets; however, Walmart sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Interest expense and income before income tax expense from the financial statements of both companies for two recent years follow (in millions):

a. Compute the times interest earned ratio for both companies for the two years. Round your answers to one decimal place.

Amazon Walmart Year 2 Year 1 Year 2 Year 1 Interest expense $ 210 $141 $2,461 $2,335 Income (loss) before income tax expense   (111)   274 24,799 24,656

Explanation / Answer

Times Interest Earned=EBIT/Interest=(Income before Tax+Interest)/Interest=Income before tax/Interest+1

Amazon:

Year 2: -111/210+1=0.471429

Year 1: 274/141+1=2.943262

Walmart:

Year 2: 24799/2461+1=11.0768

Year 1: 24656/2335+1=11.55931

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.