The vertical analysis of Amazon’s balance sheet reveals a few things. Evaluation of cash and cash equivalents reveal from 2016 to 2017, Amazon posted $1.2B increase representing a 6% gain. Other non-cash current assets including marketable securities, inventories and accounts receivable, accounted an impressive gain of $14B from 2016 to 2017. Overall this brought total current assets from $45B in 2016 to $60B in 2017. Non-current assets such as property, equipment and goodwill revealed significant gains as well. Most of the growth has come from the plant, property and equipment line, which has increased from $29B in 2016 to $48B in 2017. The acquisition of the Whole Foods Grocery Chain in 2017 for $13.2B added significantly to property.
…show more content…
The three main liquidity ratios are the current ratio, the quick ratio and the cash ratio. The current ratio is defined as the current assets divided by the current liabilities. This was 1.04% in 2016, which is essentially unchanged in 2017. The quick ratio is the current assets less the inventories, divided by the current liabilities. For Amazon, this is .74%. Both of these figures are healthy, as is the cash ratio of .59%. Net Working Capital (NWC) is also a measure of liquidity. The NWC is noted to have decreased from 2016 to 2017 by $4.3 B or 22%. Amazon has no pending liquidity issues.
Analysis of the leverage position of Amazon reveals that debt has increased $24.4 B, or 125% from 2016 to 2017 and the net debt has increased substantially from $967M to $25.2B or 2500%. The Net Debt /EBITA ratio represents how many years it would take to pay off all debt. This ration has increased to 1.62 in 2017, up from 0.08 in 2016. …show more content…
For a retailer, inventory is a critical role, because unsold inventory often must be cleared as discount. It is important to move inventory through the company as quickly as possible to recognize revenues from all good that have been purchased by the company. The total asset turnover reflects the ability of the company to generate sales from its asset base. The formula is the revenue / average total assets. The total asset turnover this past year 1.35% (2017), which is a decent number. Two years ago at the time of peak profit, Amazon had a total asset turnover of 1.64%, so there has been little change in this performance metric, event as the company as increased its total assets significantly. It is a positive considering even if the inventory turn as decreased in the past couple of years, total asset turnover has not.
The profitability ratios indicate the company’s profit position. The gross profit and net profit are two major examples of this type of ratio. The gross profit in 2017 was $65M, and this s higher than it was two years ago when the company was at its least profitable. The gross margin in 2016 was 24%. The net margin, however, is lower. The erosion of the company’s net margin is one of the most pressing financial concerns for
The three main liquidity ratios are the current ratio, the quick ratio and the cash ratio. The current ratio is defined as the current assets divided by the current liabilities. This was 1.04% in 2016, which is essentially unchanged in 2017. The quick ratio is the current assets less the inventories, divided by the current liabilities. For Amazon, this is .74%. Both of these figures are healthy, as is the cash ratio of .59%. Net Working Capital (NWC) is also a measure of liquidity. The NWC is noted to have decreased from 2016 to 2017 by $4.3 B or 22%. Amazon has no pending liquidity issues.
Analysis of the leverage position of Amazon reveals that debt has increased $24.4 B, or 125% from 2016 to 2017 and the net debt has increased substantially from $967M to $25.2B or 2500%. The Net Debt /EBITA ratio represents how many years it would take to pay off all debt. This ration has increased to 1.62 in 2017, up from 0.08 in 2016. …show more content…
For a retailer, inventory is a critical role, because unsold inventory often must be cleared as discount. It is important to move inventory through the company as quickly as possible to recognize revenues from all good that have been purchased by the company. The total asset turnover reflects the ability of the company to generate sales from its asset base. The formula is the revenue / average total assets. The total asset turnover this past year 1.35% (2017), which is a decent number. Two years ago at the time of peak profit, Amazon had a total asset turnover of 1.64%, so there has been little change in this performance metric, event as the company as increased its total assets significantly. It is a positive considering even if the inventory turn as decreased in the past couple of years, total asset turnover has not.
The profitability ratios indicate the company’s profit position. The gross profit and net profit are two major examples of this type of ratio. The gross profit in 2017 was $65M, and this s higher than it was two years ago when the company was at its least profitable. The gross margin in 2016 was 24%. The net margin, however, is lower. The erosion of the company’s net margin is one of the most pressing financial concerns for