When a parent sends their child to school, they trust that the education institution will work with their student in accordance with pedagogy best practices, childhood development principles, and reasonable care. Parents do not have to guess about their child’s progress, however, and find out about their dependent’s progress through report cards, parent-teacher conferences, and periodic updates given by teachers. Similarly, stakeholders, government entities, and curious private parties are not forced to wonder about the financial state of large public companies. The United States Securities and Exchange Commission (SEC) requires public companies with more than ten million dollars in assets and more than five hundred owners to file regular
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Two figures stand out as important to us at this juncture. First, Amazon’s debt ratio compares total debt to total assets, telling the reader the proportion of assets financed by debt tools. Amazon’s debt ratio increased slightly over the last three years, from 0.76 to 0.80, and is slightly higher than Walmart’s debt ratio, 0.60. Though Amazon is a younger company fervently pursuing growth and is subsequently likely to carry more debt to finance that growth, this ratio should be watched in coming years to determine Amazon’s ability to increase assets faster than liabilities. Another solvency ratio, the debt to equity ratio, compares total debt to total equity, and shows how the percentage of a company’s financing that comes from creditors versus investors. Between 2013 and 2015, Amazon’s debt to equity ratio went from 3.12 to 4.07, and finally to 3.89, meaning that the amount of Amazon’s financing that came from creditors is over three times higher than that which came from investors. This tells us that the Amazon relies heavily on borrowed cash, especially more so than their competitor, Walmart, which shows a ratio of 1.50 in 2015, demonstrating a more evenly distributed reliance between creditors and investors. These ratios were selected to provide a scale by which to measure Amazon’s vast debt and help the reader consider whether that is healthy …show more content…
Amazon’s return on assets reveals the corporation’s profitability relative to its total assets, found by dividing profit before taxes by net assets. This company operates with a thin return on assets, a ratio that dipped into the red in 2014 at -0.01 before rising in 2015 to a three-year-high of 0.12. The dip here is due to Amazon’s profitability falling in 2014, as new merchandise and services development soared and product-releases were met with sluggish sales (Bensinger, 2014). Nevertheless, since this company did not witness negative profits two years in row, we should not necessarily consider the profit loss in 2014 a trend have reason to believe Amazon is at risk of slumping into a chronically unprofitable situation. The final ratio at stake, the operating income margin, weighs into our understanding Amazon’s efficiency and pricing strategy. Indeed, management of the company openly discusses how low prices are part of the organization’s value proposition (10-K) and the company faces inherent operating challenges they actively work to compensate for by optimizing the location of warehousing operations and innovating in other traditional and non-traditional roles. That said, we can reasonably expect Amazon to have a low operating income margin, an assumption confirmed by Amazon’s 1%, 0.2%, and 2% ratios for 2013, 2014, and 2015. Even Walmart, a retailer with a similar everyday low price enjoys a 6% ratio here. However, since
Two figures stand out as important to us at this juncture. First, Amazon’s debt ratio compares total debt to total assets, telling the reader the proportion of assets financed by debt tools. Amazon’s debt ratio increased slightly over the last three years, from 0.76 to 0.80, and is slightly higher than Walmart’s debt ratio, 0.60. Though Amazon is a younger company fervently pursuing growth and is subsequently likely to carry more debt to finance that growth, this ratio should be watched in coming years to determine Amazon’s ability to increase assets faster than liabilities. Another solvency ratio, the debt to equity ratio, compares total debt to total equity, and shows how the percentage of a company’s financing that comes from creditors versus investors. Between 2013 and 2015, Amazon’s debt to equity ratio went from 3.12 to 4.07, and finally to 3.89, meaning that the amount of Amazon’s financing that came from creditors is over three times higher than that which came from investors. This tells us that the Amazon relies heavily on borrowed cash, especially more so than their competitor, Walmart, which shows a ratio of 1.50 in 2015, demonstrating a more evenly distributed reliance between creditors and investors. These ratios were selected to provide a scale by which to measure Amazon’s vast debt and help the reader consider whether that is healthy …show more content…
Amazon’s return on assets reveals the corporation’s profitability relative to its total assets, found by dividing profit before taxes by net assets. This company operates with a thin return on assets, a ratio that dipped into the red in 2014 at -0.01 before rising in 2015 to a three-year-high of 0.12. The dip here is due to Amazon’s profitability falling in 2014, as new merchandise and services development soared and product-releases were met with sluggish sales (Bensinger, 2014). Nevertheless, since this company did not witness negative profits two years in row, we should not necessarily consider the profit loss in 2014 a trend have reason to believe Amazon is at risk of slumping into a chronically unprofitable situation. The final ratio at stake, the operating income margin, weighs into our understanding Amazon’s efficiency and pricing strategy. Indeed, management of the company openly discusses how low prices are part of the organization’s value proposition (10-K) and the company faces inherent operating challenges they actively work to compensate for by optimizing the location of warehousing operations and innovating in other traditional and non-traditional roles. That said, we can reasonably expect Amazon to have a low operating income margin, an assumption confirmed by Amazon’s 1%, 0.2%, and 2% ratios for 2013, 2014, and 2015. Even Walmart, a retailer with a similar everyday low price enjoys a 6% ratio here. However, since