Amazon is a fast growing company with many different services it provides to customers. It's main service is providing shipments of products to customers. Amazon makes a lot of profits from these shipments. Today, we are going to analyze different parts of the company. We are going to take many different ratios and apply them to financial analysis of the company, Amazon. The ratios of the company we will be covering are the following: Current Ratio, The acid-test ratio, Inventory Turnover, Accounts Receivable Turnover, Days' Sales in Average Receivables, Debt Ratio, Times-Interest-Earned, Return on Net Sales, Return on Total Assets, Return on CS Equity, Earnings per Share, Price Earnings Ratio, Dividend Yield, and Book Value per share of CS.
The Current Ratio is analyzed by taking current assets divided by current liabilities. The current ratio measures the ability to pay current liabilities with current assets. In general, a higher current ratio indicates a stronger financial position. In other words for Amazon, there was a increase in both liabilities and assets in the a balance sheet comparison of 2009 and 2010. 2010 had a bigger current ratio sum then 2009. The acid-test ratio is analyzed by taking cash plus short term investments plus net A/R and divide by current liabilities. This acid-test ratio uses a narrower base to measure liquidity than the current ratio does. It tells us whether the entity could pass the acid test of paying all its current liabilities if they came due immediately. By analyzing liabilities and assets of Amazon, we can come to the conclusion that the assets of the company would cover the liabilities of the company. .
The Inventory Turnover ratio is calculated when you take cost of goods sold and divide it by the average inventory. Inventory turnover, measures the number of times a company sells its average level of inventory during a year. A fast turnover indicates ease in selling inventory, and a low turnover indicates difficulty.