Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. We will use Amazon as a continuing company exercise to reinforce the various tools and techniques for analyzing financial statements. We will begin with the ratio of liabilities to stockholders’ equity. 

Ratios can be used to compare companies in the same industry. For Amazon, there are a number of competitors that sell media, electronic, and other merchandise. Best Buy, Inc. (BBY) is one such company. The following total liabilities and stockholders’ equity information (in millions) is provided for Amazon and Best Buy for the end of a recent year:

a. Compute the ratio of liabilities to stockholders’ equity for each company. Round to two decimal places.
b. What conclusions regarding the margin of protection to creditors can you draw for these two companies?

Transcribed Image Text:

Amazon Best Buy Total assets $162,648 $12,901 Total liabilities 119,099 9,595 Total stockholders'equity 43,549 3,306