Amazon.com, Inc. (AMZN) is one of the largest Internet retailers in the world. Best Buy, Co. Inc. (BBY) is a leading retailer of consumer electronics and media products in the United States. Amazon and Best Buy compete in similar markets; however, Best Buy sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Current asset and current liability information from recent financial statements are as follows (in millions):

a. Compute working capital for each company
b. Compute the current ratio for each company.
c. Compute the quick ratio for each company.
d. Can the working capital be usefully compared between the two companies? Explain.
e. Which company has the greater debt-paying ability according to the current ratio?
f. Which company has the greater short-term debt-paying ability according to the quick ratio?
g. Why are the results different between (e) and (f)?

Transcribed Image Text:

Current assets: Cash Short-term investments.. Accounts receivable Inventories.... Other current assets. Total current assets. Current liabilities: Accounts payable........ Other current liabilities Total current liabilities. Amazon $31,750 9,500 16,677 17,174 $75,101 $38,192 30,199 $68,391 Best Buy $ 1,980 - 1,015 5,409 466 $ 8,870 $5,257 2,256 $7,513