Amazon Inc. is one of the largest internet retailers in the world. Walmart Stores, Inc. is the largest retailer in the U.S. Amazon and Walmart compete in similar markets; however, Walmart sells through both traditional retail stores and the internet, while Amazon sells only through the internet. Interest expense and income before income tax expense from the financial statements of both companies for two recent years (in millions) are below Amazon Walmart Year 1 Year 1 Year 2 Year 2 141 2335 Interest Expense 210 2461 Income (Loss) before 274 24799 24656 income tax expense 1. Compute the Times Interest Earned Ratio for both companies for both years. Round the ratios to two decimals. 2. a. Interpret Amazon's interest coverage (the ratios from 1. Above) from year 1 to year 2. b. Interpret Walmart's interest coverage from year 1 to year 2. 3. Does a Times Interest Earned Ratio less than 1.0 mean that creditors will not get paid interest? 4. If Walmart would have had a lot more accounts payable on its balance sheet, would its Times Interest Earned ratio have been different? Explain your answer. 5. Which company appears to have the greater protection for creditors? Let's assume that the only debt Walmart has on its balance sheet is a large amount of 6. Bonds Payable that were very recently issued at a discount, because its (fixed) coupon rate was well below the yield in the market. Walmart correctly used the effective yield method to calculate the amortization of the discount. Does the use of the effective interest rate method lead to a constant amount of a. interest expense or a constant rate of interest over the life of the bond issue? If the company would have used straight line amortization of the discount, would the Times Interest Ratios have been exactly the same as under the b. effective interest method? Explain whether the times interest earned ratio, calculated using the effective interest rate method, would depend on a. the coupon rate of the bonds or b. on the comparable market yield for the bonds at the time the bonds were issued. C. In Millions Walmart Amazon (241) Net Income (Loss) 16363 462 Average Number of Common Shares Outstanding 3230 Determine the Earnings per Share for each company. Neither company has preferred 7. shares outstanding. Round your answers to the nearest cent. 8. Which company appears more profitable from an Earnings per Share perspective? 9. At the time the market price of Amazon common stock was $437 per share, while Walmart's was $72 per share. How would you explain this difference in market price given the earnings per share computed in question 7? 10. Assume Walmart declared a 2-for-1 stock split. Would its Earnings per Share change? If so, calculate Walmart's new Earnings per Share. a. b. Would it change its Total Shareholders' Equity on the balance sheet