Compute and Interpret Coverage, Liquidity and Solvency Ratios

Selected balance sheet and income statement information from Amazon for 2016 through 2018 follows.

$ millions201820172016Net operating profit after tax (NOPAT)$11,307$3,319$2,633Net income10,3753,1242,442Operating profit12,7944,2294,312Interest expense1,332797455Cash from operating activities31,64518,91617,719Current assets77,35462,00347,154Current liabilities64,28854,41041,187Cash and cash equivalents32,70321,13819,914Marketable securities9,78510,7786,846Total debt22,08523,2587,232Assets167,527135,24985,904Liabilities111,95397,38560,270Equity40,93626,04618,128Net operating assets (NOA)24,24620,178938

a. Compute profitability measures RNOA and ROE for 2018 and 2017. In which year are the measures stronger?

Round answers to one decimal place (ex: 0.2345 = 23.5%).

20182017RNOAAnswer

Answer

ROEAnswer

Answer

b. Compute coverage metrics Times interest earned and Cash from operating activities to total debt for 2018 and 2017.

Round answers to two decimal places.

20182017Times interest earnedAnswer

Answer

Cash from operating activities to total debtAnswer

Answer

c. Determine liquidity for the company for 2018 and 2017 by computing the current ratio and quick ratio.

Round answers to two decimal places.

20182017Current ratioAnswer

Answer

Quick ratioAnswer

Answer

d. Compute the Total liabilitiestoequity ratio and the Total debt to equity ratio for 2018 and 2017.

Round answers to two decimal places.

20182017Total liabilities-to-equityAnswer

Answer

Total debt to equityAnswer

Answer

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