Profitability:

Gross Margin Ratio:

Amazons current gross margin ratio is 39.6% and Amazons prior gross margin ratio was 41.0%. Gross profit ratios indicated the percentage of revenue after deducting all the direct expenses. Higher gross profit ratios help the company to pay all indirect expenses and other expenses like interest expenses. The sales in 2019 are $280,522 and sales in 2020 are $386,064 increased at the same cost of goods sold also increased by $165,536 (2019) to $233,307 (2020). This means that in 2019 the company was more efficient in using direct material and limiting direct expenses. The higher gross profit ratio indicated the efficiency of the company. Walmart gross profit margin ratio is 24.1%. If we compare the gross profit Amazon with Walmart, the gross profit ratio of Amazon is higher than Walmart.

Return on Total Assets:

The return on total assets increased from 6.0% in 2019 to 7.8% in 2020. The ratio indicates how the company is performing and how much profit the company can generate with the help of its assets. It is better to have a higher return on assets ratio which implies that the company is being more efficient in utilizing the assets. The return on assets for Amazon company has increased from 2019 to 2020 indicating that it has been making efficient use of its assets in generating profits. It is better to have a higher ratio. When we compare the ratio of Walmart 2020 is 6.4% and Amazon for 2020 is 7.8%.

Basic Earnings per Share:

Amazons basic earnings per share for 2020 were $42.66. There was about an 82% increase in basic earnings per share from 2019 to 2020. This indicates that Amazons products and services are in great demand. The general rule of thumb for basic earnings per share is that the higher the ratio the better. Comparing Amazons basic earnings per share to the retail industry where a growth rate of at least 25% compared with year-ago levels is considered favorable, Amazons basic earnings per share is booming in the retail industry with a growth rate of 82% from 2019 to 2020. Amazon is ahead of its competitor Walmart in terms of profitability. As the basic earnings per share of Walmart is $5.19 in 2020, Amazon basic earnings per share is $42.66, this means Amazon has outrun Walmart. Walmart earnings per share lower compared to Amazon earnings per share.

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