Ratios (Decision Analysis) You may have wondered why all of the information that you have been working with is important. That information forms the basis for decision making in many areas of running a business, and often the best way to work toward a decision is the use of ratios. The use of ratios allows a business to see how different elements of the business are performing period to period. Ratios can also be used to see how the company is performing relative to other companies in the same industry. This can be information that is important in maintaining a competitive edge in the industry. Each of the ratios listed below has been a part of your instruction. They are found under the heading "Decision Analysis near the end of each chapter in your textbook. Instructions: a. Select 6 ratios from the list below. b. Using the Consolidated Balance Sheet and Consolidated Income Statement for Amazon, which are on your Blackboard menu in the Amazon 10K financials folder under the Supplemental Study Help module, compute your selected ratios, and give a short description of why each of your selected ratios is important to a company. Each correct answer will be worth 5 points extra credit, for a total of 30 available points for the project. (See the highlighted section below.) c. After completing your computations for the 6 selected ratios, use the Consolidated Balance Sheet to prove that Amazon's Balance Sheet is truly in balance by filling in each element of the Accounting Equation. This will be worth an additional 5 points. AP Ratis Return on assets Debt ratio Profit margin Current ratio Acid test ratio Gross margin ratio Inventory turnover Days sales in inventory Accounts receivable turnover Total asset turnover Times interest earned Debt to equity ratio Basic earnings per share Consolidated Statements Of Operations - USD ($) shares in Millions, $ in Millions 12 Months Ended Dec. 31, 2019 Dec. 31, 2018 $ 280,522 $ 232,887 Dec. 31, 2017 $ 177,866 139,156 34,027 28,837 13,814 Total net sales Operating expenses: Cost of sales Fulfillment Technology and content Marketing General and administrative Other operating expense (income), net Total operating expenses Operating income Interest income Interest expense Other income (expense), net Total non-operating income (expense) Income before income taxes Provision for income taxes Equity-method investment activity, net of tax Net income Basic earnings per share Diluted earnings per share Weighted average shares used in computation of earnings per share: Basic (in shares) Diluted (in shares) Net product sales Total net sales Net service sales Total net sales 165,536 40,232 35,931 18,878 5,203 201 265,981 14,541 832 (1,600) 203 (565) 13,976 (2,374) (14) $ 11,588 $ 23.46 $ 23.01 4,336 296 220,466 12,421 440 (1,417) (183) (1,160) 11,261 (1,197) 9 $ 10,073 $ 20.68 $ 20.14 111,934 25,249 22,620 10,069 3,674 214 173,760 4,106 202 (848) 346 (300) 3,806 (769) (4) $ 3,033 $ 6.32 $ 6.15 494 504 487 500 480 493 $ 160,408 $ 141,915 $ 118,573 $ 120,114 $ 90,972 $ 59,293 Dec. 31, 2019 Dec. 31, 2018 Consolidated Balance Sheets - USD ($) $ in Millions Current assets: Cash and cash equivalents Marketable securities Inventories Accounts receivable, net and other Total current assets Property and equipment, net Operating leases Goodwill Other assets Total assets Current liabilities: Accounts payable Accrued expenses and other Unearned revenue Total current liabilities Long-term lease liabilities Long-term debt Other long-term liabilities Commitments and contingencies (Note 7) Stockholders' equity: Preferred stock, $0.01 par value: Authorized shares - 500 Issued and outstanding shares - none $36,092 18,929 20,497 20,816 96,334 72,705 25,141 14,754 16,314 225,248 $ 31,750 9,500 17,174 16,677 75,101 61,797 0 14,548 11,202 162,648 47,183 32,439 8,190 87,812 39,791 23,414 12,171 38,192 23,663 6,536 68,391 9,650 23,495 17,563 0 0 5 5 Common stock, $0.01 par value: Authorized shares - 5,000 Issued shares - 507 and 514 Outstanding shares - 484 and 491 Treasury stock, at cost Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total stockholders' equity Total liabilities and stockholders' equity (1,837) 33,658 (986) 31,220 62,060 $ 225,248 (1,837) 26,791 (1,035) 19,625 43,549 $ 162,648 Ratios (Decision Analysis) You may have wondered why all of the information that you have been working with is important. That information forms the basis for decision making in many areas of running a business, and often the best way to work toward a decision is the use of ratios. The use of ratios allows a business to see how different elements of the business are performing period to period. Ratios can also be used to see how the company is performing relative to other companies in the same industry. This can be information that is important in maintaining a competitive edge in the industry. Each of the ratios listed below has been a part of your instruction. They are found under the heading "Decision Analysis near the end of each chapter in your textbook. Instructions: a. Select 6 ratios from the list below. b. Using the Consolidated Balance Sheet and Consolidated Income Statement for Amazon, which are on your Blackboard menu in the Amazon 10K financials folder under the Supplemental Study Help module, compute your selected ratios, and give a short description of why each of your selected ratios is important to a company. Each correct answer will be worth 5 points extra credit, for a total of 30 available points for the project. (See the highlighted section below.) c. After completing your computations for the 6 selected ratios, use the Consolidated Balance Sheet to prove that Amazon's Balance Sheet is truly in balance by filling in each element of the Accounting Equation. This will be worth an additional 5 points. AP Ratis Return on assets Debt ratio Profit margin Current ratio Acid test ratio Gross margin ratio Inventory turnover Days sales in inventory Accounts receivable turnover Total asset turnover Times interest earned Debt to equity ratio Basic earnings per share Consolidated Statements Of Operations - USD ($) shares in Millions, $ in Millions 12 Months Ended Dec. 31, 2019 Dec. 31, 2018 $ 280,522 $ 232,887 Dec. 31, 2017 $ 177,866 139,156 34,027 28,837 13,814 Total net sales Operating expenses: Cost of sales Fulfillment Technology and content Marketing General and administrative Other operating expense (income), net Total operating expenses Operating income Interest income Interest expense Other income (expense), net Total non-operating income (expense) Income before income taxes Provision for income taxes Equity-method investment activity, net of tax Net income Basic earnings per share Diluted earnings per share Weighted average shares used in computation of earnings per share: Basic (in shares) Diluted (in shares) Net product sales Total net sales Net service sales Total net sales 165,536 40,232 35,931 18,878 5,203 201 265,981 14,541 832 (1,600) 203 (565) 13,976 (2,374) (14) $ 11,588 $ 23.46 $ 23.01 4,336 296 220,466 12,421 440 (1,417) (183) (1,160) 11,261 (1,197) 9 $ 10,073 $ 20.68 $ 20.14 111,934 25,249 22,620 10,069 3,674 214 173,760 4,106 202 (848) 346 (300) 3,806 (769) (4) $ 3,033 $ 6.32 $ 6.15 494 504 487 500 480 493 $ 160,408 $ 141,915 $ 118,573 $ 120,114 $ 90,972 $ 59,293 Dec. 31, 2019 Dec. 31, 2018 Consolidated Balance Sheets - USD ($) $ in Millions Current assets: Cash and cash equivalents Marketable securities Inventories Accounts receivable, net and other Total current assets Property and equipment, net Operating leases Goodwill Other assets Total assets Current liabilities: Accounts payable Accrued expenses and other Unearned revenue Total current liabilities Long-term lease liabilities Long-term debt Other long-term liabilities Commitments and contingencies (Note 7) Stockholders' equity: Preferred stock, $0.01 par value: Authorized shares - 500 Issued and outstanding shares - none $36,092 18,929 20,497 20,816 96,334 72,705 25,141 14,754 16,314 225,248 $ 31,750 9,500 17,174 16,677 75,101 61,797 0 14,548 11,202 162,648 47,183 32,439 8,190 87,812 39,791 23,414 12,171 38,192 23,663 6,536 68,391 9,650 23,495 17,563 0 0 5 5 Common stock, $0.01 par value: Authorized shares - 5,000 Issued shares - 507 and 514 Outstanding shares - 484 and 491 Treasury stock, at cost Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total stockholders' equity Total liabilities and stockholders' equity (1,837) 33,658 (986) 31,220 62,060 $ 225,248 (1,837) 26,791 (1,035) 19,625 43,549 $ 162,648