Describe how and why each of the ratios has changed over the three-year period. For example, did
Question:
Describe how and why each of the ratios has changed over the three-year period. For example, did the current ratio increase or decrease? Why? Describe how three of the ratios you calculated for your company compare to the general industry.
Below are the rations for Amazon.com from 2015 through 2017
| 2017 | ||||||
| Ratio Calculations | Equations | |||||
| Current ratio | 60,197,000 | / | 57,883,000 | = | 1.04 | current assets / current liabilities |
| Debt/equity ratio | 103,601,000 | / | 27,709,000 | = | 373.9% | total liabilities / total equity |
| Free cash flow | 18,434,000 | - | 27,819,000 | = | $ (9,385,000) | total operating cash flow - capital expenditures |
| Earnings per share | 3,033,000 | / | 480,000 | = | $ 6.32 | net income / common shares outstanding |
| Price/earnings ratio | 1169.47 | / | 6.32 | = | 185.04 | stock price / earnings per share |
| Return on equity | 3,033,000 | / | 27,709,000 | = | 10.9% | net income / total equity |
| Net profit margin | 3,030,000 | / | 177,866,000 | = | 1.7% | net income / total revenue |
| 2016 | ||||||
| Ratio Calculations | Equations | |||||
| Current ratio | 45,781,000 | / | 43,816,000 | = | 1.04 | current assets / current liabilities |
| Debt/equity ratio | 64,117,000 | / | 19,285,000 | = | 332.5% | total liabilities / total equity |
| Free cash flow | 16,443,000 | - | 6,737,000 | = | $ 9,706,000 | total operating cash flow - capital expenditures |
| Earnings per share | 2,371,000 | / | 474,000 | = | $ 5.00 | net income / common shares outstanding |
| Price/earnings ratio | 749.87 | / | 5.00 | = | 149.97 | stock price / earnings per share |
| Return on equity | 2,371,000 | / | 19,285,000 | = | 12.3% | net income / total equity |
| Net profit margin | 2,371,000 | / | 135,987,000 | = | 1.7% | net income / total revenue |
| 2015 | ||||||
| Ratio Calculations | Equations | |||||
| Current ratio | 36,474,000 | / | 33,899,000 | = | 1.08 | current assets / current liabilities |
| Debt/equity ratio | 52,060,000 | / | 13,384,000 | = | 389.0% | total liabilities / total equity |
| Free cash flow | 11,920,000 | - | 4,589,000 | = | $7,331,000 | total operating cash flow - capital expenditures |
| Earnings per share | 596,000 | / | 467,000 | = | $ 1.28 | net income / common shares outstanding |
| Price/earnings ratio | 675.89 | / | 1.28 | = | 528.04 | stock price / earnings per share |
| Return on equity | 596,000 | / | 13,384,000 | = | 4.5% | net income / total equity |
| Net profit margin | 596,000 | / | 107,006,000 | = | 0.6% | net income / total revenue |
Expert Answer:
Equations 2017 2016 2015 Remark Current ratio current assets current liabilities 104 104 108 Due to ... View the full answer
