Question: Amazon 2017 Profit margin = 0.02 Total asset turnover= 1.35 equity multipler= 4.74 ROE= 10.95% 2018 Profit margin = 0.04 Total asset turnover= 1.43 equity
Amazon
2017
Profit margin = 0.02
Total asset turnover= 1.35
equity multipler= 4.74
ROE= 10.95%
2018
Profit margin = 0.04
Total asset turnover= 1.43
equity multipler= 3.73
ROE= 23.13%
2019
Profit margin = 0.04
Total asset turnover= 1.25
equity multipler= 3.63
ROE=18.67%
Netflix
2017
Profit margin = 0.05
Total asset turnover= 0.61
equity multipler= 5.31
ROE= 15.60%
2018
Profit margin = 0.08
Total asset turnover= 0.61
equity multipler= 4.96
ROE= 23.12%
2019
Profit margin = 0.09
Total asset turnover= 0.59
equity multipler= 4.48
ROE= 24.62%
1. What has happened to each firms ROE between 2017 and 2019? Using the DuPont Decomposition, explain the factors that have led to the change in each firms ROE.
2. If you were hired to analyze the profitability of NetFlix, would you select Amazon as a peer firm to use to evaluate NetFlix's ROE? Why or why not?
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