Analyze and compare

Amazon.com and Walmart

Amazon.com, Inc. $($AMZN$)$ is one of the largest Internet retailers in the world. Walmart Inc. $($WMT$)$ is the largest retailer in the United States. Amazon and Walmart

compete in similar markets; however, Walmart sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Interest expense

and income before income tax expense from the financial statements of both companies for two recent years follow $($in millions$)$:

a$.$ Compute the times interest earned ratio for both companies for the two years. Round your answers to one decimal place.

b$.$ Based on your calculations for Amazon above, which of these statements is correct?

The interest coverage indicated by these ratios suggests that Amazon will be able to cover interest payments from current$-$period income before tax.

c$.$ Does a times interest earned ratio less than $1\mathrm{.}0$ mean that creditors will not get paid interest?

Low times interest earned ratio is an early warning signal, but it does not mean the company will not be able to pay interest to creditors. $$

d$.$ Interpret Walmart's interest coverage from Year $1$ to Year $2.$

Walmart's times interest earned ratio increased and indicates a healthy protection for interest payments to creditors.

e$.$ Which company appears to have the greater protection for creditors?