Compute and Interpret Capital Structure, Coverage, and Liquidity Ratios

Selected balance sheet and income statement information from Amazon follows.

$ millionsCurrent Year Prior YearNet operating profit after tax $($NOPAT$)$$$10,978$$$3,222$Net income$10,0733,033$Operating profit$12,4214,106$Interest expense$1,417848$Cash from operating activities$30,72318,365$Current assets$300,40460,197$Current liabilities$68,39157,883$Cash and cash equivalents $($Cash$)31,75020,522$Marketable securities $($MS$)9,50010,464$Accounts receivable $($AR$)16,67713,164$Total debt$23,49524,743$Assets$162,648131,310$Average assets$146,979107,356$Total liabilities$119,099103,601$Equity$43,54927,709$Average equity$35,62923,497$Net operating assets $($NOA$)25,79421,466$Average NOA$23,63011,232$

Required

a$)$ Compare current and prior year profitability measures.

b$)$ Compare current and prior year coverage metrics.

c$)$ Compare current and prior year liquidity ratios.

$4)$ Compare current and prior year capital structure ratios.

Profitability and Coverage

Liquidity and Capital structure

c$.$ Determine liquidity for the company for both years by computing the current ratio and quick ratio.

NumeratorDenominatorResultCurrent ratioAccounts receivableAssetsAverage assetsAverage equityAverage NOACash and cash equivalentsCash from operating activitiesCurrent assetsCurrent liabilitiesEquityInterest expenseMarketable securitiesNet incomeNet operating assets $($NOA$)$NOPATOperating profitQuick assetsTotal debtTotal liabilitiesAccounts receivableAssetsAverage assetsAverage equityAverage NOACash and cash equivalentsCash from operating activitiesCurrent assetsCurrent liabilitiesEquityInterest expenseMarketable securitiesNet incomeNet operating assets $($NOA$)$NOPATOperating profitQuick assetsTotal debtTotal liabilitiesCurrent year

Prior year

Quick ratioAccounts receivableAssetsAverage assetsAverage equityAverage NOACash and cash equivalentsCash from operating activitiesCurrent assetsCurrent liabilitiesEquityInterest expenseMarketable securitiesNet incomeNet operating assets $($NOA$)$NOPATOperating profitQuick assetsTotal debtTotal liabilitiesAccounts receivableAssetsAverage assetsAverage equityAverage NOACash and cash equivalentsCash from operating activitiesCurrent assetsCurrent liabilitiesEquityInterest expenseMarketable securitiesNet incomeNet operating assets $($NOA$)$NOPATOperating profitQuick assetsTotal debtTotal liabilitiesCurrent year

Prior year

What additional information would be the most helpful in assessing the liquidity of Amazon?

Answer $40$Amount of capital expenditures financed with long$-$term debt over the two year period.Expected growth in the number of products sold by Amazon.Liquidity ratios of other online retail companies

d$.$ Compute the Total liabilities$-$to$-$equity ratio and the Total debt$-$to$-$equity ratio for both years.

NumeratorDenominatorResultTotal liabilities$-$to$-$equityAccounts receivableAssetsAverage assetsAverage equityAverage NOACash and cash equivalentsCash from operating activitiesCurrent assetsCurrent liabilitiesEquityInterest expenseMarketable securitiesNet incomeNet operating assets $($NOA$)$NOPATOperating profitQuick assetsTotal debtTotal liabilitiesAccounts receivableAssetsAverage assetsAverage equityAverage NOACash and cash equivalentsCash from operating activitiesCurrent assetsCurrent liabilitiesEquityInterest expenseMarketable securitiesNet incomeNet operating assets $($NOA$)$NOPATOperating profitQuick assetsTotal debtTotal liabilitiesCurrent year

Prior year

Total debt$-$to$-$equityAccounts receivableAssetsAverage assetsAverage equityAverage NOACash and cash equivalentsCash from operating activitiesCurrent assetsCurrent liabilitiesEquityInterest expenseMarketable securitiesNet incomeNet operating assets $($NOA$)$NOPATOperating profitQuick assetsTotal debtTotal liabilitiesAccounts receivableAssetsAverage assetsAverage equityAverage NOACash and cash equivalentsCash from operating activitiesCurrent assetsCurrent liabilitiesEquityInterest expenseMarketable securitiesNet incomeNet operating assets $($NOA$)$NOPATOperating profitQuick assetsTotal debtTotal liabilitiesCurrent year

Prior year

The liabilities$-$to$-$equity and debt$-$to$-$equity ratios have Answer $53$decreasedincreased over the two years, indicating a$($n$)$ Answer $54$improvement inworsening of in Amazon's Answer $55$liquidityprofitabilitysolvency$.$

Please answer all parts of the question.