Compute and Interpret Coverage, Liquidity and Solvency Ratios

Selected balance sheet and income statement information from Amazon for 2016 through 2018 follows.

$ millions	2018	2017	2016
Net operating profit after tax (NOPAT)	$11,527	$3,383	$2,684
Net income	10,577	3,185	2,490
Operating profit	13,042	4,311	4,395
Interest expense	1,587	950	542
Cash from operating activities	32,259	19,283	18,063
Current assets	78,856	63,207	48,070
Current liabilities	76,598	64,829	49,074
Cash and cash equivalents	33,338	21,548	20,301
Marketable securities	9,975	10,987	6,979
Total debt	26,314	27,712	8,617
Assets	170,780	137,876	87,572
Liabilities	133,391	116,033	71,811
Equity	48,775	31,034	21,599
Net operating assets (NOA)	28,889	24,042	1,118

a. Compute profitability measures RNOA and ROE for 2018 and 2017. In which year are the measures stronger?
Round answers to one decimal place (ex: 0.2345 = 23.5%).

	2018	2017
RNOA	Answer	Answer
ROE	Answer	Answer

b. Compute coverage metrics Times interest earned and Cash from operating activities to total debt for 2018 and 2017.
Round answers to two decimal places.

	2018	2017
Times interest earned	Answer	Answer
Cash from operating activities to total debt	Answer	Answer

c. Determine liquidity for the company for 2018 and 2017 by computing the current ratio and quick ratio.
Round answers to two decimal places.

	2018	2017
Current ratio	Answer	Answer
Quick ratio	Answer	Answer

d. Compute the Total liabilities‑to‑equity ratio and the Total debt to equity ratio for 2018 and 2017.
Round answers to two decimal places.

	2018	2017
Total liabilities-to-equity	Answer	Answer
Total debt to equity	Answer	Answer

Answer rating: 100% (QA)

Answer Let us go through the questions one by one Coverage ratio Assumed as Interest coverage ratio ... View the full answer