Question

According to the info below about Amazon. Are these ratios reasonable when compared to the industry? Do they indicate a well managed company?

Total Debt-to-equity ratio (MRQ) (leverage ratio) = 67.38% (AMZN) compared to 56.46% for the industry

Quick ratio (MRQ) (liquidity ratio) = .86 (AMZN) compared to .83 for the industry
Net profit margin TTM (profitability ratio) = 4.14% (AMZN) compared to 19.18% for the industry
Inventory turnover TTM (turnover ratio) = 8.79 (AMZN) compared to 9.12 for the industry
Price/Earnings TTM (market value ratio) = 77.55 (AMZN) compared to 201.01 for the industry

*TTM = Trailing Twelve Months

*MRQ = Most Recent Quarter

Answer 1

Yes these ratios are reasonable when compared to the industry.

Let us see, how each of this ratio indicates about the company.

• Total Debt-to-equity ratio (MRQ) (leverage ratio) = 67.38% (AMZN) compared to 56.46% for the industry - It implied that he borrowing of the company is little more than average of the industry.
• Quick ratio (MRQ) (liquidity ratio) = .86 (AMZN) compared to .83 for the industry - The liquidity ratio, which implies the cash or cash equivalent is less than 1 which is not healthy. However, in comparison to the industry average the company is almost at par.
• Net profit margin TTM (profitability ratio) = 4.14% (AMZN) compared to 19.18% for the industry - The company's performance on net profit margin is very poor to the industry average. The overhead expenses or indirect expenses are on higher side, hence the Net Profit Margin is low.
• Inventory turnover TTM (turnover ratio) = 8.79 (AMZN) compared to 9.12 for the industry - Inventory trurnover ratio is almost at the same level of the industry implies the inventory management is in place and performed well.
• Price/Earnings TTM (market value ratio) = 77.55 (AMZN) compared to 201.01 for the industry - The PE ratio of the company lags behind the industry average, hence its less appealing to the investors.