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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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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

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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