Liquidity Ratios
Amazon (2017)
Current Ratio = Current Assets/ Current Liabilities
= 60,197/ 57,883
= 1.04
Cash ratio = Total cash assets /current liabilities
= 30,986/57,883
= 0.54
Quick ratio = Total quick assets/Current liabilities
= 40,678/57883
= 0.7
Google Company (2017)
Current Ratio = Current Assets/ Current Liabilities
= 124,308/24,183
= 5.14
Cash ratio = Total cash assets /current liabilities
= 101,871/24,183
= 4.21
Quick ratio = Total quick assets/Current liabilities
= 120,207/24,183
= 4.97
Apple Inc (2017)
Current Ratio = Current Assets/ Current Liabilities
= 128,645/100,814
= 1.28
Cash ratio = Total cash assets /current liabilities
= 74,181/100,814
= 0.74
Quick ratio = Total quick assets/Current liabilities
= 109,854/100,814
= 1.09
A high liquidity ratio indicates that a company has inefficient use of its current assets while a ratio less than 1.0 could be problematic. From the above calculations, Apple tends to be more liquid than the others since it can easily convert its assets into cash.
Solvency Ratio
Google Company (2017)
Debt to Equity ratio = Total debt/ Stockholder’s equity
= 3,969/152,502
= 0.03
Apple (2017)
Debt to Equity ratio = Total debt/ Stockholder’s equity
= 103,922/140,199
= 0.87
Amazon (2017)
Debt to Equity ratio = Total debt/ Stockholder’s equity
= 37,926/27,709
= 1.37
A high debt to equity ratio implies that a company is aggressively financing its growths with debt. Amazon has the strongest solvency.
Profitability Ratio
Apple Inc (2017)
Gross profit ratio = 100 x Gross margin/ Net sales
= 100 x 88,186/ 229,234
= 38.5%
Return on assets ratio (ROA) = 100 x Net income/ Total assets
= 100 x 48,351/375,319
= 12.9%
Return on equity (ROE) = 100 x Net income/Shareholders’ equity
= 100 x 48,351/134,047
= 36.1%
Amazon (2017)
Gross profit ratio = 100 x Gross margin/ Net sales
= 100 × 65,932/177,866
= 37.07%
Return on assets ratio (ROA) = 100 x Net income/ Total assets
= 100 × 3,033 ÷ 131,310
= 2.31%
Return on equity (ROE) = 100 x Net income/Shareholders’ equity
= 100 × 3,033/27,709
= 10.95%
Google (2017)
Gross profit ratio = 100 x Gross margin/ Net sales
= 100 × 65,272/110,855
= 58.88%
Return on assets ratio (ROA) = 100 x Net income/ Total assets
= 100 × 12,662 ÷ 197,295
= 6.42%
Return on equity (ROE) = 100 x Net income/Shareholders’ equity
= 100 × 12,662 ÷ 152,502
= 8.30%
Profitability ratio measures company’s performance and ability to make profits. I think Apple is the most profitable since it has relatively high percentage of return on the three profitability ratios compared to the others.
Apple tends to be the most solid financial investment since it scores well in terms of profitability, solvency and liquidity from the above calculations.
References
Alphabet Inc. (GOOG). (2018). Retrieved from Yahoo Finance:
https://finance.yahoo.com/quote/GOOG/balance-sheet?p=GOOG
Amazon.com, Inc. (AMZN.SN). (2018). Retrieved from Yahoo Finance:
https://finance.yahoo.com/quote/AMZN.SN/balance-sheet?p=AMZN.SN
Amazon.com, Inc. (AMZN.SN). (2018). Retrieved from Yahoo Finance:
https://finance.yahoo.com/quote/AMZN.SN/balance-sheet?p=AMZN.SN
iloeja
M4_A2_Discussion_ACC201.docx
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