The Ratio And Cash Ratio

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Liquidity is the ability to convert any asset into cash quickly. Liquidity is important because liquid assets can provide cash that can be reinvested into other assets when prices are low. This can also reduce some investing risks by ensuring that an investor will be able to quickly react to market moves. There are several ratios that are used to measure liquidity – the current, quick, and cash ratios. Essentially, the higher the current asset ratio, the better. Amazon’s current ratio (107%) is higher than that of Walmart (83%) and this suggests that this company’s short term assets are more readily available to pay off the company’s short term liabilities than Walmart.
Amazon’s quick ratio and cash ratio are also higher than that of
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A higher margin percentage indicates a higher profitability. Therefore, Amazon (27.2) would appear to be more profitable than Walmart (24.9). In their 2013 financial report, Amazon demonstrates that their gross profit margin has increased in 2013 compared to prior years – which they attribute to their increase in their total sales/service sales.
The operating profit margin is another quantitative measure of profitability. Investors pay close attention to this ratio because positive and negative trends in the operating margin are attributable to management decisions. Amazon’s operating profit margin (1.0) is significantly lower than that of Walmart (5.90). This means that a net profit of $5.90 is made on each dollar of sales at Walmart whereas Amazon only makes a net profit of $1.00 on each dollar of sales. This indicates that a higher proportion of Walmart’s revenue is converted to operating income. Over the past few years, Amazon’s operating margin ratio has actually declined – which signifies that their probability is not improving as of resent times. In comparison, Walmart’s operating margin has been consistent or stable for the past few years.
Net profit margin is most often mentioned when discussing the profitability of a company because investors can see a great deal from a net profit analysis For example, this measurement allows them to
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