Industry averages and financial ratios paper $5
The company I selected is Amazon. Its gross profit margin ratio was 37%, while the industry average was 28%. This suggests that Amazon is generating higher profits compared to its peers in the same industry. Its return on assets ratio stood at 8%, which was significantly higher than the industry average of 4%. This indicates that Amazon is highly efficient with its use of assets and resources to generate revenue for shareholders.
Amazon’s debt-to-equity ratio stood at 0.26, which means it has low levels of liabilities relative to shareholder equity, indicating strong financial health and stability. The quick ratio was 1.55, which suggests that the company can meet its current liabilities through liquid assets if needed, further confirming its solvency position. In comparison, the industry average for these ratios were 0.43 and 1.42 respectively.
Amazon’s inventory turnover rate stood at 6 times per year, which meant that it had a more efficient inventory management system compared to other companies in the sector (industry average=3 times per year). Additionally, its receivable turnover rate was 11 times per year versus an industry average of 9 times per year; this shows how quickly they are able to collect payments from customers within their credit terms and customer policies guidelines.