Amazon.com Inc (AMZN)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.11 | 0.15 | 0.12 | 0.10 | 0.10 |
| Debt-to-capital ratio | 0.22 | 0.31 | 0.26 | 0.25 | 0.27 |
| Debt-to-equity ratio | 0.29 | 0.46 | 0.35 | 0.34 | 0.38 |
| Financial leverage ratio | 2.61 | 3.17 | 3.04 | 3.44 | 3.63 |
Amazon.com Inc. has shown a consistent trend of maintaining favorable solvency ratios over the past five years. The debt-to-assets ratio has remained relatively stable, indicating that the company finances a small proportion of its assets through debt. This suggests a conservative approach to leverage, with only 11% of assets funded by debt as of December 31, 2023.
Similarly, the debt-to-capital and debt-to-equity ratios have exhibited a downward trend, indicating a decreasing reliance on debt to fund the company's operations and investments. As of the most recent fiscal year-end, the debt-to-capital ratio stood at 22%, while the debt-to-equity ratio was at 29%, highlighting a healthy balance between debt and equity financing.
The financial leverage ratio, which measures the extent of a company's financial leverage, has also shown a downward trajectory over the period under review. A lower financial leverage ratio indicates a lower level of debt relative to equity, signaling a reduced financial risk for the company.
Overall, Amazon.com Inc.'s solvency ratios demonstrate prudent financial management and a strong capital structure, with a gradual reduction in the reliance on debt financing over the years. These ratios suggest that the company has a solid financial foundation to support its growth and long-term sustainability.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 12.79 | -1.51 | 22.09 | 15.69 | 9.74 |
The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt with its operating income. A higher interest coverage ratio indicates that the company is more capable of servicing its debt obligations.
In the case of Amazon.com Inc., the interest coverage ratio has fluctuated over the past five years. The ratio was significantly high at 158.11 in 2023, which may indicate a strong ability to cover interest expenses with operating income. This is a positive sign as it suggests that the company has a comfortable margin of safety to meet its debt obligations.
However, in 2022, the interest coverage ratio dropped sharply to 8.89, indicating a potential strain on meeting interest payments with operating income. This could be a cause for concern as it may suggest lower profitability or increased debt levels relative to the previous year.
The interest coverage ratios in 2021, 2020, and 2019 were 18.28, 20.92, and 18.92, respectively. These ratios demonstrate a relatively healthy ability to cover interest expenses with operating income during those years.
Overall, while Amazon.com Inc. has shown fluctuations in its interest coverage ratio over the past five years, the exceptionally high ratio in 2023 indicates a strong ability to service its debt. It is important for investors and stakeholders to monitor these ratios to assess the company's financial health and debt servicing capabilities.