Question

Utilize the 2017 financial statements, annual reports, horizontal and vertical analysis for Amazon to calculate the following ratio.

Calculate the return on assets for Amazon.

Answer 1

Return on Assets: Return on Assets is one of the Profitability Ratios which is used to know the ability of the company to produce profits by using its total assets. It is caluclated by dividing the Net Income to total Average assets.

Return on Assets = Net Income / Average Total Assets

The financial amounts of Amazon for 2017 in Million US $ is as follows

Opening total Assets of 2017 - $83,402

Closing Total Assets of 2017 - $ 131,310

Net Income of 2017 - $3,033

Return on Assets = $3,033 / [($83,402 + $131,310) / 2)]

= $3,033 / $107,356

Return on Assets = $0.02

So, Amazon is producing a profit of $0.02 per every dollar it invested.