Continuing Company Analysis-Amazon: Asset turnover ratio Amazon.com, Inc. is one

Question

Continuing Company Analysis-Amazon: Asset turnover ratio Amazon.com, Inc. is one of the largest Internet retailers in the world. Netflix, Inc. provides digital streaming and DVD rentals in the United States. Amazon compete in streaming and digital services, however Amazon also sells many other products through the Internet. The sales and total assets (in millions) fro financial statements were reported as follows for both companies: Amazon Netflix Total revenues (sales) Total assets $88,988 5,505 Beginning of year40,159 5,413 End of year 4,505 7,057 a. Which of these assets are used by Netflix, Inc. to generate revenue? a. DVD content library b. Distribution centers c. Streaming content library d. Manufacturing plant 1. a and b 2. a and c 3. a and d 4. b and c b. Compute the asset turnover ratio for each company. Round to two decimal places Amazon Netflix Asset turnover ratio 5.5 c.Which company generates sales from total assets more efficiently?

Explanation / Answer

Answer a The assets used by Netflix Inc to generate revenue are , a) DVD Content Library c) Streaming Content Library The answer is Option 3 i.e. a and c Answer b Asset turnover ratio = Turnover / Average assets Amazon Netflix Turnover $88,988.00 $5,505.00 / Average Assets $47,332.00 $6,235.00 Asset turnover ratio               1.88           0.88 Answer c Amazon has a higher asset turnover ratio , hence it generates sales from total assets more efficiently.

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