ASSIGNMENT | Is Oracle’s debt/equity ratio lower than Amazon.com’s?

It is important for a financial analyst to analyze various financial ratios. There are many profitability ratios to choose from such as the profit margin on sales, the basic earning power ratio, the return on total assets (ROA), and return on common equity (ROE). There are many management efficiency ratios to choose from such as the inventory turnover ratio, the days sales outstanding ratio, the fixed assets turnover ratio, and the total assets turnover ratio. There are many leverage ratios to choose from such as the total debt to total assets ratio, the times-interest-earned ratio, and the EBITDA coverage ratio. Regarding other types of ratios, there are various liquidity and market value ratios to choose. For liquidity ratios, there’s the current ratio and the quick ratio. For market value ratios, there is the price/earnings ratio, the price/cash flow ratio, and the market/book ratio.

SAMPLE SOLUTION

Is Oracle’s debt/equity Ratio Lower than Amazon.com’s?
Debt/equity ratio is a measure of how much fraction of owners’ equity and debt used to finance a company’s assets. Higher ratio indicates that more debt has been used to finance a firm’s assets as compared to owner’s equity (Bragg, 2018). In short, debt/equity ratio is a measure of how much a company is able to finance its business operations using debts as compared to owner’s equity. In the event of a business downturn, it gives the ability of shareholders’ equity to comfortably pay outstanding debts. It is obtained by dividing long-term debt by common shareholders’ equity. These financial indicators are always available on the balance sheet of every company’s financial statements.
Oracle’s debt/equity ratio is higher than Amazon.com’s. According to the New York Stock exchange, Oracle’s debt/equity ratio over the last 10 years has been a minimum of 0 and a maximum of 2.37. The median debt to equity ratio for the last 13…