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Over 1 month ago
Prompt Details
Model
Completion - GPT-3.5 (text-davinci-003)
Token size
661 ($0.01320 / call)
Example input
Company: Amazon.com, Inc.
Industry: Internet Retail
Located in United States.
Current assets = 146791
Current liabilities = 155393
Inventories = 34405
Cash and Cash equivalents = 70026
Operating cash flow = 46752
Total assets = 462675
Total liabilities = 316632
Shareholder’s equity = 146043
Operating income = 12248
Interest expenses = 2367
Total debt service = 5200
Net sales = 513983
Average total assets = 441612
Cost of goods sold = 446343
Average inventory = 33522
Gross profit = 67640
Operating income = 12248
Net income = -2722
Example output
CALCULATIONS:
1. Liquidity Ratios
Current ratio: 146791 / 155393 = 0.945
Acid-test ratio: (146791 - 34405) / 155393 = 0.735
Cash ratio: 70026 / 155393 = 0.45
Operating cash flow ratio: 46752 / 155393 = 0.301
2. Leverage Financial Ratios
Debt ratio: 462675 / 462675 = 1.00
Debt to equity ratio: 316632 / 146043 = 2.16
Interest coverage ratio: 12248 / 2367 = 5.18
Debt service coverage ratio: 12248 / 5200 = 2.35
3. Efficiency Ratios
Asset turnover ratio: 513983 / 441612 = 1.16
Inventory turnover ratio: 446343 / 33522 = 13.26
Days sales in inventory ratio: 365 / 13.26 = 27.5 days
4. Profitability Ratios
Gross margin ratio: 67640 / 513983 = 0.13
Operating margin ratio: 12248 / 513983 = 0.02
Return on assets ratio: -2722 / 462675 = -0.01
Return on equity ratio: -2722 / 146043 = -0.02
ANALYSIS:
Liquidity Ratios: Amazon.com, Inc. has a current ratio of 0.945, which is lower than the ideal ratio of 1. This indicates that the company has an inadequate amount of current assets to cover its current liabilities. The acid-test ratio of 0.735 is also below the ideal ratio of 1, which means that the company does not have enough liquid assets to cover its current liabilities. The cash ratio of 0.45 is also lower than the ideal ratio of 1, which shows that the company does not have enough cash to cover its current liabilities. Lastly, the operating cash flow ratio of 0.301 is also lower than the ideal ratio of 1, which means that the company has inadequate cash flow to cover its current liabilities.
Leverage Financial Ratios: Amazon.com, Inc. has a debt ratio of 1, which is higher than the ideal ratio of 0.5. This indicates that the company has a high debt burden relative to its assets. The debt to equity ratio of 2.16 is also higher than the ideal ratio of 1, which indicates that the company has a high debt burden relative to its equity. The interest coverage ratio of 5.18 is higher than the ideal ratio of 2, which means that the company can easily cover its interest expenses. Lastly, the debt service coverage ratio of 2.35 is higher than the ideal ratio of 1.5, which indicates that the company can easily cover its total debt service payments.
Efficiency Ratios: Amazon.com, Inc. has an asset turnover ratio of 1.16, which is lower than the ideal ratio of 2. This indicates that the company is not using its assets efficiently. The inventory turnover ratio of 13.26 is higher than the ideal ratio of 8, which indicates that the company is efficiently managing its inventory. The days sales in inventory ratio of 27.5 days is higher than the ideal ratio of 20 days, which shows that the company is efficiently managing its inventory.
Profitability Ratios: Amazon.com, Inc. has a gross margin ratio of 0.13, which is lower than the ideal ratio of 0.2. This indicates that the company has a low profitability relative to its revenue. The operating margin ratio of 0.02 is also lower than the ideal ratio of 0.1, which means that the company has a low profitability relative to its revenue. The return on assets ratio of -0.01 is lower than the ideal ratio of 0.1, which indicates that the company is not generating sufficient profits from its assets. Lastly, the return on equity ratio of -0.02 is lower than the ideal ratio of 0.2, which shows that the company is not generating sufficient profits from its equity.
Based on these figures, it is clear that Amazon.com, Inc. is not in a good financial position. The company has an inadequate amount of current assets to cover its current liabilities, a high debt burden relative to its assets and equity, and a low profitability relative to its revenue.
In order to improve its liquidity, Amazon.com, Inc. should increase its current assets or decrease its current liabilities. To reduce its indebtedness and leverage, the company should reduce its debt or increase its equity. To improve its efficiency, the company should focus on increasing its asset turnover ratio. Lastly, to improve its profitability, the company should focus on increasing its gross margin and operating margin ratios.