Amazon.com Inc. (NASDAQ:AMZN)

The solvency position, as indicated by the presented metrics, demonstrates a strengthening financial structure over the analyzed period. A consistent decline is observed across most debt ratios, suggesting a reduction in financial risk and increased reliance on equity financing. However, fluctuations in coverage ratios warrant further examination.

Debt Levels

The Debt to Equity ratio decreased from 0.54 in 2021 to 0.20 in 2025, indicating a progressively improved ability to meet obligations with equity. Similarly, the Debt to Capital ratio exhibited a decline from 0.35 to 0.16 over the same period. When including operating lease liabilities, the ratios show a similar decreasing trend, though at higher levels – moving from 0.96 to 0.41 for Debt to Equity and 0.49 to 0.29 for Debt to Capital. The Debt to Assets ratio also decreased, from 0.18 to 0.10, and the ratio including operating lease liabilities decreased from 0.31 to 0.21.

Leverage

Financial leverage, measured as total assets to total equity, decreased from 3.04 in 2021 to 1.99 in 2025. This reduction signifies a lessening of the company’s dependence on debt financing and a more conservative capital structure.

Coverage Ratios

The Interest Coverage ratio experienced significant volatility. A substantial decrease to -1.51 was recorded in 2022, before recovering to 12.80 in 2023 and increasing substantially to 43.55 by 2025. This suggests a temporary period of difficulty in covering interest expenses, followed by a strong improvement. The Fixed Charge Coverage ratio mirrored this pattern, declining to 0.47 in 2022, then increasing to 6.94 in 2025, indicating a growing capacity to meet all fixed financing obligations.

Overall, the trend suggests a deliberate strategy to reduce debt and improve the company’s solvency position. The recovery in coverage ratios, particularly after the anomaly in 2022, reinforces the conclusion of a strengthening financial foundation. The inclusion of operating lease liabilities consistently shows higher debt levels, highlighting the impact of these obligations on the overall financial risk profile.

The debt-to-equity ratio demonstrates a consistent decline over the five-year period. Initially, the ratio stood at 0.54 in 2021 and increased to 0.59 in 2022, before exhibiting a marked downward trajectory through 2025.

Debt-to-Equity Trend

In 2021, the debt-to-equity ratio was 0.54, indicating that for every dollar of equity, the company held $0.54 in debt. This ratio increased to 0.59 in 2022, suggesting a slightly increased reliance on debt financing relative to equity.

However, a significant shift occurred in subsequent years. The ratio decreased to 0.39 in 2023, 0.24 in 2024, and further to 0.20 in 2025. This represents a substantial reduction in the proportion of debt financing compared to equity.

The decrease in the debt-to-equity ratio suggests improving solvency. The company appears to be reducing its financial leverage, potentially through debt repayment, increased equity financing, or a combination of both. This trend could indicate a strengthening financial position and reduced risk for creditors and investors.

Underlying Factors

The observed decline coincides with increases in stockholders’ equity, which grew from US$138,245 million in 2021 to US$411,065 million in 2025. While total debt fluctuated, it did not increase at the same rate as equity, contributing to the lower ratio.

The initial increase in the ratio from 2021 to 2022, followed by the subsequent decline, suggests a period of strategic financial management. The company may have taken on additional debt for specific investments in 2022, then prioritized deleveraging in the following years.

The continued reduction in the debt-to-equity ratio through 2025 indicates a sustained commitment to a more conservative capital structure. This trend warrants further investigation to understand the specific strategies employed to achieve this outcome and their implications for future growth and profitability.

The debt to equity ratio, including operating lease liability, demonstrates a consistent decline over the five-year period. Total debt fluctuated, initially increasing before exhibiting a decrease, while stockholders’ equity showed a steady and substantial increase. This combination resulted in a decreasing ratio, indicating improving solvency.

Debt to Equity Ratio Trend

The ratio began at 0.96 in 2021 and rose to 1.06 in 2022. Following 2022, a significant downward trend commenced, decreasing to 0.77 in 2023, 0.52 in 2024, and further to 0.41 in 2025. This suggests a diminishing reliance on debt financing relative to equity.

Total Debt

Total debt, inclusive of operating lease liabilities, increased from US$132,318 million in 2021 to US$154,972 million in 2022. It then decreased slightly to US$154,556 million in 2023 and continued to decline to US$147,838 million in 2024. A final increase was observed in 2025, reaching US$169,934 million, though the ratio still decreased due to the larger increase in equity.

Stockholders’ Equity

Stockholders’ equity experienced consistent growth throughout the period. It rose from US$138,245 million in 2021 to US$146,043 million in 2022. Subsequent years saw more substantial increases, reaching US$201,875 million in 2023, US$285,970 million in 2024, and US$411,065 million in 2025. This growth significantly contributed to the declining debt to equity ratio.

The observed trend suggests a strengthening financial position, with the company increasingly funded by equity rather than debt. While total debt saw a final increase in 2025, the substantial growth in equity more than offset this, resulting in the lowest debt to equity ratio of the period.

The debt to capital ratio demonstrates a consistent downward trend over the five-year period. Initially, the ratio stood at 0.35 in 2021, increasing slightly to 0.37 in 2022, before exhibiting a marked decline through 2025.

Total Debt

Total debt increased from US$73,988 million in 2021 to US$85,932 million in 2022. Subsequently, it decreased to US$78,917 million in 2023 and further to US$68,242 million in 2024. A slight increase to US$80,682 million is observed in 2025, but remains below the 2022 peak.

Total Capital

Total capital experienced consistent growth throughout the period. It rose from US$212,233 million in 2021 to US$231,975 million in 2022, continuing to US$280,792 million in 2023, US$354,212 million in 2024, and reaching US$491,747 million in 2025.

Debt to Capital Ratio - Trend Analysis

The initial increase in the debt to capital ratio in 2022 suggests a relative increase in debt financing compared to capital. However, the subsequent and sustained decline from 2023 through 2025 indicates a strengthening capital structure, with capital growing at a faster rate than debt. The ratio’s reduction from 0.37 in 2022 to 0.16 in 2025 signifies a substantial decrease in financial leverage. This suggests a reduced reliance on debt financing and an improved ability to meet long-term obligations.

The observed trend suggests a deliberate strategy to improve the company’s solvency position, potentially through increased equity financing or retained earnings, leading to a more conservative capital structure.

The Debt to Capital ratio, inclusive of operating lease liabilities, demonstrates a consistent decline over the five-year period. Total debt, including operating lease liability, fluctuated, initially increasing from 2021 to 2022, then decreasing in 2023 and 2024, before rising again in 2025. However, Total Capital experienced consistent growth throughout the period, driving the overall reduction in the Debt to Capital ratio.

Debt to Capital Ratio Trend

The ratio decreased from 0.49 in 2021 to 0.29 in 2025. This indicates a strengthening solvency position, as the proportion of debt financing relative to total capital employed has diminished.

Total Debt (including operating lease liability)

Total debt increased from US$132,318 million in 2021 to US$154,972 million in 2022, representing a notable increase in borrowing. A subsequent decrease to US$147,838 million in 2024 suggests debt reduction efforts. The final year, 2025, saw an increase to US$169,934 million, potentially reflecting new investments or financing activities.

Total Capital (including operating lease liability)

Total capital exhibited a steady upward trend, growing from US$270,563 million in 2021 to US$580,999 million in 2025. This growth suggests increased equity contributions, retained earnings, or a combination of both, contributing to a more robust capital base.

The consistent growth in Total Capital, coupled with the fluctuating but ultimately contained levels of Total Debt, resulted in a progressively improving Debt to Capital ratio. This suggests a decreasing reliance on debt financing and a strengthening financial structure over the analyzed period.

The debt-to-assets ratio demonstrates a generally decreasing trend over the five-year period. Initially, the ratio stood at 0.18 in 2021, increasing slightly to 0.19 in 2022, before exhibiting a consistent decline through 2025.

Overall Trend

A clear downward trend in the debt-to-assets ratio is observed from 2022 through 2025. This suggests a decreasing reliance on debt financing relative to the company’s asset base.

Year-over-Year Changes

From 2021 to 2022, the ratio experienced a marginal increase, indicating a slight rise in debt relative to assets. However, 2023 saw a noticeable decrease to 0.15, followed by further reductions to 0.11 in 2024 and 0.10 in 2025. These declines suggest proactive debt management or substantial asset growth.

Magnitude of Change

The most significant decrease occurred between 2022 and 2023, with a reduction of 0.04. The subsequent decreases, while consistent, were more moderate, at 0.04 between 2023 and 2024, and 0.01 between 2024 and 2025. This indicates that the initial phase of debt reduction was more impactful than later periods.

Asset and Debt Dynamics

Total debt fluctuated over the period, increasing from 2021 to 2022, decreasing in 2023 and 2024, and increasing again in 2025. However, total assets consistently increased throughout the entire period. The combined effect of these movements resulted in the observed declining debt-to-assets ratio.

The consistent decline in the debt-to-assets ratio from 2023 to 2025 suggests improving solvency and a stronger financial position. The company appears to be effectively managing its debt levels in relation to its growing asset base.

The debt to assets ratio, including operating lease liability, demonstrates a generally decreasing trend over the five-year period. Total debt fluctuated, initially increasing before declining and then increasing again, while total assets consistently increased throughout the period. This combination resulted in a decreasing ratio, indicating a strengthening solvency position.

Overall Trend

A consistent downward trend in the debt to assets ratio is observed from 0.31 in 2021 to 0.21 in 2025. This suggests the company is relying less on debt to finance its assets over time.

Year-over-Year Changes

From 2021 to 2022, the ratio increased from 0.31 to 0.33, coinciding with a larger increase in total debt compared to the growth in total assets. However, from 2022 to 2023, the ratio decreased to 0.29 as the growth in total assets outpaced the change in total debt. This decreasing trend continued from 2023 to 2024, with the ratio falling to 0.24, driven by substantial asset growth. A further decrease to 0.21 was noted from 2024 to 2025, despite an increase in total debt, due to significantly larger asset growth.

Debt and Asset Movements

Total debt increased from US$132,318 million in 2021 to US$154,972 million in 2022, then decreased slightly to US$154,556 million in 2023. A further decrease to US$147,838 million was observed in 2024, before increasing again to US$169,934 million in 2025. Total assets exhibited consistent growth, increasing from US$420,549 million in 2021 to US$818,042 million in 2025.

The consistent growth in total assets, coupled with the fluctuations and eventual increase in total debt, has resulted in a progressively improved debt to assets ratio. This indicates a reduced level of financial risk associated with debt financing as the company expands.

An examination of the financial information reveals a notable trend in the company’s financial leverage over the five-year period. Total assets consistently increased, while stockholders’ equity also demonstrated growth, though at varying rates. The interplay between these two factors resulted in a decreasing trend in financial leverage.

Financial Leverage

The financial leverage ratio decreased from 3.04 in 2021 to 1.99 in 2025. This indicates a diminishing reliance on debt financing relative to equity. The most significant decrease occurred between 2022 and 2023, dropping from 3.17 to 2.61, and continued at a slower pace through 2025.

The growth in stockholders’ equity appears to be a primary driver of the declining financial leverage. While total assets increased each year, the rate of increase in equity accelerated, particularly between 2022 and 2024. This suggests improved profitability and/or effective equity financing strategies. The decreasing ratio implies a strengthening of the company’s financial position and a reduced risk profile associated with debt obligations.

Total Assets

Total assets increased steadily throughout the period, rising from US$420,549 million in 2021 to US$818,042 million in 2025. This consistent growth suggests expansion of the company’s operations and investments.

Stockholders’ Equity

Stockholders’ equity also exhibited growth, increasing from US$138,245 million in 2021 to US$411,065 million in 2025. The growth rate was not uniform; a more substantial increase is observed between 2022 and 2024, contributing significantly to the reduction in financial leverage.

In summary, the observed trends indicate a strengthening financial structure. The company has effectively managed its debt levels relative to equity, resulting in a lower financial leverage ratio and potentially improved financial stability.

The interest coverage ratio exhibits significant fluctuation over the observed period. Initial values are strong, followed by a period of concern, and then a substantial recovery and continued improvement. Earnings before interest and tax (EBIT) and interest expense both contribute to these shifts.

Overall Trend

The interest coverage ratio demonstrates a volatile pattern. It begins at a robust level in 2021, experiences a substantial decline resulting in a negative value in 2022, and then recovers strongly through 2025, achieving its highest point in the period.

2021-2022

From 2021 to 2022, the interest coverage ratio decreased dramatically from 22.09 to -1.51. This decline is attributable to a significant decrease in Earnings Before Interest and Tax (EBIT) coupled with an increase in interest expense. The negative ratio in 2022 indicates that earnings were insufficient to cover interest obligations.

2022-2023

A substantial improvement is observed from 2022 to 2023, with the interest coverage ratio rising to 12.80. This recovery is driven by a considerable increase in EBIT, outweighing the continued, though moderated, increase in interest expense.

2023-2025

The period from 2023 to 2025 shows continued strengthening of the interest coverage ratio. It increases from 12.80 in 2023 to 29.48 in 2024 and further to 43.55 in 2025. This trend is supported by consistently growing EBIT and a slight decrease in interest expense from 2024 onwards.

EBIT and Interest Expense Relationship

The relationship between EBIT and interest expense is a key driver of the observed trends. The negative interest coverage in 2022 highlights the sensitivity of this ratio to fluctuations in earnings. The subsequent improvements are directly linked to the substantial growth in EBIT, demonstrating a strengthening ability to meet interest obligations.

In summary, the interest coverage ratio experienced a period of vulnerability in 2022, but has since demonstrated a strong and sustained recovery, indicating improving solvency and a greater capacity to service its debt.

The company’s fixed charge coverage exhibited significant fluctuation between 2021 and 2025. Initial coverage was strong, followed by a substantial decline, and then a period of recovery and growth.

Earnings Before Fixed Charges and Tax

Earnings before fixed charges and tax decreased dramatically from US$47,163 million in 2021 to US$5,275 million in 2022. A strong recovery was then observed, with earnings increasing to US$51,277 million in 2023, US$82,880 million in 2024, and further to US$113,037 million in 2025. This indicates a volatile earnings performance with a clear upward trend in the latter years of the period.

Fixed Charges

Fixed charges demonstrated a consistent upward trend throughout the analyzed period. Increasing from US$9,008 million in 2021 to US$16,280 million in 2025, this suggests a growing commitment to obligations such as debt service and lease payments. The rate of increase appeared relatively stable year-over-year.

Fixed Charge Coverage

The fixed charge coverage ratio mirrored the earnings volatility. It began at a robust 5.24 in 2021, but plummeted to 0.47 in 2022, indicating a limited ability to cover fixed charges with available earnings. The ratio rebounded to 3.73 in 2023, and continued to improve, reaching 5.77 in 2024 and 6.94 in 2025. This recovery suggests improved financial health and a strengthening capacity to meet fixed obligations as earnings increased.

The substantial decline in fixed charge coverage in 2022 warrants further investigation, as it represents a period where earnings were insufficient to comfortably cover fixed obligations. However, the subsequent and sustained improvement in the ratio through 2025 is a positive indicator of the company’s evolving financial position.