Gaining the information needed for calculating key ratios
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Develop a Financial Analysis for Home Depot, Inc.
1- Calculate the following financial ratios/numbers as the Starting point of your analysis.
(Note: there are five categories with a total of 19 ratios/numbers.
LIQUIDITY (Short-term solvency)
Current ratio
Quick/Acid Test Ratio
Cash Ratio
Financial Leverage (Long-term solvency)
TOTAL DEBT RATIO
LONG-TERM DEBT-TO- EQUITY RATIO
TIMES INTEREST EARNED
EBITDA
ASSET UTILIZATION
INVENTORY TURNOVER and DAYS' SALES IN INVENTORY
RECEIVABLES TURNOVER and DAYS' SALES IN RECEIVABLES
TOTAL ASSET TURNOVER and CAPITAL INTENSITY
PROFITABILITY
PROFIT MARGIN
RETURN ON ASSETS (ROA)
RETURN ON EQUITY (ROE)
MARKET VALUE
PRICE PER SHARE
EARNINGS PER SHARE
PRICE-TO-EARNINGS (P/E) RATIO
DIVIDEND YIELD
MARKET-TO-BOOK RATIO
MARKET CAPITALIZATION
2. How has Home Depot's financial position changed over the most recent five years?
3. How does Home Depot's current FY financial position compare to Lowe's and Wal-Mart?
4. Based on all your analyses, what are your conclusions regarding Home Depot's financial position, and would you consider Home Depot to be a good investment (common stock, bond, etc.)?
Note: 1. For Questions 2, 3 and 4, you should consider Home Depot's overall performance (Historical, sales, earnings, share price, market capitalization, number of stores, employees, etc.), as well as the 12 key ratios/numbers (in boldface type) in Question 1.
2. Sources for all data/information included in your analyses should be cited as references.
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Solution Summary
The solution provides links and instruction on calculating key financial performance rations. A company's key ratios are in constant motion, just as a firm's Balance Sheet only captures a snapshot in time. The instructions provided by this solution give the student the directions for importing the most recent financial data and then explains each of the calculations required. The calculations are not provided in a spreadsheet because the data would not be relevant for current assignments. Questions 2 through 4 are left to the student to answer based on the results of the calculations created from the solutions instructions.
Solution Preview
See attached file.
The key ratios are simple calculations that combine values from a company's three general financial reports: the income statement, the balance sheet, and the statement of cash flows & investment activities. I have attached a description of the key ratios from the GLOBUS simulator at http://www.glo-bus.com/users/FinancialRatios.pdf
It will be easier to do calculations if you import the financial data into Excel. For example, use ...
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