# Gaining the information needed for calculating key ratios

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 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 ...

#### 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.