Business Analysis Part II
October 29, 2012
The Home Depot, Inc. Business Analysis
Home Depot is a home improvement retailer. Currently, Home Depot has a total of 2,252 stores, which include 1,974 stores in the United States, including the Commonwealth of Puerto Rico and the territories of the U.S. Virgin Islands and Guam; 180 stores in Canada, 91 stores in Mexico and seven stores in China. The store sells a range of building materials, home improvement, and lawn and garden products. It also provides a range of services including installation programs, which include products such as carpeting, flooring, cabinets, countertops, and water heaters. The Home Depot stores serve three primary customer groups: Do-It-Yourself, Do-It-For-Me and Professional. (Datamonitor, 2011) Financial Health of Home Depot, Inc.
Before investing in a company it is very important for a business or individual to understand the financial health of an organization. To understand the financial health of an organization a review of its financial statement is necessary. These documents can assist in gaining a financial understanding of an organizations, and making the decision to invest or not invest by the review of these documents. A financial statement is a summary of all the financial transactions that have occurred over a particular period for an organization (Nickels, McHugh, & McHugh, 2010). The key financial statement documents are the balance sheet, income statement. Below will be a synopsis of the financial health of Home Depot, Inc. Balance Sheet
The balance sheet is a financial statement that reports the firm’s financial condition at a specific time and is composed of three major accounts: assets, liabilities, and owners’ equity (Nickels, McHugh, & McHugh, 2010). Assets are things of value held by the firm, liabilities are debts the company owes, and owners’ equity is the amount of business belonging to the owners, minus the company liabilities. The balance sheet for Home Depot, Inc. for the periods of January 2012 and January 2011 and are summarized below and measured in millions. The consolidated balance sheet shows assets, followed by liability equity and stockholders’ equity. Current assets include cash and any asset that can convert to cash within the year. Non-current assets such as property and equipment, these are things that the company usually cannot sell within the year. The current liabilities are items within the organization that will be completely paid for within the year. There is also long-term liabilities, these are liabilities that the organization will be paying for over a year. Stockholders’ equity shows the amount stockholders’ have invested in the company minus expenses and earnings. Home Depot, Inc.’s balance sheet shows that the total assets in 2012 were $40,518, as compared to 2011 that is $40,125. Dollar amounts are measured in millions. The total liabilities for the company for 2012 and 2011 are $22,620 and $21,236. The total stockholders’ equity for the two years is $17,898 and $18,889. The dollar amounts were higher in 2012. Although, not a significant increase and increase none the less. The closest competitive company is Lowe’s. These companies have different fiscal year end but the bottom line shows that Home Depot bested the competition. Lowes numbers during the same time in the same categories totaled $35,032 and $37,045 in total assets. Lowe’s falls below Home Depot on all categories of the balance sheet for those two years discussed (Home Depot, 2012).
The income statement summarizes all resources, called revenue that have come into the firm from operating activities, money resources the firm used up, expenses it incurred in doing business, and resources it has left after paying all cost, and expenses, including taxes (Nickels, McHugh, & McHugh, 2010). This document...