Financial Analysis Home Depot
Financial Analysis of Home Depot
For Fiscal Year Ending February 3, 2008
Presented by:
Team FAB 5
Financial Analysis of Home Depot
Introduction
Founded in 1978 by Arthur Banks and Bernie Marcus, who were both fired from a local hardware store after a disagreement with their supervisor (http://founderbios.com/bernie-marcus.php), Home Depot opened its first store in Atlanta, Georgia on June 22, 1979 (www.corporate.homedepot.com). The founders had a vision to create a big-box retail chain that empowered customers to take on their own home improvement and repair projects. As the fourth largest retailer in the U.S. and the world’s largest home improvement retailer (www.corporate.homedepot.com) , Home Depot operates nearly 2,000 stores in the U.S., Canada, Mexico and China, with annual retail sales in excess of $66 billion dollars.
In the spirit of “do-it-yourself”, our team carefully reviewed the 2007 and 2008 financial statements presented in our class text. Our purpose is to provide a thorough but poignant analysis of Home Depot’s financial strength. The following report will focus on liquidity, profitability, credit risk and other financial measures.
The below information is information that was obtained from Appendix A; Williams, J., Haka, S., Bettner, M., Carcello, J., Financial & Managerial Accounting the Basis for Business Decisions, 15e, 2010
1. Is The Home Depot's liquidity situation such that current liabilities can be easily paid? Why or why not?
With net earnings of $4,395,000 as of February 2008, Home Depot was not as profitable as the previous two years. Its net income percentage (net income $77,349 divided by total revenue $4,395) was only 5.7% meaning that the company was only able to convert 5.7% of its revenue into net income. Its return on equity (net income $77,349 divided by average stockholders’ equity $17,714 + $25,030/2 = $21,372) was 20.5% meaning
For Fiscal Year Ending February 3, 2008
Presented by:
Team FAB 5
Financial Analysis of Home Depot
Introduction
Founded in 1978 by Arthur Banks and Bernie Marcus, who were both fired from a local hardware store after a disagreement with their supervisor (http://founderbios.com/bernie-marcus.php), Home Depot opened its first store in Atlanta, Georgia on June 22, 1979 (www.corporate.homedepot.com). The founders had a vision to create a big-box retail chain that empowered customers to take on their own home improvement and repair projects. As the fourth largest retailer in the U.S. and the world’s largest home improvement retailer (www.corporate.homedepot.com) , Home Depot operates nearly 2,000 stores in the U.S., Canada, Mexico and China, with annual retail sales in excess of $66 billion dollars.
In the spirit of “do-it-yourself”, our team carefully reviewed the 2007 and 2008 financial statements presented in our class text. Our purpose is to provide a thorough but poignant analysis of Home Depot’s financial strength. The following report will focus on liquidity, profitability, credit risk and other financial measures.
The below information is information that was obtained from Appendix A; Williams, J., Haka, S., Bettner, M., Carcello, J., Financial & Managerial Accounting the Basis for Business Decisions, 15e, 2010
1. Is The Home Depot's liquidity situation such that current liabilities can be easily paid? Why or why not?
With net earnings of $4,395,000 as of February 2008, Home Depot was not as profitable as the previous two years. Its net income percentage (net income $77,349 divided by total revenue $4,395) was only 5.7% meaning that the company was only able to convert 5.7% of its revenue into net income. Its return on equity (net income $77,349 divided by average stockholders’ equity $17,714 + $25,030/2 = $21,372) was 20.5% meaning