Part 2 Financial Statement Analysis

Financial Statements Paper Part II
Tammy St John
ACC/497
December 8, 2014
Silvana Moffitt

Financial Statements Paper Part II
The Home Depot is a retailer that is in the home improvement industry. They sell building materials along with home improvement products. The Home Depot was considered the world’s largest home improvement retailer during the 2008 fiscal year. They were able to increase their operating strategy even through the difficult economic times, by focusing on their core retail business, investing in their associates, and customer service improvements. In this paper we will assess the financial statements to see how effective The Home Depot’s management is achieving their goals and the mission statement to the stakeholders’.

The consolidated statement of cash flow shows that The Home Depot cut capital expenditures from $3,558 billion to $1,847 billion, which was a decrease of 92.6% from fiscal periods 2007 to 2008 to help with the difficult economic times. These funds helped terminate the short term borrowing in fiscal year 2008. The Home Depot also reduced their repurchasing of common stock but should have used the cash and credit to repurchase stocks when the prices are down instead of paying back the short-term

The higher the ratio, the larger the margin is to cover short-term debt. The inventory turnover ratio tells how frequent a company buys and sells their inventory. The current ratio measures a company’s ability to pay their current liabilities. The Home Depot’s current ratio was 1.20 percent in fiscal 2008. There was a slight increase from fiscal 2007 to 2008. With the current ratio greater than one percent, they have the ability to pay their current liability safely. The quick ratio compares the sum of cash, short-term investment, and accounts receivable to current liabilities. The Home Depot’s quick ratio for fiscal 2008 is 13.4 percent that is .1 percent lower than fiscal year 2007.
Solvency ratio is a measurement of a company’s ability to meet their debt and other obligations. It indicates whether a company’s cash flow is enough to meet its short-term and long-term liabilities. If the company’s solvency ratio is lower, than there is a big chance that they will default on their debt obligations. The debt to assets ratio for The Home Depot in fiscal year 2008 is 57 percent that tells us that they rely more on debt