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Financial Analysis: Home Depot
Summary of Operations
Net Sales
Gross Margin
Operating Margin
Income before Taxes
Net Income
Financial Position
Working Capital
Property, Plant and Requirement
Total Assets
Long-Term Assets
Stockholders' Equity
Financial Ratio Analysis and Interpretation
Historical View of Financial Performance
Competitor and Industry Standards Comparison
The relevance of subjecting the financial statements of a company to intensive analysis cannot be overstated. This is more so the case given that the information obtained from such an analysis comes in handy in the determination of a company's financial health as well-being. In this text, I concern myself with the analysis of Home Depot's financial statements in an attempt to not only determine but also assess its financial performance and stability.
Summary of Operations
Net Sales
From the onset, it is important to note that with regard to net sales, Home Depot showed significant improvement throughout the three years under consideration. Between the financial years 2011 and 2012, the net sales figure increased from $67,997 million to $70,395 million. This essentially represents a 3.53% increase in the net sales figure. It is also important to note that between the financial years 2012 and 2013, the net income registered yet another increase of 6.19%.
Gross Margin
The company's gross profit margin for the three years under consideration was 1.33, 1.55,...
The same increased by 15.08% and 19.00% between the years 2011-2012 and 2012-2013 respectively.
Net Income
Lastly, we have the net income. Like the net sales figure, the net income figure registered impressive growth within the three years under consideration. Between the years 2011 and 2012, the net income figure increased by 16.33%. Similarly, between the financial years 2012 and 2013, the net income figure increased by 16.79%.
Summary/Interpretation
The growth in the income figures in this case is impressive. If the company manages to contain its costs going forward, the increase in income will further enhance shareholders' value. When it comes to the gross margin, it is important to note that the same comes in handy in the determination of how much gross profit a business entity earns from the sale of goods and services. The company's gross profit margin in this case was largely stable, i.e. It did not fluctuate significantly during the three years under consideration. This is an indicator that the company is not likely to face challenges in the settlement of operating and other expenses going forward.
Financial Position
Working Capital
The company's working capital ratio/current ratio…
Financial Ratio Analysis and Interpretation
To begin with, liquidity ratios come in handy in the determination of a business entity's ability to settle its financial obligations in the short-term. The current asset ratio in this case indicates that Home Depot would not have had trouble settling its obligations were they to suddenly fall due at any point. Although the quick ratio for the years 2013 and 2011 paints a grim picture of the firm's ability to settle its obligations using its most liquid assets, the industry average indicates that the Home Depot still has sufficient liquid assets to cover its current liabilities.
When it comes to the leverage ratios, the debt ratio in the words of Davis and
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