Home Depot Financial Analysis Name: Course: Professor: Institution: Date: Financial Analysis – Home Depot Company Overview Based on the record sales in the fiscal year ended February 1, 2015, Home Depot Inc. is the largest home improvement company that offers a wide range of services and sells a variety of materials. The main objectives of the company is to provide its customers with a unique customer experience, have a product authority and good capital allocation and an efficiency in productivity. The company has been able to achieve these objectives through introduction of mobile services used mainly by the stores departments, improvements on the company websites and mobile sites and efficiency in the supply chain operations. Home Depot has three customer groups, which is the customers who own homes and do their own installations when they purchase products. What the company does is to answer their questions about installations and how to handle the projects. Another group of customers are those home owners who purchase materials and have their projects handled by 3rd parties and finally the professional customers. The associates are trained to provide quality and unique customer service and those who show exemplary performance are rewarded. Home Depot opened six new stores in Mexico during the fiscal year ended February 1st. This included one relocation and it also opened one new store in Canada. It had 2,269 stores operating at the end of 2014, 10 % under lease and the rest owned by Home Depot and 162 warehouses and distribution centers located in different provinces. (Home Depot 2014 Annual Report, 2015). The mission of Home Depot can be summarized as follows: It strives to provide exceptional services with a wide range of products at competitive prices. Its main values are providing outstanding experience to its customers, ensuring its employees are satisfied, participating in corporate social responsibilities, generating shareholders’ worth, promoting an entrepreneurial spirit and building strong relationships. Due to improving U.S. economy and recovery of the U.S. housing market, the fiscal year 2014 was a successful year for Home Depot with record sales made. The sales revenue grew from 78,812 million to 83,176 million. The diluted earnings per share increased from 3.76 to 4.71 dollars per share. The Company’s performance depends on several factors like the construction of homes, upgrading of homes whose prevailing economic conditions and ever changing nature of these markets affect the performance of Home Depot. Ratio Analysis Ratio 1st January 2015 1St January 2014 Current ratio = Current Assets Current Liabilities = 15302 11269 =1.3579 =1.4 15279 = 10749 = 1.42 =1.4 Quick ratio = Current Assets−Inventories Current Liabilities = 15302−11079 11269 = 0.37474 = 0.4 15279−11057 = 10749 = 0.3927 = 0.4 Inventory Turnover = Sales Revenue Inventory = 83176 11079 = 7.5075 =7.5 78812 = 10749 = 7.3320 =7.3 Total asset turnover = Sales Revenues Total Assets = 83176 39946 = 1.344 =1.3 = 78812 40518 = 1.344 =1.3 Debt ratio = Total liabilities Total assets = 30624 39946 =0.7666×100 = 76.66% = 27996 40518 =0.69095×100 = 69.1% Gross margin profit = Gross profits Sales revenues = 28954 83176 = 0.3481 =0.3481 ×100 = 34.8% = 27390 78812 =0.3475 = 0.3475 ×100 =34.8% Net profit margin = Net profit after interest and taxes Sales revenues = 6345 83176 = 0.07628×100 =7.6% = 5385 78812 =0.06833×100 = 6.8% Return on Investment = Net Profit Total Assets = 6345 39946 =0.1588×100 = 5385 40518 =0.1329×100 = 15.88% = 13.3% Return on Equity = Net Income Shareholders′
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