Question

Comprehensive Problem 4

The following are the consolidated statement of earnings and the balance sheet of Home Depot, Inc and Subsidiaries.

THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS
	Fiscal Year Ended(1)
amounts in millions, except per share data	January 31,2016				February 1, 2015				February 2, 2014
NET SALES	$	66,192			$	71,299			$	77,359
Cost of Sales		43,752				47,292				51,341
GROSS PROFIT		22,440				24,007				26,018
Operating Expenses:
Selling, General and Administrative		15,886				17,828				17,051
Depreciation and Amortization		1,703				1,770				1,692
Total Operating Expenses		17,589				19,598				18,743
OPERATING INCOME		4,851				4,409				7,275
Interest and Other (Income) Expense:
Interest and Investment Income		(27	)			(27	)			(87	)
Interest Expense		660				616				686
Other		(152	)			152				—
Interest and Other, net		785				741				599
EARNINGS BEFORE PROVISION FOR INCOME TAXES		4,066				3,668				6,676
Provision for Income Taxes		1,361				1,259				2,409
NET EARNINGS	$	2,705			$	2,409			$	4,267
Weighted Average Common Shares		1,579				1,642				1,728
BASIC EARNINGS PER SHARE	$	1.71			$	1.65			$	2.47
Diluted Weighted Average Common Shares		1,591				1,650				1,589
DILUTED EARNINGS PER SHARE	$	1.70			$	1.46			$	2.69

⁽¹⁾ Fiscal years ended January 31, 2016, February 1, 2015 and February 2, 2014 include 52 weeks.

THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
amounts in millions, except share and per share data	January 31, 2016				February 1, 2015
ASSETS
Current Assets:
Cash and Cash Equivalents	$	1,276			$	1,238
Receivables, net		980				975
Merchandise Inventories		10,253				10,743
Other Current Assets		1,334				1,198
Total Current Assets		13,843				14,154
Property and Equipment, at cost		37,401				36,565
Less Accumulated Depreciation and Amortization		11,785				10,168
Net Property and Equipment		25,616				26,397
Goodwill		1,177				1,134
Other Assets		227				406
Total Assets	$	40,863			$	42,091
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-Term Debt	$	370			$	560
Accounts Payable		5,443				4,807
Accrued Salaries and Related Expenses		1,250				1,127
Sales Taxes Payable		343				330
Deferred Revenue		1,152				1,149
Income Taxes Payable		104				286
Current Installments of Long-Term Debt		1,013				1,759
Other Accrued Expenses		1,575				1,643
Total Current Liabilities		11,250				11,661
Long-Term Debt, excluding current installments		8,661				9,650
Other Long-Term Liabilities		2,131				2,196
Deferred Income Taxes		1,152				1,149
Total Liabilities		23,194				24,656
STOCKHOLDERS’ EQUITY
Common Stock, par value $0.05; authorized: 10 billion shares; issued: 1.754 billion shares at January 31, 2016 and 1.733 billion shares at February 1, 2015; outstanding: 1.484 billion shares at January 31, 2016 and 1.537 billion shares at February 1, 2015		82				81
Paid-In Capital		6,294				6,031
Retained Earnings		11,529				11,784
Accumulated Other Comprehensive Income		355				87
Treasury Stock, at cost, 270 million shares at January 31, 2016 and 196 million shares at February 1, 2015		(591	)			(374	)
Total Stockholders’ Equity		17,669				17,435
Total Liabilities and Stockholders’ Equity	$	40,863			$	42,091

Selected information as on February 2, 2014:

Working capital	$	2,668
Cash balance	$	1,280
Total assets	$	44,404
Stockholders' equity	$	17,684

rev: 04_07_2020_QC_CS-207273, CS-207274

Comprehensive Problem 4 Part 2

Assume that you are the credit manager of a medium-size supplier of building materials and related products. Home Depot wants to make credit purchases from your company, with payment due in 60 days.

Instructions:

a-1. Compute the current ratio for the fiscal years ending January 31, 2016, and February 1, 2015.

a-2. Compute the quick ratio for the fiscal years ending January 31, 2016, and February 1, 2015.

a-3. Compute the amount of working capital for the fiscal years ending January 31, 2016, and February 1, 2015.

a-4. Compute the percentage change in working capital from the prior year for the fiscal years ending January 31, 2016, and February 1, 2015.

a-5. Compute the percentage change in cash and cash equivalents from the prior year for the fiscal years ending January 31, 2016, and February 1, 2015.

Answer 1

				2016		2015
1-	current ratio	total of current assets/total of current liabilities	13843/11250	1.230488889	14154/11661	1.21379
2-	Quick Assets	(total of current assets-inventory)/total of current liabilities	(13843-10253)/11250	0.319111111	(14154-10743)/11661	0.292514
3-	Amount of working capital	total of current assets-total of current liabilities	13843-11250	2593	14154-11661	2493
4-	% change in working capital	2014	2015	2016
	net working capital	2668	2493	2593
	% change in working capital =(working capital in current year-working capital in previous year)/working capital in previous year		-6.56%	4.01%
5-	% change in cash and cash equivalents	2014	2015	2016
	cash and cash equivalents	1280	1276	1238
	% change in cash and cash equivalents =(cashin current year-cashin previous year)/cash in previous year		-0.31%	-2.98%