Question

Please calculate the following ratios:

Market value added

Market to book ratio

Return on Asset

The Home Depot, Inc. Cash Flow
All numbers in thousands
Period Ending	1/29/17	1/31/16
Net Income	7,957,000	7,009,000
Operating Activities, Cash Flows Provided By or Used In
Depreciation	1,973,000	1,863,000
Adjustments To Net Income	267,000	100,000
Changes In Accounts Receivables	-138,000	-181,000
Changes In Liabilities	654,000	1,151,000
Changes In Inventories	-769,000	-546,000
Changes In Other Operating Activities	-161,000	-23,000
Total Cash Flow From Operating Activities	9,783,000	9,373,000
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures	-1,621,000	-1,503,000
Investments	-	144,000
Other Cash flows from Investing Activities	38,000	-1,623,000
Total Cash Flows From Investing Activities	-1,583,000	-2,982,000
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid	-3,404,000	-3,031,000
Sale Purchase of Stock	-6,662,000	-6,772,000
Net Borrowings	2,274,000	4,012,000
Other Cash Flows from Financing Activities	-78,000	4,000
Total Cash Flows From Financing Activities	-7,870,000	-5,787,000
Effect Of Exchange Rate Changes	-8,000	-111,000
Change In Cash and Cash Equivalents	330,000	604,000

The Home Depot, Inc. Income Statement All numbers in thousands Revenue 1/29/17 1/31/16 Total Revenue 94,595,000 88,519,000 Cost of Revenue 62,282,000 58,254,000 Gross Profit 32,313,000 30,265,000 Operating Expenses Research Development - - Selling General and Administrative 17,132,000 16,801,000 Non Recurring - - Others 1,754,000 1,690,000 Total Operating Expenses - - Operating Income or Loss 13,427,000 11,774,000 Income from Continuing Operations Total Other Income/Expenses Net 36,000 166,000 Earnings Before Interest and Taxes 13,463,000 11,940,000 Interest Expense 972,000 919,000 Income Before Tax 12,491,000 11,021,000 Income Tax Expense 4,534,000 4,012,000 Minority Interest - - Net Income From Continuing Ops 7,957,000 7,009,000 Non-recurring Events Discontinued Operations - - Extraordinary Items - - Effect Of Accounting Changes - - Other Items - - Net Income Net Income 7,957,000 7,009,000 Preferred Stock And Other Adjustments - - Net Income Applicable To Common Shares 7,957,000 7,009,000 The Home Depot, Inc. Balance Sheet
All numbers in thousands
Period Ending	1/29/17	1/31/16
Current Assets
Cash And Cash Equivalents	2,538,000	2,216,000
Short Term Investments	-	-
Net Receivables	2,029,000	1,890,000
Inventory	12,549,000	11,809,000
Other Current Assets	608,000	569,000
Total Current Assets	17,724,000	16,484,000
Long Term Investments	-	-
Property Plant and Equipment	21,914,000	22,191,000
Goodwill	2,093,000	2,102,000
Intangible Assets	-	-
Accumulated Amortization	-	-
Other Assets	1,235,000	1,196,000
Deferred Long Term Asset Charges	-	-
Total Assets	42,966,000	41,973,000
Current Liabilities
Accounts Payable	11,212,000	10,531,000
Short/Current Long Term Debt	1,252,000	427,000
Other Current Liabilities	1,669,000	1,566,000
Total Current Liabilities	14,133,000	12,524,000
Long Term Debt	22,349,000	20,789,000
Other Liabilities	1,855,000	1,965,000
Deferred Long Term Liability Charges	296,000	379,000
Minority Interest	-	-
Negative Goodwill	-	-
Total Liabilities	38,633,000	35,657,000
Stockholders' Equity
Misc. Stocks Options Warrants	-	-
Redeemable Preferred Stock	-	-
Preferred Stock	-	-
Common Stock	88,000	88,000
Retained Earnings	35,519,000	30,973,000
Treasury Stock	-40,194,000	-33,194,000
Capital Surplus	9,787,000	9,347,000
Other Stockholder Equity	-867,000	-898,000
Total Stockholder Equity	4,333,000	6,316,000

Answer 1

Answer:

Market value added: It is the sum of all capital claims held against the company plus the market value of debt and equity. It is calculated as:

MVA = V - K

where, MVA is the market value added of the firm, V is s the market value of the firm, including the value of the firm's equity and debt (its enterprise value), and K is the total amount of capital invested in the firm.

Since, the question did not provide the market value of The Home Depot, Inc., we have used the latest market value of company (i.e. Market capatalization), which is $238416000 ( in thousands), whic is always at current time and so we cannot find 2016 MVA

V (Market value) = $238416000

K (Total invested capital) = Total stockholders equity + (Total liabalities - account payable)

K (Total invested capital) = 4,333,000 + ( 38,633,000 - 11,212,000) = $31754000

So, MVA (Market value added) is = $238416000 - $31754000 = $206,662,000

Market to book ratio:

= V (Market capatalization) / Net Book Value

Net Book Value = Total Assets – Total Liabilities

Net Book Value = 42,966,000 - 38,633,000 = $4,333,000

V (Market value) = $23841600

So Market value of book is:

= $23841600 / $4,333,000

= 5.50

Return on Asset (ROA):

ROA = Net Income / Total Assets

= 7,957,000 / 42,966,000

= 0.1851 or 18.51%