Fin/571 Week 3 individual

Fin/571 Week 3 individual

  • Submitted By: diamondda
  • Date Submitted: 07/24/2014 1:17 AM
  • Category: Business
  • Words: 1384
  • Page: 6
  • Views: 12

Interpreting Financial Results
July 17, 2014

Interpreting Financial Results
Explaining movements in daily stock prices is one of the most difficult tasks in modern finance, but accurately investing is even harder. When analyzing a business, financial statements provide a detailed look into the company. This look can show the success or failure which lies within in. Financial ratios are useful indicators of a firm's performance and financial situation. Once these ratios are determined, they offer information concerning the businesses return on investment and the ability of the business to pay its bills on time, as well as what their projected future earnings will be. The following paper will depict the financial status of The Home Depot, Inc. (NASDAQ: HD) which has enjoyed the majority market share in the do-it-yourself one-stop shop warehouse companies. This status will be deciphered by calculating the financial ratios and interpreting those results against the company historical data and industry benchmark.
Financial Ratios
The following ratios will be used to analyze the status of Home Depot.
- Liquidity Ratio
o Current Ratio
- Leverage Ratio
o Debt ratio
- Profitability Ratio
o Net profit margin
o Return on assets (ROA)
o Return on equity (ROE)
Liquidity Ratio
The liquidity ratio, also known as the current ratio shows a clear overview and between the current liabilities of the company and the current assets. The ratio measures a company's ability to pay short-term obligations. The current ratio is calculated as follows:
Current ratio=Asset/Liabilities (All numbers in thousands)
2014 2013
Current Assets 15,279,000 Current Assets 15,372,000
Current Liabilities 10,749,000 Current Liabilities 11,462,000
Current Ratio 1.42 Current Ratio 1.34

2012 2011
Current Assets 14,520,000 Current Assets 13,479,000
Current Liabilities 9,376,000 Current Liabilities 10,122,000
Current Ratio 1.55 Current Ratio 1.33...

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