- Submitted By: tuhinseng
- Date Submitted: 08/08/2013 4:45 AM
- Category: Business
- Words: 757
- Page: 4
- Views: 242

Financial Ratio Analysis of Home Depot

Liquidity Ratio: This ratio measures the company’s ability to meet its short-term obligations.

The various ratios that tells about the liquidity position of the company are:

1. Current Ratio – Current assets/Current liabilities

2013. 1.34

2012. 1.55

The ratio has deteriorated this year compared to the last year

2. Quick Ratio – (Current assets – inventories)/Current liabilities

2013 0.41

2012 0.45

This ratio has deteriorated slightly as compared to last year

It is more conservative than current ratio.

3. Cash Ratio – Total Cash assets/Marketable securities

2013 0.22

2012 0.21

This ratio has improved from last year. It only looks at the most liquid short-term assets of the company which could be used to pay-off the current obligations very easily.

Profitability Ratio: this ratio gives a good understanding of how well the company utilized its resources in generating profit and shareholder value

The various ratios which come under this are:

1. Gross profit margin – (Gross profit/Net sales ) * 100

2013 34.57%

2012 34.47%

The ratio has improved compared to last year. Higher margin percentage is a favorable indicator.

2. Operating profit margin – (operating profit/Net sales) * 100

2013 10.39%

2012 9.46%

The ratio has improved considerably from the previous year. By subtracting selling, general or administrative or operating expenses from a company’s gross profit, we get operating profit.

3. Net profit margin – (net profit/net sales) * 100

2013 6.07%

2012 5.52%

There is an improvement in this ratio from the last year. This so-called bottom line is the most mentioned when discussing a company’s profitability.

4. Return on Assets –(Net earnings/total assets)*100

2013 11.04%

2012 9.58%

There is a considerable improvement in this ratio as compared to the previous year. The more, the merrier.

5. Return on equity – (Net earnings/...

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