Question

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	$	88,519			$	83,176			$	78,812
Cost of Sales		58,254				54,787				51,897
GROSS PROFIT		30,265				28,389				26,915
Operating Expenses:
Selling, General and Administrative		16,801				16,280				16,122
Depreciation and Amortization		1,690				1,640				1,627
Total Operating Expenses		18,491				17,920				17,749
OPERATING INCOME		11,774				10,469				9,166
Interest and Other (Income) Expense:
Interest and Investment Income		(166	)			(337	)			(12	)
Interest Expense		919				830				711
Interest and Other, net		753				493				699
EARNINGS BEFORE PROVISION FOR INCOME TAXES		11,021				9,976				8,467
Provision for Income Taxes		4,012				3,631				3,082
NET EARNINGS	$	7,009			$	6,345			$	5,385
Weighted Average Common Shares		1,277				1,338				1,425
BASIC EARNINGS PER SHARE	$	5.49			$	4.74			$	3.78
Diluted Weighted Average Common Shares		1,283				1,346				1,434
DILUTED EARNINGS PER SHARE	$	5.46			$	4.71			$	3.76

⁽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	$	2,216			$	1,723
Receivables, net		1,890				1,484
Merchandise Inventories		11,809				11,079
Other Current Assets		1,078				1,016
Total Current Assets		16,993				15,302
Property and Equipment, at cost		39,266				38,513
Less Accumulated Depreciation and Amortization		17,075				15,793
Net Property and Equipment		22,191				22,720
Goodwill		2,102				1,353
Other Assets		1,263				571
Total Assets	$	42,549			$	39,946
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-Term Debt	$	350			$	290
Accounts Payable		6,565				5,807
Accrued Salaries and Related Expenses		1,515				1,391
Sales Taxes Payable		476				434
Deferred Revenue		1,566				1,468
Income Taxes Payable		34				35
Current Installments of Long-Term Debt		77				38
Other Accrued Expenses		1,943				1,806
Total Current Liabilities		12,526				11,269
Long-Term Debt, excluding current installments		20,888				16,869
Other Long-Term Liabilities		1,965				1,844
Deferred Income Taxes		854				642
Total Liabilities		36,233				30,624
STOCKHOLDERS’ EQUITY
Common Stock, par value $0.05; authorized: 10 billion shares; issued: 1.772 billion shares at January 31, 2016 and 1.768 billion shares at February 1, 2015; outstanding: 1.252 billion shares at January 31, 2016 and 1.307 billion shares at February 1, 2015		88				88
Paid-In Capital		9,347				8,885
Retained Earnings		30,973				26,995
Accumulated Other Comprehensive Loss		(898	)			(452	)
Treasury Stock, at cost, 520 million shares at January 31, 2016 and 461 million shares at February 1, 2015		(33,194	)			(26,194	)
Total Stockholders’ Equity		6,316				9,322
Total Liabilities and Stockholders’ Equity	$	42,549			$	39,946
Selected information as on February 2, 2014: Working capital $ 4,530 Cash balance $ 1,929 Total assets $ 40,518 Stockholders' equity $ 12,522 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

a1: Current ratio = current assets/current liabilities. Ratio for fiscal year ending January 31, 2016 = 16993/12526 = 1.357

Ratio for the fiscal year ending February 1, 2015 = 15302/11269 = 1.358

a2: Quick ratio = (total current assets – inventory – prepaid expenses)/current liabilities. Ratio for fiscal year ending January 31, 2016 = (16993-11809)/12526 = 0.414

Ratio for the fiscal year ending February 1, 2015 = (15302-11079)/11269 = 0.375

a3: Working capital = current assets – current liabilities. Working capital for fiscal year ending January 31, 2016 = 16993-12526 = 4,467.

Working capital for the fiscal year ending February 1, 2015 = 15302-11269 = 4,033.

a4: % change in working capital in 2016 from prior year = (4467-4033)/4033 = 10.76%

% change in working capital in 2015 from prior year = (4033-4530)/4530 = -10.97%

a5: % change in cash and cash equivalents in 2016 from prior year = (2216-1723)/1723 = 28.61%

% change in cash and cash equivalents in 2015 from prior year = (1723-1929)/1929 = -10.68%