Question

Refer to the financial statements of The Home Depot in Appendix A. (Note: Fiscal 2016 for The Home Depot runs from February 1, 2016, to January 29, 2017. As with many retail companies, The Home Depot labels the period “Fiscal 2016” even though it ends in the 2017 calendar year. The label “Fiscal 2016” is appropriate because Fiscal 2016 includes 11 months from the 2016 calendar year. The Home Depot explains its choice of fiscal period in Note 1 to its financial statements.)

Required: Using the financial statements for Home Depot, find the

Average Days to Sell Inventory

Gross Profit Margin

Return on Assets

Earnings Per Share

Price-Earnings

Accounts Receivable Turnover

Average Days to Collect A/R

APPENDIX A Excerpts from the Fiscal 2016 Annual Report of The Home Depot, Inc THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Balance Sheets January 29, 2017 Fiscal 2016 January 31, 2016 Fiscal 2015 amounts in millions, except share and per share data ASSETS Current Assets: Cash and Cash Equivalents Receivables, net 2,538 2,029 12,549 S 2.216 1,890 11,809 Other Current Assets Total Current Assets 17,724 16.484 Property and Equipment, at cost 40,426 Net Property and Equipment Goodwill Other Assets 21,914 2,093 1,235 $42,966 22.191 2.102 1,196 Total Assets LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: 710 7,000 1,484 Short-Term Debt Accounts Payable Accrued Salaries and Related Expenses Sales Taxes Payable Deferred Revenue Income Taxes Payable Current Installments of Long-Term Debt Other Accrued Expenses S 350 1,515 1,669 1,566 2.195 4.133 Total Current Liabilities Long-Term Debt, excluding current installments Other Long-Term Liabilities Deferred Income Taxes 20,789 1,965 1,855 Total Liabilities 38,633 35,657 STOCKHOLDERS' EQUITY Common Stock, par value S0.05; authorized: 10 billion shares; issued: 1.776 billion shares at January 29, 2017 and 1.772 billion shares at January 31, 2016; outstanding:1.203 billion shares at January 29, 2017 and 1.252 illion shares at January 31, 2016 Paid-in Capital Retained Earnings Accumulated Other Comprehensive Loss Treasury Stock, at cost, 573 million shares at January 29, 2017 and 520 million 9.787 35,519 (867) 40,194 9,347 30,973 (898) 33.194) shares at January 31, 2016 Total Stockholders' Equity Total Liabilities and Stockholders' Equity $42,966 See accompanying Notes to Conolidated Financial Statements.

Answer 1

1. Average days to sell Inventory is 71.43 days

Calculation -

Average days to sell inventory will be calculated as: number of days in a year divided by Inventory Turnover Ratio

And there Inventory turnover ratio = Cost of Goods Sold/ Average Inventory

= 62,282/[(12,549+11,809)/2]

= 5.11times

Average days to sell Inventory = 365/5.11

= 71.43 days

2. Gross Profit Margin is 34.16%

Calculation-

Gross Profit Margin = (Gross Profit/Revenue) *100

= (32,313/94,595)*100

= 34.16%

3. Return on Assets is 18.73%

Calculation -

Return on Assets = Net Income/ Average Assets

=$7,957/(42,966+41,973)/2

=$7,957/42,469.50

=0.1873

4. Earning per share is $6.47

Calculation -

  Earning per share = Earning attributable to shareholders/ No. of shares

=7957/1229

=6.47

5. Price- Earning-

Price Earning is Market price of share divided by earning. As market price is not given the same cannot be calculated.

6. Accounts Receivable Turnover Ratio is 48.27

Calculation -

  Accounts Receivable Turnover Ratio = Sales/Average Accounts Receivable

=$94,595/(2,029+1,890)/2

=48.27

7. Average days to collect AR is 7.56 days

Calculation-

  Average days to collect AR = 365/Accounts Receivable Turnover

365/48.27

=7.56