Question

Hi,

I am requesting your help. This is for the Introduction to Business course. I want to get your opinions about Home Depot's 3 ratios for Current, Quick, Cash.

Any insights & thoughts from your analysis of these ratios including trends for example; Is the company performing better or worse relative to the previous year?

Here a Home Depot's Ratios:

Three ratios:  

Current Ratio:  

2/3/2019 = 1.11

01/28/2018 = 1.17

Quick Radio:

2/3/2019 = 0.22

01/28/2018 = 0.34

Cash Ratio:

2/3/2019 = 0.11

01/28/2018 = 0.22

As for 2019 Calculations:

Current ratio = Current assets / Current liabilities

= 18,529 / 16,716 = 1.11  

Quick ratio = Total quick assets / Current liabilities

= 3,714 / 16,716 = 0.22  

Cash ratio = Total cash assets / Current liabilities

= 1,778 / 16,716 = 0.11  

As for 2018 Calculations:

Current ratio = Current assets / Current liabilities

= 18,933 / 16,194 = 1.17

Quick ratio = Total quick assets / Current liabilities

= 5,547 / 16,194 = 0.34

Cash ratio = Total cash assets / Current liabilities

=3,595 / 16,194 = 0.22

Thank you,

Michelle

Answer 1

	Particulars	2019	2018
	Current Ratio	1.11	1.17
	Quick Ratio	0.22	0.34
	Cash Ratio	0.11	0.22
	Current Liability	$16,176	$16,194
	Current Assets	$18,529	$18,933
	Current Assets - Inventory - Prepaid expenses	$3,714	$5,547
	Cash & Cash equivalent	$1,778	$3,595
	As we can see from the above data that there is a decrease in all of the 3 Liquidity ratio
	Which shows that the company's liquid assets are declining which is not a good sign for the company
1	The Current assets have decline by $404 which is not so significant
2	However when we look at the Quick assets figures for both year, it shows that most of the current assets
	of the company comprises of mostly Inventory. Further there in 2019 the value of inventory is much
	more greater than inventory of 2018 which goes to show that company is holding more inventory
	which is again not good sign for the company
3	Now as far as Cash ratio is concerned we can see that the cash balance has reduced by $1,817
	which in itself is quite significant and not good for the health of the company
	Conclusion:From the above analysis it is clear that the compan's liquidity is in danger
	and the company should take measures to improve it