Home Depot Analysis

Files with balances on the attached excel sheet
a.
We flush toilet analyze the particular of the company under different dimensions: solidity, efficiency, liquidity, profitability.
Solidity.
The debt ratio has increased dramatically. The ratio of debt/equity moved from 0,6 up to 2. This means that the equity is retributory the half of the debt and this can be dangerous for the company because it can have negative impacts on the profitability if suddenly the leverage would became negative (ROA < i)
Regarding the financing of the long term investments, the situation is, however, alleviate good: the ratio Net Non Current Assets/Equity + farseeing Term Liabilities is still <1. This means that on that point were not utilize short term liabilities for financing long term investments, a situation that can be dangerous for a company.
Liquidity
man the debt has dramatically increased, the liquidity situation has became better. We can argue that argon the long term liabilities that are increased, not the short term.
The current ratio has moved from 2.43 to 3.11. This is still not liberal to organise a judge on the liquidity position because it includes inventories. arsenal can be difficult to transform in cash, and the selling price could be significantly different from the value compose on the balance sheet.




Thats why we analyzed the agile ratio. This moved from 0,73 to 1,34. This means that the amount cash+receivables is more than enough to cover all the short term liabilities.
To a motionless analysis of the liquidity, we should also add a flux analysis. Thats why we use the statement of cash flow: we call for to know how and why the cash moved.
The document present in the case study analyzed how and why the Net working(a) Capital moved and not the cash. We can see that there is more cash generated from operating activities, that most of the cash is used, in 1985, for investments (good signal)
Efficiency
As we noticed, the debt has increased dramatically. With the increase of the debt, also the...If you want to progress to a full essay, order it on our website: Orderessay



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