Financial statements are the primary way that public companies communicate its financial activities and position of the business to management, investors and other users of financial information. Home Depot (NYSE symbol: HD), the world giant home improvement retailer, has complex business model that is characterized by its business philosophy, “stack it high, watch it fly” that reflected a primary focus on sales growth in consumers and construction professionals. In the following paper will analyze the financial information presented in 2015 Home Depot’s financial statements, will explain how each statement present the financial information regarding the business, why each statement are important to the business and other users of financial …show more content…
statements. This paper also will discuss the financial position of Home depot with a comparison to the prior two years on its financial statements. The Income Statement gives users a summary of Home Depot’s financial performance, in which it indicated the business incurs its revenues and expenses through the company’s operating activities. Over the past three years, Home Depot reported the total revenue of $74,754,000 for 2013, $78,812,000 for 2014, and $83,176,000 for 2015 (The Home Depot.com), which shows a steady increase in total sales each year. It has been achieved by increase in sales from 2013 to 2015. In the income statement of 2015, it also shows the diluted Earning Per Share (EPS) increased $0.95 or 25% to $4.71 in 2015 from $3.76 in 2014. Compare to the income statement provided in 2015 and 2014, Home Depot shows a total increase of $4,364,000 in revenue, net earnings increased 17.83% from $5,385,000 in 2014 to $6,345,000 in 2015. The Home Depot attributed to the amount of increasing sales compared to the increasing in home improvement and residential construction markets. In addition, Home Depot reported a slightly increasing of 1% and less in expenses during 2015. The income statement is primary important, which shows Home Depot’s profitability during a period of time. Because of the statement’s “predictive value, a qualitative characteristic as a measure of future cash flows, management efficiency and a guide to the accomplishment of managerial objectives” (Schroeder, Clark & Cathey, 2010, pp. 166-167). Users can make their decision through out the financial information presented in this statement. For instance, an investor may compare at profit margin and expense ratios from Home Depot’s income statement over a certain period of 5-years, he will have a clear vision about the company’s revenue and expenses. For Home Depot management, in order to keep the intention of growth in sales, the management decided to increase its credit offers for consumers. Balance sheet is another important financial statement; it gives a full picture of the company’s financial position. At the end of year 2015, Home Depot reported total assets of $39,946,000; this amount represented the value of property owned by the company. The total assets were decreased by $572,000 from the previous year of 2014. The large decline in assets was from Home Depot’s Fixed Assets; it was declined $628,000 in 2015 compare to the Fixed Assets in 2014 on balance sheet. In the Liabilities and Equity section on balance sheet, there was a big jump in short-term debt / Current portion of long-term debt, the debt was increased 893.94% from $33,000 in 2014 to $328,000 in 2015 (Nasdaq.com, 2016). The Long-term Debt also increased by $2,178,000 from 2014. However, the company’s paid-in capital was increased to $8,885,00 in 2015 from $8,420,00 in 2014, as well as increased $3,815,000 in Retained Earnings, but the gaining offset the decline from Treasury Stock, which shown a negative balance of $7,000,000 between 2015 and 2014. Overall, the total stockholders’ equity was decreased by $3,200,000 in 2015(Nasdaq.com 2016). Looking back information presented on the balance sheet from 2013 to 2015, which shows Home Depot’s total assets has a steady declined, at the same period of time, the company’s liabilities increased, but the shareholders’ equity declined as well. .
This statement summarizes the assets, liabilities, and net worth (stockholders’ equity) that Home Depot held at a specific point in time (Schroeder, Clark & Cathey, 2010, p. 212). The purpose of the balance sheet is to give users a clear ideal of Home Depot’s financial strength and capabilities of the company’s business. It is important that the balance sheet is used to determine if Home Depot has sufficient cash for immediate needs; the balance sheet is also used to evaluate the relationship between debt and owner’s equity (Kimmel, Weygandt & Kieso, 2013, …show more content…
p.14). The revenues and expenses have reported in income statement, but the money may or may not been collected or paid.
Cash flow is another financial statement that summarizes a company’s cash inflow and outflow of a business in a specific period of time (Kimmel, Weygandt & Kieso, 2013, p.115). In addition, the cash flow statement presents the net cash increase or decrease from the company’s operating, investing, and financing activities during the period, it also presents how much money that company has at end of the period. Cash from Home Depot’s operating activities is the best measure of the company’s ability to pay its debt and dividend. Home Depot has managed a health cash balance, which has reported on its balance sheet, the company generated a significant amount of cash from its operating activities. On the cash flow statement, Home Depot’s net cash provided by operating activities was gained 614 million in 2015, which compared to $7,628 in 2014 (The Home Depot, 2016). Along with the gaining in its net earning, Home Depot present a strong financial position to its investors, also provided valuable financial information to its potential investors that how Home Depot generated and spent its cash, and what changes in the cash balance within the period. Also, the cash flow helps Home Depot management to identify financial opportunities and risks; this statement ensures the company’s business is heading in its planed
direction. Financial statements present an accurate financial picture of a company’s business activities in a defined period of time. The information provide in the balance sheet gives a whole picture of the business, it will help the users to identify the opportunities for efficiencies and growth. The income statement presents the profitability of the business over a defined period of time, provides a tool and help users to determine a company’s past and future financial performance, gauge the capability of future income, and help management to control operating expenses. However, the income statement does not provided the information regarding when the revenue is received and the payment is paid. The cash flow statement differs from the income statement in significant ways, it tells a user about the company’s ability to manage operations, which is if the company has sufficient funds to pay its debts over the short-term. Thus, the three financial statement provide financial information in operating activities, investing activities, and financial activities that assist different level of managerial decision making.
Overall, The Home Depot’s market conditions are improving as basic earnings per share increased, as well as dividend yield percentage. The decrease in the P/E and dividend payout ratios can be explained through positive
The company I have chosen to research for my final paper is Home Depot. Home Depot’s principal assets, debt and stock information as of January 30, 2001 are as follows: (amounts in millions, except stock)
The Home Depot organization has generated quick growth throughout its operating years. From the first store openings in 1979, the firm has created an exceptional growth pattern, opening their 100th store in 1989 and continuing on into the global market. The company feels that their unique culture and values are what gives them their competitive advantage in the marketplace. Their strengths are in the strong position they have with professional
Home Depot and Lowe's are two home improvement chains in the United States. Home Depot is the leading company in this industry followed by Lowe's as the second largest. This paper uses financial ratios to compare these companies regarding operating profitability, asset utilization, and risk management in the years 2005 and 2006. The evaluation compares the performances of these stores against the industry.
Finding the perfect capital structure in terms of risk and reward can ensure a company meets shareholder expectations and protects a firm in times of recession. Capital structure refers to how a business puts its money to “work”. The two forms of capital structure are equity capital and debt capital. Both have their benefits and limitations. Striking that perfect balance between the two can mean the difference between thriving versus trying to survive.
For this analysis we have chosen Home Depot Incorporated a home improvement retailer. It primary clients are professional “professional remodelers, general contractors, repairmen, small business owners, and tradesmen” (Yahoo Finance, 2015). In addition Home Depot sub contracts installations to third parties (Yahoo Finance, 2015). Home Depot has 2,270 stores in the US and international stores located in Mexico and Canada (Yahoo Finance 2015).
Home Depot is built on the principle of creating value for our stockholders while never forgetting our values. We seek to be profitable, responsible and balance the needs of our communities. Throughout our company, our associates are challenged with finding ways in which we can provide the best products for our customers, provide the best possible work environment for our associates, have a positive impact on the communities in which we operate, and provide excellent returns for our stockholders.
Since January 31, 2004, the investment banker for Wal-Mart has been Moody's investor services. Wal-Mart plans to refinance for their long term dept with Mood's Investor Services and also a few other investment banking for other corporate purposes that are not mentioned. Wal-Mart also plans to bowwow 3.3 billion dollars and an additional 1.1 billion for commercial paper By January 31, 2004 the, Wal-Mart had already established a 5.1 billion dollar lines of credits from 77 different banking industries and investment and used up approximately 145 million in the production of commercial paper. During the same time period Wal-Mart had 6 billion dollar debt of securities under a shelf registration regulation which derived from the SEC. Wal-Mart sold 1.25 billion in notes and maturity. The notes bear an interest of 4.1.25 % and mature by February 2011. The total quantity of notes allowed to be sold to is up to 4 billion.
Balance Sheet and Covenants – Our cash position was at 115.1 Days of Cash on Hand at October 31th, although there were 46 offsetting days in third party reserves. Days in Accounts Receivable were at 51.3 days. The Debt Service Coverage Ratio at the end of October was 4.69-to-1 versus the minimum covenant requirement of
When it comes to home improvement projects, the one-stop shop, Home Depot should come to mind. As one of the world’s largest home improvement specialty retailers, Home Depot operates over 2,256 stores throughout the U.S., Canada and Mexico. The home improvement store offers a variety of products, ranging from lumber to appliances, to name a few. Geared towards the DIY marketing demographic, Home Depot was founded by Bernie Marcus and Arthur Blank in 1978. The first formal stores opened June 1979 in Atlanta, Georgia.
Home Depot’s improvements are been seen from stock prices to better customer experience through new technologies (www.forbes.com, 2015). The company’s stock increased by 175% and introduced FIRST phones, a mobile in-store technology (www.forbes.com, 2015). Therefore, the strategic plan is for this device is to increase customer interaction for information on products and checking its availability (www.forbes.com, 2015). Also, Home Depot put together another strategy which made same day shipping on customers that order online before 5 p.m. (www.forbes.com, 2015). However, Finance and Information Systems can’t be the only strategy focus for the company. It must consider all entities to ensure that all functional strategies are working together.
Financial statements are a formal record of financial activities. During this 10-K report of financial analysis, we provided an overview of the Balance Sheet and Income Statement. The financial statement also overviewed what we analyzed comparing two major affordable retail companies such as Wal-Mart and Target. The information resulted in accurate information provided by the Security Exchange Commission (SEC). The SEC information gave us insight to analyze the two retails financial condition that involved both short and long-term, income and expense, and assets and liabilities. This insight is an important tool for investors in assessing Wal-Mart and Target overall position in the market place. From what it owes and owns as well the
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