Analysis Of Home Depot

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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). For our analysis, we will use the following ratios: 1-Current Ratio 2-Return on Investments Ratio 3-Debt Ratio 4-Inventory Turnover Ratio 5-Cost of Goods to Sales 6- Cash Flow to Debt Ratio 7-Gross Profit Margin Ratio The Current Ratio is calculated by taking the current debt and dividing it by the current liabilities. It is the measurement on how a company can meet its short term liabilities with liquid assets (Loth, Rihar, 2015a).A higher ratio indicates favorable activity. A company should be able to meet it responsibilities with its …show more content…

Average inventory is calculated using the sum of the first quarterly reporting month to the last quarterly reporting month and then dividing this quantity by two (Gibson, C.H., 2013, pg. 239). With this tool we can see if a business is turning over inventory in an adequate industry manner. It is a beneficial to compare with other similar industries. A high score shows that a business is bringing in inventory and getting rid of it quickly (Gibson, C.H., 2013, pg. 239). A low score means that inventory is not turning over as quick as possible. This indicator allows a business to stock up to meet the inventory necessities. In our comparison with Home Depot and Lowe’s we see a major difference in inventory turnover. Lowes leads with 116% and Home Depot at 13%.s a result we see that Home Depot is turning inventory in a great manner that it is possible to increase

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