Question

Required information

The following are the balance sheet and consolidated statement of earnings of The Home Depot, Inc.

THE HOME DEPOT, INC. CONSOLIDATED BALANCE SHEETS
millions, except per share data	February 3, 2019			January 28, 2018			January 29, 2017
Assets
Current Assets:
Cash and Cash Equivalents	$	1,778		$	3,595		$	2,538
Receivables, net		1,936			1,952			2,029
Merchandise Inventories		13,925			12,748			12,549
Other Current Assets		890			638			608
Total Current Assets		18,529			18,933			17,724
Net Property and Equipment		22,375			22,075			21,914
Goodwill		2,252			2,275			2,093
Other Assets		847			1,246			1,235
Total Assets	$	44,003		$	44,529			42,966
Liabilities and stockholders’ equity
Current Liabilities:
Short-Term Debt	$	1,339		$	1,559		$	710
Accounts Payable		7,755			7,244			7,000
Accrued Salaries and Related Expenses		1,506			1,640			1,484
Sales Taxes Payable		656			520			508
Deferred Revenue		1,782			1,805			1,669
Income Taxes Payable		11			54			25
Current Installments of Long-Term Debt		1,056			1,202			542
Other Accrued Expenses		2,611			2,170			2,195
Total Current Liabilities		16,716			16,194			14,133
Long-Term Debt, excluding current installments		26,807			24,267			22,349
Deferred Income Taxes		491			440			296
Other Long-Term Liabilities		1,867			2,174			1,855
Total Liabilities		45,881			43,075			38,633
Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,782 at February 3, 2019, 1,780 shares at January 28, 2018; and 1,776 shares at January 29, 2017;outstanding: 1,105 shares at February 3, 2019, 1,158 shares at January 28, 2018 and 1,203 shares at January 29, 2019		89			89			88
Paid-In Capital		10,578			10,192			9,787
Retained Earnings		46,423			39,935			35,519
Accumulated Other Comprehensive Loss		(772	)		(566	)		(867	)
Treasury stock, at cost, 677 shares at February 3, 2019, 622 shares at January 28, 2018 and 573 shares at January 29, 2017		(58,196	)		(48,196	)		(40,194	)
Total stockholders’ (deficit) equity		(1,878	)		1,454			4,333
Total Liabilities and Stockholders’ Equity	$	44,003		$	44,529		$	42,966

THE HOME DEPOT, INC. CONSOLIDATED STATEMENTS OF EARNINGS
in millions, except per share data	Fiscal 2018				Fiscal 2017				Fiscal 2016
Net sales	$	108,203			$	100,904			$	94,595
Cost of Sales		71,043				66,548				62,282
Gross profit		37,160				34,356				32,313
Operating Expenses:
Selling, General and Administrative		19,513				17,864				17,132
Depreciation and Amortization		1,870				1,811				1,754
Impairment loss		247				—				—
Total Operating Expenses		21,630				19,675				18,886
Operating income		15,530				14,681				13,427
Interest and other (income) expense:
Interest and investment income		(93	)			(74	)			(36	)
Interest expense		1,051				1,057				972
Other		16				—				—
Interest and other, net		974				983				936
Earnings before provision for income taxes		14,556				13,698				12,491
Provision for Income Taxes		3,435				5,068				4,534
Net earnings	$	11,121			$	8,630			$	7,957
Basic weighted average common shares		1,137				1,178				1,229
Basic earnings per share	$	9.78			$	7.33			$	6.47
Diluted weighted average common shares		1,143				1,184				1,234
Diluted earnings per share	$	9.73			$	7.29			$	6.45

Fiscal 2018 includes 53 weeks. Fiscal 2017 and fiscal 2016 include 52 weeks.

Assume that you are the credit manager of a medium-size supplier of building materials and related products. Home Depot wants to make credit purchases from your company, with payment due in 60 days.

Instructions:

a-1. Compute the current ratio for the fiscal years ending February 3, 2019, and January 28, 2018.

a-2. Compute the quick ratio for the fiscal years ending February 3, 2019, and January 28, 2018.

a-3. Compute the amount of working capital for the fiscal years ending February 3, 2019, and January 28, 2018.

a-4. Compute the change in working capital from the prior year for the fiscal years ending February 3, 2019, and January 28, 2018.

Answer 1

a-1 Current Ratio = Current Assets / Current Liabilities
Feb 3, 2019 = $18529 / 16716 = 1.11
Jan 28, 2018 = $18933 / 16194 = 1.17

a-2 Quick Ratio = (Cash + Receivable) / Current Liabilities
Feb 3, 2019 = ($1778+1936) / 16716 = 0.22
Jan 28, 2018 = ($3595+1952) / 16194 = 0.34

a-3 Working Capital = Current Assets - Current Liabilities
Feb 3, 2019 = $18529 - 16716 = $1813
Jan 28, 2018 = $18933 - 16194 = $2739

a-4 Change in Working Capital = $1813 - 2739 = ($926)
in (%) = ($926) / 2739 = -33.81%