A. Outstanding Little or no risk of inability to pay. For customers in this category, we fill any reasonable order without imposing a credit limit. The customer's credit is reevaluated B. Good Customer has good debt-paying ability but is assigned a credit limit that is reviewed every 90 days. Orders above the credit limit are accepted only on a cash basis. C. Marginal Customer appears sound, but credit should be extended only on a and with a relatively low credit limit. Creditworthiness and credit limit are reevaluated every Part Ill As general background, study the "Five-Year Summary of Financial and Operating in parts a POSSIBLE CREDIT RATINGS annually. 30-day basis 90 days. D. Unacceptable Customer does not qualify for credit. Results." Instructions a. Compute the following for the fiscal years ending January 31, 2016, and February 1, 2015 (round percentages to the nearest tenth of 1 percent): 1. Percentage change in net sales (relative to the prior year). 2. Percentage change in net earnings. 3. Gross profit rate. 4. Net income as a percentage of sales. 5. Return on average total assets. 6. Return on average total equity. b. Write a statement that describes your conclusion(s) concerning trends in Home Depot's prof- itability during the period covered in your analysis in part a above. Justify your conclusion(s). Appendix A Home Depot 2015 Financial Statements A-4 THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS January 31, 2016 $ 88,519 58,254 30,265 Fiscal Year Ended) February 1, 2015 $ 83,176 54,787 28.389 February 2, 2014 $ 78,812 51,897 26,915 16,801 1,690 18,491 11,774 16,280 1,640 17,920 10,469 16,122 1,627 17,749 9,166 amounts in millions, except per share data NET SALES Cost of Sales GROSS PROFIT Operating Expenses: Selling, General and Administrative Depreciation and Amortization Total Operating Expenses OPERATING INCOME Interest and Other (Income) Expense: Interest and Investment Income Interest Expense Interest and Other, net EARNINGS BEFORE PROVISION FOR INCOME TAXES Provision for Income Taxes NET EARNINGS Weighted Average Common Shares BASIC EARNINGS PER SHARE Diluted Weighted Average Common Shares DILUTED EARNINGS PER SHARE (337) 830 493 9,976 3,631 (166) 919 753 11,021 4,012 7,009 1,277 5.49 1,283 5.46 $ 6,345 (12) 711 699 8,467 3,082 5,385 1,425 3.78 1,434 3.76 $ 1,338 4.74 1,346 4.71 $ (1) Fiscal years ended January 31, 2016, February 1, 2015 and February 2, 2014 include 52 weeks. See accompanying Notes to Consolidated Financial Statements. Appendix A Home Depot 2015 Financial Statements THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Fiscal Year Ended) January 31, February 1, February 2, 2016 2015 7,009 $ 6,345 $ 5,385 amounts in millions $ 2014 Net Earnings Other Comprehensive Loss: Foreign Currency Translation Adjustments Cash Flow Hedges, net of tax Other Total Other Comprehensive Loss COMPREHENSIVE INCOME (412) (34) (510) 11 (329) (446) 6,563 (12) (10) (351) 5,034 (498) 5,847 $ $ $ (1) Fiscal years ended January 31, 2016, February 1, 2015 and February 2, 2014 include 52 weeks. See accompanying Notes to Consolidated Financial Statements. Set comparing Notes to Consolidated Financial Statements Appendix A Home Depot 2015 Financial Statements THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Accumulated Other Common Stock Treasury Stock Pald-In Retained Comprehensive Stockholders Shares Amount Capital Earnings Income (Low) Shares Amount Equity 1,754 S 88 $ 7,948 $ 20,038 $ (270) S (10,694) $ 17,777 5,385 5385 103 103 123 123 (329) (329) (12) (12) III 228 (111) (8,500) 1111 (2.243) amounts in millions, except per share data Balance, February 3, 2013 Net Earnings Shares Issued Under Employee Stock Plans Tax Effect of Stock-Based Compensation Foreign Currency Translation Adjustments Cash Flow Hedges, net of tax Sock Options, Awards and Amortization of Restricted Stock Repurchases of Common Stock Cash Dividends ($1.56 per share) Other Balance, February 2, 2014 Net Earnings Shares Issued Under Employee Stock Plans Tax Effect of Stock-Based Compensation Foreign Currency Translation Adjustments Cash Flow Hedges, net of tax Stock Options, Awards and Amortization of Restricted Stock Repurchases of Common Stock Cash Dividends ($1.88 per share) Ober Balance, February 1, 2015 (10) 46 1,761 88 $ 8,402 $ 23,180 $ (381) $ (19,194) S 228 (8,500) (2.243) (10) 12,522 6,345 122 136 (510) 11 6.345 122 136 TI 11 III III Illal III (510) 11 225 (80) (7.000) (2.530) 1,768 (452) (461) $ (26,194) $ 88 $ 8,885 $ 26,995 $ 7,009 73 145 TIIT! I 8 225 (7,000) (2.530) 1 9,322 7.009 73 145 (412) (34) Net Earnings Stares Issued Under Employee Stock Plans Tu Effect of Stock-Based Compensation Foreign Currency Translation Adjustments Cal Flow Hedges, net of tax Sede Options, Awards and Amortization of (412) (34) 244 Restricted Stock Ruchases of Common Stock Dividends (5236 per share) Dance, January 31, 2016 (59) (7,000) (3,031) 88 S 9,347 $ 30,973 $ 244 (7.000 (3.031 6,316 1,772 $ (898) (520) $ (33,194) S Appendix A Home Depot 2015 Financial Statements AO THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended January 31, 2016 February 1, February 2014 2015 $ 7,909 $ 6345 5 1,863 244 (144) 1,786 235 (23) CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities Depreciation and Amortization Smock Based Compensation Expense Gain on Sales of Investments Changes in Assets and Liabilities, net of the effects of acquisitions: Receivables, net Merchandise Inventories Other Current Assets Accounts Payable and Accrued Expenses Deferred Revenue Income Taxes Payable Deferred Income Taxes Other Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures, net of $165, 8217 and $46 of non-cash capital expenditures in fiscal 2015, 2014 and 2013, respectively Proceeds from Sales of Investments Payments for Businesses Acquired, net Proceeds from Sales of Property and Equipment Net Cash Used in Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Short-Term Borrowings, net Proceeds from Long-Term Borowings, net of discounts Repayments of Long-Term Debe Repurchases of Common Stock (181) (546) (5) 888 109 154 15 (33) 9,373 (199) 244 146 168 159 (104) 00 015 (1,503) 144 (1,666) 3 (2,982) (1.442) 323 (200) 48 (1.271) 34 Proceeds from Sales of Common Stock Cash Dividends Paid to Stockholders Other Financing Activities Net Cushed in Financing Activities Change in Cash and Cash Equivalents Effect of Exchange Rate Changes on Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR: Interest, et of interest capitalized Income Taxes 60 3,991 (39) (7,000) 228 (3,031) 4 (5,787) 604 (111) 1,723 2,216 290 1.981 (39) (7.000) 252 (2,530) (25) (7,071) (100) (106) 1.99 1,723 15 $ $ 5 (1) Fiscal years ended January 31, 2016 February 1, 2015 and February 2, 2014 include 52 weeks. See accompanying Noles to Consolidated Financial Statements. $ $ 874 3,853 $ S $ 3,435 S Appendix A Home Depot 2015 Financial Statements AO THE HOME DEPOT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Fiscal Year Ended January 31, 2016 February 1, February 2014 2015 $ 7,909 $ 6345 5 1,863 244 (144) 1,786 235 (23) CASH FLOWS FROM OPERATING ACTIVITIES: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities Depreciation and Amortization Smock Based Compensation Expense Gain on Sales of Investments Changes in Assets and Liabilities, net of the effects of acquisitions: Receivables, net Merchandise Inventories Other Current Assets Accounts Payable and Accrued Expenses Deferred Revenue Income Taxes Payable Deferred Income Taxes Other Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures, net of $165, 8217 and $46 of non-cash capital expenditures in fiscal 2015, 2014 and 2013, respectively Proceeds from Sales of Investments Payments for Businesses Acquired, net Proceeds from Sales of Property and Equipment Net Cash Used in Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Short-Term Borrowings, net Proceeds from Long-Term Borowings, net of discounts Repayments of Long-Term Debe Repurchases of Common Stock (181) (546) (5) 888 109 154 15 (33) 9,373 (199) 244 146 168 159 (104) 00 015 (1,503) 144 (1,666) 3 (2,982) (1.442) 323 (200) 48 (1.271) 34 Proceeds from Sales of Common Stock Cash Dividends Paid to Stockholders Other Financing Activities Net Cushed in Financing Activities Change in Cash and Cash Equivalents Effect of Exchange Rate Changes on Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year SUPPLEMENTAL DISCLOSURE OF CASH PAYMENTS MADE FOR: Interest, et of interest capitalized Income Taxes 60 3,991 (39) (7,000) 228 (3,031) 4 (5,787) 604 (111) 1,723 2,216 290 1.981 (39) (7.000) 252 (2,530) (25) (7,071) (100) (106) 1.99 1,723 15 $ $ 5 (1) Fiscal years ended January 31, 2016 February 1, 2015 and February 2, 2014 include 52 weeks. See accompanying Noles to Consolidated Financial Statements. $ $ 874 3,853 $ S $ 3,435 S Natet sociales at fiscal year-end (in thousands) this year 2012 includes 5 weeks; all other fiscal years reported include 52 weeks. 2 la focul 2015, the Company changed its accounting policy for shipping and handling costs from the Company's stores, locations or darbuon ciers to comers and for online filmni center costs. This change in accounting policy has been applied retrospectively. See the Coolidged Financial Statements included in Hem & "Financial Statements and Supplementary Data". Includes a Soles at locations open greater than 12 months, including relocated and remodeled stores and online sales, and lading deed stores. Retail stores become comparable on the Monday following their 365th day of operation comparable store les is indeeded only a supplemental information and is not a substitute for Ner Sales or Ner Earnings presented in accordance werely accepted accounting principles. Ner Sales for the 53rd week of fiscal 2012 are not included in comparable store sales Des do not include results for the Interline acquisition that was completed in the third quarter of fiscal 2015 Appendix A Home Depot 2015 Financial Statements Niet earnings increase (5) Five-Year Summary of Financial and Operating Results The Home Depot, Inc. and Subsidiaries amountsin millions, except where noted 2015 2014 2013 2012 STATEMENT OF EARNINGS DATA 2011 Net sales 88,519 $ 83,176 $ 78,812 5 74,754 $ 70,395 6.4 Net sales increase (5) 5.5 5.4 6.2 3.5 Earnings before provision for income taxes 11,021 9,976 8.467 7.221 6,060 Net earnings 7,009 6,345 5,385 4,535 3,883 10.5 17.8 18.7 16.8 16.3 Diluted earnings per share (5) 5.446 4,71 3.76 3.00 2.47 Diluted earnings per share increase (5) 15.9 25.3 21.5 22.9 Diluted weighted average number of common shares 1,283 1,346 1,434 1.511 1.570 Gross margin- of sales 34.2 34.2 34.0 33.9 Total operating expenses- of sales 20,9 21.5 22.5 23.6 24.4 Interest and other, net- of sales 0.9 0.6 0.9 0.7 0.8 Earnings before provision for income taxes- of sales 12.5 12.0 10.7 9.7 Net carnings- of sales 7.9 7.6 6.8 6.1 5.5 BALANCE SHEET DATA AND FINANCIAL RATIOS Total assets $ 42,549 $ 39,946 S 40,518 5 41.084 5 40.518 Working capital 4,467 4,033 4,530 3.910 5,144 Merchandise inventories 11,809 11,079 11.057 10,710 10.325 Net property and equipment 22,191 22.720 23,348 24,069 24.448 Long-term debt 20,888 16,869 14,691 9,475 10,758 Stockholders' equity 6,316 9.322 12.522 17.777 17.898 Long-term debt-to-equity (5) 330.7 181.0 1173 53.3 60.1 Total debe-to-equity (5) 337.5 184.5 117.6 60.7 60.3 Current ratio 1.3611 1.36:1 1.42:1 1.34:1 1.55:1 Inventory turnover 4.7% 4.6x 4.5x 4.3x Return on invested capital (9) 28.0 24.9 20.9 17.0 14.9 STATEMENT OF CASH FLOWS DATA Depreciation and amortization $ 1.863 $ 1,786 $ 1,757 $ 1.684 5 1.682 1,503 1,442 1,389 1.312 1.221 Cash dividends per share (5) 2.360 1.880 1.560 1.160 1.040 4.9 Capital expenditures 2,269 2,274 237 104 236 2,263 236 104 2.256 235 104 2.252 215 104 104 STORE DATA Number of stones Square footage at fiscal year-end Autre quare footage per store (in thousands) STORE SALES AND OTHER DATA Comparable store sales increase (yoko Sie per quare foot (5) Number of customer transactions 5.6 371 1,501 58.77 385 5.3 352 1,442 57.87 371 6.8 334 1,391 56.78 365 4.6 319 1,364 54.89 340 299 1,318 53.28 331 for fiscal 2012