• Calculate the following Financial Ratios: Use the form provided in Blackboard and show all calculations. If a ratio does not apply to your company write N/A for that ratio.

Debt to Assets Ratio

Current Ratio

Net Profit Margin

Asset Turnover

Assets to Equity Ratio

Return on Equity

Inventory Turnover

Average Days to Sell Inventory

Gross Profit Margin

Earnings per Share

Price-Earnings Ratio

Accounts Receivable Turnover

Average Days to Collect A/R

THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Earnings Fiscal Year Ended) Jan. 31, 2016 Fiscal 2015 Feb. 1, 2015 iscal z014 Jan. 29,2017 "Fiseal 206" amounts is miions, exe NET SALES Cost of Sales GROSS PROFIT Operating Fxpenses: per share data 88,519 $83,176 $94,595 62.282 32.313 2B,380 Sclling, General and Administrative Depreciation aad Amorliation 16,801 17,132 1,764 8.886 13,47 Total Operating ixpenses OPERATING INCOME 11,774 Interest aud Other (lucome) Expense: (166) Interest and Investment Income (36) (337) Interest Rxpense Intereat and Other, net EARNINGS BEFORE PROVISION FOR INCOME TAXES Provision for Income Taxes NET FARNINGS Weighted Average Common Shares BASICEARNINGS PER SHARE Dilnted Weighted Average Common Shares DILUTED EARNINGS PER SHARE L1,021 9.976 4.534 L,277 S 5.49 1,283 S 5.46 s 6.47 $4-74 s 6.45 4.71 THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Fiscal Year Ended) Jan. 29, 2013 "Fiseal 2016" Tan. 31, 2016 Fiscal 2015" Feh. 1, 2015 "Fiscal 2014 amonnis in illions Net Earuings Other ComprehensiveIm(Loss): $7,957 $7,009 412) 34) Fareign Caurrency Translation Adjnstments Cash low Hedges, net of tax Olher 34 Tital Other Comprehensive Tnoamer(Inss) COMPREHENSIVE INCOME THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Earnings Fiscal Year Ended) Jan. 31, 2016 Fiscal 2015 Feb. 1, 2015 iscal z014 Jan. 29,2017 "Fiseal 206" amounts is miions, exe NET SALES Cost of Sales GROSS PROFIT Operating Fxpenses: per share data 88,519 $83,176 $94,595 62.282 32.313 2B,380 Sclling, General and Administrative Depreciation aad Amorliation 16,801 17,132 1,764 8.886 13,47 Total Operating ixpenses OPERATING INCOME 11,774 Interest aud Other (lucome) Expense: (166) Interest and Investment Income (36) (337) Interest Rxpense Intereat and Other, net EARNINGS BEFORE PROVISION FOR INCOME TAXES Provision for Income Taxes NET FARNINGS Weighted Average Common Shares BASICEARNINGS PER SHARE Dilnted Weighted Average Common Shares DILUTED EARNINGS PER SHARE L1,021 9.976 4.534 L,277 S 5.49 1,283 S 5.46 s 6.47 $4-74 s 6.45 4.71 THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Fiscal Year Ended) Jan. 29, 2013 "Fiseal 2016" Tan. 31, 2016 Fiscal 2015" Feh. 1, 2015 "Fiscal 2014 amonnis in illions Net Earuings Other ComprehensiveIm(Loss): $7,957 $7,009 412) 34) Fareign Caurrency Translation Adjnstments Cash low Hedges, net of tax Olher 34 Tital Other Comprehensive Tnoamer(Inss) COMPREHENSIVE INCOME THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity Accumulated Treasury Stock Common Stock Paid-In Capital 88,402 Stockholders Equity $12,522 Shares Earnings $23,180 6,345 Shares mounts in milions, excepper share data Balance, Fehruary 2, 2014 Net Earnings Shares Issued Under Employee Stock Plans Tax Effect of Stock-Based Compensation Foreign Currency Translation Adjustment:s Cash Flow Hedges, net of tax Stock Options, Awards and Amortization of Restricted Amount Income (Loss) (381) 46 (19.194) 1,761 S88 (610) 225 (T,Io) (7,00) (2,530) Rermrehases of Common Stock Cash Divideads ($1.88 per share) (2.530) S(452) Balance. February 1, 2015 Net Earnings Shares Issued Under Employee Stock Plans Tax Effect of Stack-Based Compensation Foreign Currency Translation Adjustments Cash Flow Tedges, net of tax Stock Options, Awards and Amortization of Restricted 88,885 $(26,194) .768 826,995 461) 9.322 2,009 (412) (34) (7,000) Repurchases of Couunon Stock. Cash Dividends ($2-36 per share) Balance, January 31, 2016 Net Farnings Shares Issued Under Employee Stock Plans Tax Effect of Stack-Based Compensation Foreign Currency Translation Adjustments Cash Flow Tedges, net oftax Stock Options, Awards and Amortization of Restricted (59) 7.000) 3,031) $30.973 -957 3,og1) S 6,316 $9,347 S88 $(898) (520) S(33,194) 1772 267 Repurchases of Couon Stock Cash Dividends $276 per share) (53) 7,000) 3-404) 7.000) 3.404) H(867) Balance, January 9, 2017 1,776 573) H(40,194) H88 H9.787 #35-519 H 4,333 Pape AB THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Fiscal Year Rnded Jan. 29, 2017 "Fiscal 2016 Jan. 31, 2016 "Fiscal 2015" Fcb. 1, 2015 Fiscal 2014" amnonts in millions CASH FLOWS FROM OPERATING ACTIVITTFS: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: $7.00y $6.315 87,957 1,863 1,786 225 (323) 1,973 Stock-Based Compensation Expense Gain on Sales of Investments Changes in Assets and Liahilities, net of the effects of acquisitions: (144) (181) (138) 769) (48) 446 (81) (124) (199) 244 146 (546) Other Current Assets Accounts Payable and Accrued Expenscs Deferred Revenue Inome Taxes Payable Dcterred Income Taxes Other 154 (117) 15 Net Cash rovdey Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures, net of $179, $165 and S217 of non-cash capital expenditures in fiscal 2016, 2015 and 2014 respectively Procceds trom Sales of Investments Payments for Businesses Acquired, net Proceeds fro Sales of Property ad Eipment (1442) 1,503 (1,621) 323 (1,666) Net Cash Used in Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Shorl-Term Borrwings, nel Procceds trom Long Term Borrowings, net of discounts Repayments of Long-Term Debt Repurchases of Common Stock Procceds from Sales of Common Stock Cash Dividends Paid to Stockholders Olher FinaigActivities 60 3.991 (39) (7,000) 228 (3,031) 1,981 (39) 7,000) 4.959 (3.045) (6,88o) 3-404) (2.530) Net Cash Used in Financing Activities .870 Change in Cash and Cash Equivalents Effect of Exchange Rale Changes on Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year SUPPLEMENTAL DISCLOSUREOF CASH PAYMENIS MADE FOR: Interest, net of interest capitalized Income Taxes 330 (106) S1.72 874 3.853 * 782 $3.435 924 4.623 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business, Consolidation and Presentation The Home Depot, Inc., together with its subsidiaries (the "Company").is a home improvement retailer that sells a wide assortment of building materials, home improvement products and lawn and garden products and provides a number services. T ie Home Depot stom s, which are ull ervor, war '"ise sty e stres averaging appro imately io4 noo suua re: Pe n endnsed space, with approximate y 2 000 additional square m't nfontside gar en area, stx approximately 30,0o0 to 40,o00 different kinds of products that are sold to do-it-yourself customers, do-it-for-me customers and professional customers. The Company also offers a significantly broader product assortment through its wehsites. At theend of fiscal 20h, the Company was operating 2,278 The Home Depol stores, which includeid 1,977 stores in the United Slates,including the Commonwealth of Puerto Rico ad the lerritories of the U.S. Virgin Islands and Guam ("U.S."), 182 stores in Canada and 119 stores in Mexico. The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiarics. All significant intercompany transactions have been eliminated in consolidaton Fiscal Year The Company's fiscal year is a 52-or 53-week period ending on the Sunday neares oJanuary 31. Fiscal years endedanry 29, 2017Fiscal 20 anuary 31, 2016 Fiscal 20) and February 1, 2015Fiscal 2014 nlude 52 weeks. Use of stimales Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in preparing these financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP"). Actual results could differ from these estimates. Fair Value of Financial Fustruments The carrying amounts of Cash and Cash Equivalents, Roceivables, Short-Term Debt and Accounts Payable approximate fair value due to the short-term maturities of these financial instruments. The fair value of the Company's Long-Term Debt is discussed in Note 11. Cash Equivalemts The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company's cash equivalents are carried at fair market value and consist primarily of money marke funds. Accoants Receivable ompany has agreements with hire arty servire providers who dne c y extend r edit D ru omers manage the Ynnpan 's pmvate lahe cre dit card prngram PI.C program and own he related receivables. T e nmpanv evaluate the third-party entities holding the receivables under the program and concluded that they should not be consolidated by the Company. The agreement with the primary third-party service provider for the Company's PLCC program expires in 2028, with the Companv having the option, but n ohl Ration to pure ase the receivab es a the e d o th agreement. The de erl interest charges me rrel y the Xmpany Dr sk erre financing l og am o re tits ustomers are included in Cost of Sales. The interchange fees charged to the Company for the customers' use of the cards and any profit sharing with the third-party service providers are included in Selling, General and Administrative expenses ("SG&A"). The sum of these three components is referred tn by the Company as "the enst ofcredit of the PLC program In addition, certain subsidiaries of the Company, including Inlerline Brands, Inc. ("Inlerline"), extend credit directly tn customers in the ondinary course of business. The receivables due fromcustomers were $216 million and S253 millon as of January 29, 2017 and January 31, 2016, respectively. The Company's valuation reserve related to accounts rcocivable was not material to the Consolidated Financial Statements of the Company as of the end of fiscal 2016 or 2015 Merchawdise Inventories The majority of the Company's Merchandise Inventorics are stated at the lower of cost (first-in, tirst-out) or market, as determined by the retail inventory method. As the inventory retail value is adjusted regularly to reflect market ronditions, the inventory valued using the relail methad approximates the lower of cost ar market. Certain suhsidiaries, including retail operations in Canada and Mexicn, distribun centers and Interline, record Mercha Pe AID nventones at the lower of cost or market, as determined by a cost method These Merehandse Inventones represent approximate v 30% o the total Merchandise nventores balance. T e Company evaluates the inventory valued using a cost method at the end of each quarter to ensure that it is carried at the lower of cost or market. The valuation allowance for Merchandise nventories valued under a cost method was not material to the Consolidated Financial Statements of the Company as of the end of fiscal 2016 or 2015- ndependent pl. sical inven on cuints or c cle counts are taken on a regular basis in each s ore and dis ribution center to ensure hat amounts renes: e in the acu anl an n anso da ed inancial Statemen s or Merchandise Inventories are properly stated. During the period between physical inventory counts in stores, the Company accrucs for estimated losses related to shrink on a store-by-store basis based on recent shrink results and current trends in the busincss. Shrink (or in the caseof excess inventory, "swll") is thedifference bel ween the recorded a ofventory and the physical inventory. Shrinkmay ocu e to hss, inaccurate rcrds for the receipt of inventory or delerioration of goods, among other things. ncome Yaxes Income taxes are accounted for under the asset and liability method. The Company provides for federal, state and foreign income taxes currently payable, as wel as for those deferred due to timing differences between reporting income and expenscs for tinancial statement purposes versus tax purposes. Deferred tax asscts and liabilities are recognized for the future tax conscquences attributable to temporary differences between the tinancial statement carrying amounts of existing assels and liabilities and their resective lax bases. Deserred lax asels and liabils aremsred using enacled incomlax rales expecled lo apply lo laxahle incom th yersin which those lemporary differences are expecled to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date. Te ompany recognizes the effect of income tax positions on v fthose positions are more likelv than not of being sustained. Recognized n come tax positions are measured at the largest amount that s greater than 50% realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. kelv of being The Company and its cligible subsidiarics tile a consolidated U.S. tederal income tax return. Non-U.S. subsidiarics and certain U.S. subsidiaries, which are consolidated for tinancial reporting purposcs, are not cligible to be included in the Company's oded U.S. federal incomelax relurn. Sepaale provisions for income laxes havebeen delerminedo hes h Copays lorinvest subslantially all of the unreitled eaings ofils non-U.S. subsidiaries and postpone their remittance indefinitely. Accordingly, no provision for U.S.income taxes on these carnings was recorded in the accompanying Consolidated Statements of Earnings. The Company's Buildings, Furniture, Fixtures and Equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold Improvements are amortized using the straight-line method over the original term of the lease or the uscful life of the improvement, whichever is shorter. The Company's Property and Equipment is depreciated using the following estimated usctul lives 5-45 years 2-20 years 5-45 years Furniture, Fixtures and Equipment Capisalized Software Cosis The Company capitalizes certain costs related to the acquisition and development of software and amortizes these costs using the straight-line methodover the estimated useful life of the software, which is three to six years. Certain development costs not mceting the criteria for capitalization are expensed as incurred. THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Earnings Fiscal Year Ended) Jan. 31, 2016 Fiscal 2015 Feb. 1, 2015 iscal z014 Jan. 29,2017 "Fiseal 206" amounts is miions, exe NET SALES Cost of Sales GROSS PROFIT Operating Fxpenses: per share data 88,519 $83,176 $94,595 62.282 32.313 2B,380 Sclling, General and Administrative Depreciation aad Amorliation 16,801 17,132 1,764 8.886 13,47 Total Operating ixpenses OPERATING INCOME 11,774 Interest aud Other (lucome) Expense: (166) Interest and Investment Income (36) (337) Interest Rxpense Intereat and Other, net EARNINGS BEFORE PROVISION FOR INCOME TAXES Provision for Income Taxes NET FARNINGS Weighted Average Common Shares BASICEARNINGS PER SHARE Dilnted Weighted Average Common Shares DILUTED EARNINGS PER SHARE L1,021 9.976 4.534 L,277 S 5.49 1,283 S 5.46 s 6.47 $4-74 s 6.45 4.71 THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Fiscal Year Ended) Jan. 29, 2013 "Fiseal 2016" Tan. 31, 2016 Fiscal 2015" Feh. 1, 2015 "Fiscal 2014 amonnis in illions Net Earuings Other ComprehensiveIm(Loss): $7,957 $7,009 412) 34) Fareign Caurrency Translation Adjnstments Cash low Hedges, net of tax Olher 34 Tital Other Comprehensive Tnoamer(Inss) COMPREHENSIVE INCOME THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Earnings Fiscal Year Ended) Jan. 31, 2016 Fiscal 2015 Feb. 1, 2015 iscal z014 Jan. 29,2017 "Fiseal 206" amounts is miions, exe NET SALES Cost of Sales GROSS PROFIT Operating Fxpenses: per share data 88,519 $83,176 $94,595 62.282 32.313 2B,380 Sclling, General and Administrative Depreciation aad Amorliation 16,801 17,132 1,764 8.886 13,47 Total Operating ixpenses OPERATING INCOME 11,774 Interest aud Other (lucome) Expense: (166) Interest and Investment Income (36) (337) Interest Rxpense Intereat and Other, net EARNINGS BEFORE PROVISION FOR INCOME TAXES Provision for Income Taxes NET FARNINGS Weighted Average Common Shares BASICEARNINGS PER SHARE Dilnted Weighted Average Common Shares DILUTED EARNINGS PER SHARE L1,021 9.976 4.534 L,277 S 5.49 1,283 S 5.46 s 6.47 $4-74 s 6.45 4.71 THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Comprehensive Income Fiscal Year Ended) Jan. 29, 2013 "Fiseal 2016" Tan. 31, 2016 Fiscal 2015" Feh. 1, 2015 "Fiscal 2014 amonnis in illions Net Earuings Other ComprehensiveIm(Loss): $7,957 $7,009 412) 34) Fareign Caurrency Translation Adjnstments Cash low Hedges, net of tax Olher 34 Tital Other Comprehensive Tnoamer(Inss) COMPREHENSIVE INCOME THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity Accumulated Treasury Stock Common Stock Paid-In Capital 88,402 Stockholders Equity $12,522 Shares Earnings $23,180 6,345 Shares mounts in milions, excepper share data Balance, Fehruary 2, 2014 Net Earnings Shares Issued Under Employee Stock Plans Tax Effect of Stock-Based Compensation Foreign Currency Translation Adjustment:s Cash Flow Hedges, net of tax Stock Options, Awards and Amortization of Restricted Amount Income (Loss) (381) 46 (19.194) 1,761 S88 (610) 225 (T,Io) (7,00) (2,530) Rermrehases of Common Stock Cash Divideads ($1.88 per share) (2.530) S(452) Balance. February 1, 2015 Net Earnings Shares Issued Under Employee Stock Plans Tax Effect of Stack-Based Compensation Foreign Currency Translation Adjustments Cash Flow Tedges, net of tax Stock Options, Awards and Amortization of Restricted 88,885 $(26,194) .768 826,995 461) 9.322 2,009 (412) (34) (7,000) Repurchases of Couunon Stock. Cash Dividends ($2-36 per share) Balance, January 31, 2016 Net Farnings Shares Issued Under Employee Stock Plans Tax Effect of Stack-Based Compensation Foreign Currency Translation Adjustments Cash Flow Tedges, net oftax Stock Options, Awards and Amortization of Restricted (59) 7.000) 3,031) $30.973 -957 3,og1) S 6,316 $9,347 S88 $(898) (520) S(33,194) 1772 267 Repurchases of Couon Stock Cash Dividends $276 per share) (53) 7,000) 3-404) 7.000) 3.404) H(867) Balance, January 9, 2017 1,776 573) H(40,194) H88 H9.787 #35-519 H 4,333 Pape AB THE HOME DEPOT, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Fiscal Year Rnded Jan. 29, 2017 "Fiscal 2016 Jan. 31, 2016 "Fiscal 2015" Fcb. 1, 2015 Fiscal 2014" amnonts in millions CASH FLOWS FROM OPERATING ACTIVITTFS: Net Earnings Reconciliation of Net Earnings to Net Cash Provided by Operating Activities: $7.00y $6.315 87,957 1,863 1,786 225 (323) 1,973 Stock-Based Compensation Expense Gain on Sales of Investments Changes in Assets and Liahilities, net of the effects of acquisitions: (144) (181) (138) 769) (48) 446 (81) (124) (199) 244 146 (546) Other Current Assets Accounts Payable and Accrued Expenscs Deferred Revenue Inome Taxes Payable Dcterred Income Taxes Other 154 (117) 15 Net Cash rovdey Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures, net of $179, $165 and S217 of non-cash capital expenditures in fiscal 2016, 2015 and 2014 respectively Procceds trom Sales of Investments Payments for Businesses Acquired, net Proceeds fro Sales of Property ad Eipment (1442) 1,503 (1,621) 323 (1,666) Net Cash Used in Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Shorl-Term Borrwings, nel Procceds trom Long Term Borrowings, net of discounts Repayments of Long-Term Debt Repurchases of Common Stock Procceds from Sales of Common Stock Cash Dividends Paid to Stockholders Olher FinaigActivities 60 3.991 (39) (7,000) 228 (3,031) 1,981 (39) 7,000) 4.959 (3.045) (6,88o) 3-404) (2.530) Net Cash Used in Financing Activities .870 Change in Cash and Cash Equivalents Effect of Exchange Rale Changes on Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Year Cash and Cash Equivalents at End of Year SUPPLEMENTAL DISCLOSUREOF CASH PAYMENIS MADE FOR: Interest, net of interest capitalized Income Taxes 330 (106) S1.72 874 3.853 * 782 $3.435 924 4.623 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business, Consolidation and Presentation The Home Depot, Inc., together with its subsidiaries (the "Company").is a home improvement retailer that sells a wide assortment of building materials, home improvement products and lawn and garden products and provides a number services. T ie Home Depot stom s, which are ull ervor, war '"ise sty e stres averaging appro imately io4 noo suua re: Pe n endnsed space, with approximate y 2 000 additional square m't nfontside gar en area, stx approximately 30,0o0 to 40,o00 different kinds of products that are sold to do-it-yourself customers, do-it-for-me customers and professional customers. The Company also offers a significantly broader product assortment through its wehsites. At theend of fiscal 20h, the Company was operating 2,278 The Home Depol stores, which includeid 1,977 stores in the United Slates,including the Commonwealth of Puerto Rico ad the lerritories of the U.S. Virgin Islands and Guam ("U.S."), 182 stores in Canada and 119 stores in Mexico. The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiarics. All significant intercompany transactions have been eliminated in consolidaton Fiscal Year The Company's fiscal year is a 52-or 53-week period ending on the Sunday neares oJanuary 31. Fiscal years endedanry 29, 2017Fiscal 20 anuary 31, 2016 Fiscal 20) and February 1, 2015Fiscal 2014 nlude 52 weeks. Use of stimales Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and reported amounts of revenues and expenses in preparing these financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP"). Actual results could differ from these estimates. Fair Value of Financial Fustruments The carrying amounts of Cash and Cash Equivalents, Roceivables, Short-Term Debt and Accounts Payable approximate fair value due to the short-term maturities of these financial instruments. The fair value of the Company's Long-Term Debt is discussed in Note 11. Cash Equivalemts The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company's cash equivalents are carried at fair market value and consist primarily of money marke funds. Accoants Receivable ompany has agreements with hire arty servire providers who dne c y extend r edit D ru omers manage the Ynnpan 's pmvate lahe cre dit card prngram PI.C program and own he related receivables. T e nmpanv evaluate the third-party entities holding the receivables under the program and concluded that they should not be consolidated by the Company. The agreement with the primary third-party service provider for the Company's PLCC program expires in 2028, with the Companv having the option, but n ohl Ration to pure ase the receivab es a the e d o th agreement. The de erl interest charges me rrel y the Xmpany Dr sk erre financing l og am o re tits ustomers are included in Cost of Sales. The interchange fees charged to the Company for the customers' use of the cards and any profit sharing with the third-party service providers are included in Selling, General and Administrative expenses ("SG&A"). The sum of these three components is referred tn by the Company as "the enst ofcredit of the PLC program In addition, certain subsidiaries of the Company, including Inlerline Brands, Inc. ("Inlerline"), extend credit directly tn customers in the ondinary course of business. The receivables due fromcustomers were $216 million and S253 millon as of January 29, 2017 and January 31, 2016, respectively. The Company's valuation reserve related to accounts rcocivable was not material to the Consolidated Financial Statements of the Company as of the end of fiscal 2016 or 2015 Merchawdise Inventories The majority of the Company's Merchandise Inventorics are stated at the lower of cost (first-in, tirst-out) or market, as determined by the retail inventory method. As the inventory retail value is adjusted regularly to reflect market ronditions, the inventory valued using the relail methad approximates the lower of cost ar market. Certain suhsidiaries, including retail operations in Canada and Mexicn, distribun centers and Interline, record Mercha Pe AID nventones at the lower of cost or market, as determined by a cost method These Merehandse Inventones represent approximate v 30% o the total Merchandise nventores balance. T e Company evaluates the inventory valued using a cost method at the end of each quarter to ensure that it is carried at the lower of cost or market. The valuation allowance for Merchandise nventories valued under a cost method was not material to the Consolidated Financial Statements of the Company as of the end of fiscal 2016 or 2015- ndependent pl. sical inven on cuints or c cle counts are taken on a regular basis in each s ore and dis ribution center to ensure hat amounts renes: e in the acu anl an n anso da ed inancial Statemen s or Merchandise Inventories are properly stated. During the period between physical inventory counts in stores, the Company accrucs for estimated losses related to shrink on a store-by-store basis based on recent shrink results and current trends in the busincss. Shrink (or in the caseof excess inventory, "swll") is thedifference bel ween the recorded a ofventory and the physical inventory. Shrinkmay ocu e to hss, inaccurate rcrds for the receipt of inventory or delerioration of goods, among other things. ncome Yaxes Income taxes are accounted for under the asset and liability method. The Company provides for federal, state and foreign income taxes currently payable, as wel as for those deferred due to timing differences between reporting income and expenscs for tinancial statement purposes versus tax purposes. Deferred tax asscts and liabilities are recognized for the future tax conscquences attributable to temporary differences between the tinancial statement carrying amounts of existing assels and liabilities and their resective lax bases. Deserred lax asels and liabils aremsred using enacled incomlax rales expecled lo apply lo laxahle incom th yersin which those lemporary differences are expecled to be recovered or settled. The effect of a change in income tax rates is recognized as income or expense in the period that includes the enactment date. Te ompany recognizes the effect of income tax positions on v fthose positions are more likelv than not of being sustained. Recognized n come tax positions are measured at the largest amount that s greater than 50% realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. kelv of being The Company and its cligible subsidiarics tile a consolidated U.S. tederal income tax return. Non-U.S. subsidiarics and certain U.S. subsidiaries, which are consolidated for tinancial reporting purposcs, are not cligible to be included in the Company's oded U.S. federal incomelax relurn. Sepaale provisions for income laxes havebeen delerminedo hes h Copays lorinvest subslantially all of the unreitled eaings ofils non-U.S. subsidiaries and postpone their remittance indefinitely. Accordingly, no provision for U.S.income taxes on these carnings was recorded in the accompanying Consolidated Statements of Earnings. The Company's Buildings, Furniture, Fixtures and Equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Leasehold Improvements are amortized using the straight-line method over the original term of the lease or the uscful life of the improvement, whichever is shorter. The Company's Property and Equipment is depreciated using the following estimated usctul lives 5-45 years 2-20 years 5-45 years Furniture, Fixtures and Equipment Capisalized Software Cosis The Company capitalizes certain costs related to the acquisition and development of software and amortizes these costs using the straight-line methodover the estimated useful life of the software, which is three to six years. Certain development costs not mceting the criteria for capitalization are expensed as incurred