QUESTION - The income statement and balance sheet for The Home Depot, Inc. can be found on separate worksheets on tabs (a) and (b), respectively. On worksheet (c), prepare ratio analysis and interpretations for 2021 and 2020 that includes the ratios listed below. You must include formulas.

Ratios:

Current ratio

Return on equity

Inventory turnover

Days' outstanding in accounts receivable (assume 365 days in a year)

Debt to total assets

Net profit on sales

Return on assets

Acid-test (quick ratio)

Interpretations:

For three ratios (current ratio, days outstanding in accounts receivable, and net profit on sales) include your interpretation of the results of your analysis. Your interpretation should include 1) a definition of the ratio, 2) whether the ratio is getting better or worse, and 3) whether the company should be concerned about the change in the ratio. An example interpreation is below.

Example:

The debt to total asset ratio shows how much of the company's assets are financed through debt. In 2020, Home Depot had a 1.06 ratio which means they had 6% more debt than assets. In 2021, the ratio dropped to 0.95 which means 95% of their assets are financed with debt. The trend is decreasing which means there is less det otr more assets. In either case, the comapny is in a stronger financial position.

Income statement - worksheet A

			The Home Depot, Inc.
			Income Statement
			For the years ended
(all numbers in millions)
		January 31, 2021	January 31, 2020	January 31, 2019
Revenue:
Total Revenue		132,110	110,225	108,203
Cost of Revenue (COGS)		87,257	72,653	71,043
Gross profit		44,853	37,572	37,160
Operating Expenses:
Selling, General & Administrative		26,575	21,729	21,383
Other Expense		-	-	263
Total Operating Expense		26,575	21,729	21,646
Operating Income		18,278	15,843	15,514
Other Income		47	73	93
Earnings before Income and Taxes		18,325	15,916	15,607
Interest Expense		1,347	1,201	1,051
Income before Tax		16,978	14,715	14,556
Income Tax Expense		4,112	3,473	3,435
Net Income		12,866	11,242	11,121

Balance Sheet - worksheet B

			The Home Depot, Inc.
			Balance Sheet
(all numbers in millions)
		January 31, 2021	January 31, 2020	January 31, 2019
Current Assets:
Cash and Cash Equivalents		7,895	2,133	1,778
Net Receivables		2,992	2,106	1,936
Inventory		16,627	14,531	13,925
Other Current Assets		963	1,040	890
Total Current Assets		28,477	19,810	18,529
Long-term Assets:
Property, Plant & Equipment		30,667	28,365	22,375
Goodwill		7,126	2,254	2,252
Other		4,311	807	847
Total Long-term Assets		42,104	31,426	25,474
Total Assets		70,581	51,236	44,003
Current Liabilities:
Accounts Payable		18,099	12,618	12,539
Short-term debt		2,244	3,641	2,395
Other current liabilities		2,823	2,116	1,782
Total Current Liabilities:		23,166	18,375	16,716
Long-term Liabilities:
Long-term Debt		41,178	33,736	26,807
Other		1,807	1,535	1,867
Deferred Liabilities		1,131	706	491
Total Long-term Liabilities		44,116	35,977	29,165
Total Liabilities		67,282	54,352	45,881
Stockholders Equity:
Common Stock		89	89	89
Retained Earnings		58,134	51,729	46,423
Treasury Stock		(65,793)	(65,196)	(58,196)
Capital Surplus		11,540	11,001	10,578
Other Stockholder Equity		(671)	(739)	(772)
Total Stockholder's Equity		3,299	(3,116)	(1,878)
Total Liabilities and Stockholder's Equity		70,581	51,236	44,003

Worksheet - C (need excel formulas)

	2021	2020	Interpret
Current Ratio (Interpret)
Return on Equity
Inventory Turnover
Number of days' outstanding in accounts receivable (assume 365 days)(Interpret)
Debt to Total Assets ratio	0.953259376	1.060816613
Net Profit on Sales (Interpret)
Return on Assets
Acid-test (quick) ratio