Selected balance sheet and income statement information for Home Depot for two recent years follows.

$ millions Current Year Prior Year

Cash $$2,702$ $$2,296$

Accounts receivable $3,2513,357$

Current assets $31,82228,474$

Current liabiliites $22,64828,119$

Short$-$term debt $-1,014$

Current installments of long$-$term debt $1,2062,398$

Current operating lease liabilities $926813$

Long$-$term debt, excluding current installments $41,12335,872$

Long$-$term operating lease liabilities $6,1015,246$

Total liabilities $73,38572,101$

Treasury stock $(85,552)(79,178)$

Total stockholders$$ equity $($deficit$)1,531(1,662)$

Interest expense $1,5851,320$

Earnings before interest and taxes $($EBIT$)23,55822,579$

Cash from operating activities $($Operating cash$)14,32316,240$

Depreciation and amortization $2,9162,805$

Capital expenditures $3,0572,515$

Required

Compute the following ratios for both years:

Capital Structure Ratios Coverage Ratios Liquidity Ratios

Liabilities$-$to$-$equity ratio Times interest earned Current ratio

Total debt$-$to$-$equity ratio EBITDA coverage ratio Quick ratio

Cash from operations to total debt

Free operating cash flow to total debt

Capital structure ratios

Coverage ratios

Liquidity ratios

Compute the capital structure ratios.

Capital structure ratios Numerator Denominator Result

Liabilities$-$equity ratio Answer $1$

Total liabilities

Answer $2$

Equity $($deficit$)$

Current year Answer $3$

$73385$

Answer $4$

$1531$

$47\mathrm{.}93$

Prior year Answer $5$

$72101$

Answer $6$

$-1662$

$-43\mathrm{.}38$

Total debt$-$to$-$equity ratio Answer $7$

Total debt

Answer $8$

Equity $($deficit$)$

Current year Answer $9$

$0$

Answer $10$

$1531$

$0$

Prior year Answer $11$

$0$

Answer $12$

$-1662$

$0$

Home Depot had Answer $13$

significant

balances in Treasury stock in both years. When analyzing the company's capital structure, these amounts Answer $14$

distort

total stockholders' equity.

Analysts commonly adjust negative and small balances in stockholders$$ equity caused by large levels of treasury stock. One way to handle this is to add back the treasury stock balance to both total equity and total assets. Use this adjustment technique to restate Home Depot$$s capital structure ratios.

Adjusted capital structure ratios Numerator Denominator Result

Liabilities$-$to$-$equity ratio Answer $15$

Total liabilities

Answer $16$

Equity $($deficit$)$

Current year Answer $17$

$73385$

Answer $18$

Prior year Answer $19$

$72101$

Answer $20$

$0$

Total debt$-$to$-$equity ratio Answer $21$

Total debt

Answer $22$

Average assets

Current year Answer $23$

$0$

Answer $24$

$0$

Prior year Answer $25$

$0$

Answer $26$

$0$

The adjusted capital structure ratios indicate that Home Depot is primarily financed by Answer $27$

investors

$.$