This is a 3 step problem which utilizes the information that is in the attachment. Either that or http://highered.mcgraw-hill.com/sites/dl/free/0073526819/388107/appendix_a_home_depot.pdf would work. Part I Instructions: Answer each of the following questions and briefly explain where in the statements, notes, or other sections of the annual report you located the information used in your answer. a. How many years are covered in each of the primary comparative financial statements? Were all of these statements audited? Name the auditors. What were the auditors' conclusions concerning these statements? b. Home Depot combines its statement of retained earnings with another financial statement. Where are details about changes in the amount of retained earnings fund? c. Over the three years presented, have the company's annual net cash flows been positive or negative from 1) operating activities, 2) investing activities, and 3) financing activities? Has the company's cash balance increased or decreased during each of these three years? Part II Home Depot wants to make credit purchases from your company, with payment due in 60 days assuming you are a credit manager of a medium sized supplier. a. read the first note to the financial statements, "Summary of Significant Accounting Policies". Compute the following for the fiscal years ending feb. 3, 2008, and jan. 28, 2007 (round percentages to the nearest tenth of 1 percent, and other computations to one decimal place): 1. Current Ratio 2. Quick Ratio 3. Amount of Working Capital 4. Percentage change in working capital from the prior year 5. Percentage change in cash and cash equivalents from the prior year. B. Based upon your analysis in part a, does teh company's liquidity appear to have increased or decreased during the most recent fiscal year? Explain. C. Other than the ability of Home Depot to pay for it's purchases, do you see any major considerations that should enter into your company's decision? Explain. D. Your company assigns each customer one of the four credit ratings listed below. Assign a credit rating to Home Depot and write a memorandum explaining your decision. Possible Credit Ratings: A- Outstanding B- Good C- Marginal D- Unacceptable Part III a. compute the following for the fiscal years ending Feb. 3, 2008 and jan. 28, 2007 (round percentages to the nearest tenth): 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 rends in Home Depot's profitability during the period covered in your analysis in part a above.

THE HOME DEPOT From THE HOME DEPOT financial statements attached, Income Statement and Balance Sheet, answer the following: Follow the formulas on pp. 660 and 661, exactly (use whole numbers) 2007 BALANCE SHEET DATA Quick Assets Current Assets Current Liabilities Stockholders' Equity Total assets 1,716 14,674 12,706 17,714 44,324 2006 3,837 18,000 12,931 25,030 52,263 2005 3,203 15,346 12,901 26,909 44,482 (use whole numbers) INCOME STATEMENT DATA Net sales Gross profit Operating Income Net income 2007 77,349 25,997 7,242 4,395 2007 Working capital Current ratio Quick ratio (Round to one-tenth of 1 percent.) 2006 79,022 26,546 8,866 5,761 2006 1,968 1.15 0.14 5,069 1.39 0.30 from 2006 TO 2007 Percentage change : Net sales Net income (Round to one-tenth of 1 percent.) Gross profit rate Net income as a percentage of sales Return on assets Return on equity 2005 77,019 25,938 9,047 5,838 2005 2,445 1.19 (Round to two decimal place.) 0.25 (Round to two decimal place.) from 2005 TO 2006 -2.1% -23.7% 2.6% -1.3% 2007 33.6% 5.7% 15.0% 20.6% 2006 33.6% 7.3% 18.3% 22.2% APPENDIX A HOME DEPOT CONSOLIDATED BALANCE SHEETS PAGE A-4 Feb 3,2008 Assets Cash & Equivalents Short Term Investments Receivables, Net Merchadise Inventories Other Current Assets, Total Total Current Assets Land/Improvements Buildings Machinery/Equipment Leasehold Improvements Construction in Progress Leases Property/Plant/Equipment - Gross Accumulated Depreciation Property/Plant/Equipment - Net Note in Excess of the Fair Value of Cost Receivables - Long Term Net Assets Acquired Other Long Term Assets Total Assets Liabilities Notes Payable/Short Term Debt Accounts Payable Accrued Salaries & Related Expenses Sales Tax Payable Deferred Revenues Income Installments of Current Taxes Payable Long-Term Debt Other Accrued Expenses Total Current Liabilities Long-Term Debt, excluding current installments Other Long-Term Liabilities Deferred Income Tax Long-Term Debt Total Liabilities Jan 28,2007 29-Jan-06 30-Jan-05 2007 2006 2005 2004 445 12 1259 11731 1227 14,674 8398 16,642 8050 1390 1435 497 36,412 (8,936) 27,476 342 1209 623 44,324 600 14 3,223 12,822 1,341 18,000 8,355 15,215 7,799 1,391 1,123 475 34,358 (7,753) 26,605 343 6314 1001 52,263 793 14 2,396 11,401 742 15,346 7,924 14,056 7,073 1,207 843 427 31,530 (6,629) 24,901 348 3286 601 44,482 506 1,659 1,499 10,076 533 14,273 6,932 12,325 6,195 1,191 1,404 390 28,437 (5,711) 22,726 369 1394 258 39,020 1747 5732 1094 445 1474 60 300 1,854 12,706 11383 1833 688 13,904 26,610 7,356 1,307 475 1,634 217 18 1,924 12,931 11,643 1,243 1,416 14,302 27,233 900 6,032 1,176 488 1,757 388 513 1,647 12,901 2,672 977 1,023 4,672 17,573 5,766 1,055 412 1,546 161 11 1,504 10,455 2,148 871 1,388 4,407 14,862 85 5800 11388 755 121 7,930 33,052 310 (16,383) 25,030 52,263 120 7,287 28,943 409 (138) (9,712) 26,909 44,482 119 6,650 23,962 227 (108) (6,692) 24,158 39,020 Shareholder Equity Common Stock Additional Paid-In (Accumulated Retained EarningsCapital Deficit) Accumulated Other Comprehensive Income Unearned Compensation Treasury Stock - Common Total Equity Total Liab & Shareholders' Equity -314 17,714 44,324 2007 1716 2006 3837 2005 3203 2004 3664 Quick Assets PAGE A-3 THE HOME DEPOT, INC CONSOLIDATED STATEMENTS OF EARNINGS 02/03/08 01/28/07 01/29/06 2007 2006 2005 2004 77,349 51,352 25,997 79,022 52,476 26,546 77,019 51,081 25,938 73,094 48,664 24,430 17,053 1,702 18,755 7,242 16,106 1,574 17,680 8,866 15,480 1,411 16,891 9,047 15,256 1,248 16,504 7,926 27 (391) (364) 8,502 3,236 5,266 495 5,761 62 (142) (80) 8,967 3,326 5,641 197 5,838 56 (70) (14) 7,912 2,911 5,001 NET EARNINGS 74 (696) (622) 6,620 2,410 4,210 185 4,395 Weighted Average Common Shares BASIC EARNINGS PER SHARE 1,849 2.28 2,054 2.56 2,138 2.64 2,207 2.27 NET SALES Cost of Sales GROSS PROFIT Operating Expenses: Selling, General and Administrative Depreciation and Amortization Total Operating Expenses OPERATING INCOME Interest Income (Expense): Interest and Investment Income Interest Expense Interest, net EARNINGS BEF PROVISION FOR INCOME TAXES Provision for Income Taxes NET EARNINGS FROM CONTINUING OPERATIONS EARNINGS FROM DISCONTINUED OPERATIONS, NET OF TAX 01/30/05