Financial Statements Part

Larissa Galberth

Financial Statements Paper Part II

University of Phoenix

ACC497 Bob Davis

It is often important to read and discuss management discussion and analysis (MD&A) section when reviewing financial statements in order to fully and actually interpret a company’s financial position. Discussed in the MD&A is the company’s various aspects of operations, often including revenue, investments, and liabilities. Not only does the MD&A discusses past and present business operations, but it will often include forward looking statements which talk about future goals and development of the business. This paper will address management’s assessment of the financial condition of the Home Depot in comparison to Financial Statements Part I. In addition this paper discusses managements concerns outlined in the Home Depot’s 2008 annual report.

Does the management’s assessment of the financial condition agree with your assessment from the Financial Statements Paper Part 1? Explain. Support your answer using trend analysis, vertical analysis and ratio analysis.

The assessment in Financial Statements Part 1 concluded that the Home Depot experienced a significant drop between 2008 and 2009. In 2008 the Home Depot reported total revenue of 77 million whereas in 2009 71 million was reported. This is a decrease of (7.8) percent of (6061) million. Also noted in the financial statements part 1 is the Home Depots decrease in earnings per share from 2008 to 2009. In 2008 the Home Depot reported earnings per share at $2.38 and in 2009 earnings per share had dropped to $1.34 a (78) percent or (1.04) decrease per share. This assessment of the Home Depot financial statement led to the conclusion that the company may not be financially sound in accordance with the income statement.

At first glance the Home Depot 2008 balance sheet reports a working capital deficit of $2209 which for the most part is a sign of a company’s inability to remain profitable. This isn’t...