Home Depot

Question 1

Look at the page following the financial statements titled “Selected Financial Data.” Note that fiscal 1985 ends on February 2, 1986, and there is a typographical error in the case. That is, the first column of data is for February 2, 1986 – NOT 1985. Graph Home Depot's performance in the following areas. Provide a brief, 1-3 sentence evaluation of each area.

* Growth in Sales

* Growth in Total Assets

* Change in Net Income

* Growth in Long-term Debt

Answer:

Sales Growth:

Sales nearly doubled each year, indicating significant growth during this time due to the aggressive expansion.

Total Assets Growth:

The amount of assets increased each year from additional investments. The rate of growth is not as steep as the sales indicating a good return on assets.

Net Income Changes:

Net income increased significantly from 1982 to 1984, often more than doubling in these years. In 1985, net income slowed and in 1986, decreased to almost 1983 levels. This trend is due to the increased interest from long-term debt growth which started in 1985.

Long-term Debt Growth:

Long-term (LT) debt in 1982-1984 remained relatively low. In 1983, Home Depot had a very small amount of LT debt. However, in 1985, they increased their long-term debt significantly in conjunction with their expansion.

Table 1

Home Depot 1982-1986 Consolidated Financial Comparison | | |

| | | | | |

| 1982 | 1983 | 1984 | 1985 | 1986 |

Sales Growth | $51,542,000 | $117,645,000 | $256,184,000 | $432,779,000 | $700,729,000 |

Total Assets Growth | $16,906,000 | $33,014,000 | $105,230,000 | $249,364,000 | $380,193,000 |

Net Income Changes | $1,445,000 | $5,315,000 | $10,261,000 | $14,122,000 | $8,219,000 |

Long-term Debt Growth | $3,738,000 | $236,000 | $4,384,000 | $117,942,000 | $199,943,000 |

Table 2

Question 2

Look at the page following the financial statements titled “Management Discussion and Analysis …”. Compare...