Question: Compute and Interpret Liquidity, Capital Structure ( Solvency ) , and Coverage Ratios Selected balance sheet and income statement information for Home Depot for two
Compute and Interpret Liquidity, Capital Structure Solvency and Coverage Ratios Selected balance sheet and income statement information for Home Depot for two recent years follows. $ millionsCurrent YearPrior YearCash$$Accounts receivableCurrent assetsCurrent liabilitiesShortterm debtCurrent installments of longterm debtCurrent operating lease liabilitiesLongterm debt, excluding current installmentsLongterm operating lease liabilitiesTotal liabilitiesTreasury stockTotal stockholders equity deficitInterest expenseEarnings before interest and taxes EBITCash from operating activities Operating cashDepreciation and amortizationCapital expenditures Required Compute the following ratios for both years: Capital Structure RatiosCoverage RatiosLiquidity RatiosLiabilitiestoequity ratioTimes interest earnedCurrent ratioTotal debttoequity ratioCash from operations to total debtQuick ratio Capital structure ratios Coverage ratios Liquidity ratios Compute the capital structure ratios. Capital structure ratiosNumeratorDenominatorResultLiabilitiesequity ratioAnswer Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity deficitFree cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Answer Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity deficitFree cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Current yearAnswer Answer Prior yearAnswer Answer Total debttoequity ratioAnswer Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity deficitFree cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Answer Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity deficitFree cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Current yearAnswer Answer Prior yearAnswer Answer Home Depot had Answer insignificantsignificant balances in Treasury stock in both years. When analyzing the company's capital structure, these amounts Answer distortdo not 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 Depots capital structure ratios. Adjusted capital structure ratiosNumeratorDenominatorResultLiabilitiestoequity ratioAnswer Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity deficitFree cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Answer Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity deficitFree cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Current yearAnswer Answer Prior yearAnswer Answer Total debttoequity ratioAnswer Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity deficitFree cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Answer Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity deficitFree cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Current yearAnswer Answer Prior year
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