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$3,171$2,694Accounts receivable3,8153,940Current assets37,34233,413Current liabilities26,57732,997Short-term debt-1,190Current installments of long-term debt1,4162,814Current operating lease liabilities1,087955Long-term debt, excluding current installments48,25642,095Long-term operating lease liabilities7,1606,156Total liabilities86,11584,608Treasury stock(100,393)(92,913)Total stockholders equity (deficit)1,796(1,950)Interest expense1,8601,549Earnings before interest and taxes (EBIT)27,64526,496Cash from operating activities (Operating cash)16,80719,057Depreciation and amortization3,4213,291Capital expenditures3,5872,951 Required Compute the following ratios for both years: Capital Structure RatiosCoverage RatiosLiquidity RatiosLiabilities-to-equity ratioTimes interest earnedCurrent ratioTotal debt-to-equity ratioCash from operations to total debtQuick ratio Capital structure ratios Coverage ratios Liquidity ratios Compute the capital structure ratios. Capital structure ratiosNumeratorDenominatorResultLiabilities-equity ratioAnswer 1Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity (deficit)Free cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Answer 2Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity (deficit)Free cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Current yearAnswer 3 Answer 4 Prior yearAnswer 5 Answer 6 Total debt-to-equity ratioAnswer 7Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity (deficit)Free cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Answer 8Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity (deficit)Free cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Current yearAnswer 9 Answer 10 Prior yearAnswer 11 Answer 12 Home Depot had Answer 13insignificantsignificant balances in Treasury stock in both years. When analyzing the company's capital structure, these amounts Answer 14distortdo 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 ratiosNumeratorDenominatorResultLiabilities-to-equity ratioAnswer 15Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity (deficit)Free cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Answer 16Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity (deficit)Free cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Current yearAnswer 17 Answer 18 Prior yearAnswer 19 Answer 20 Total debt-to-equity ratioAnswer 21Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity (deficit)Free cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Answer 22Accounts receivableAssetsAverage assetsAverage equityCAPEXCash and cash equivalentsCurrent assetsCurrent liabilitiesEBITEBITDAEquity (deficit)Free cash flowInterest expenseMarketable securitiesNet incomeOperating cash flowQuick assetsTotal debtTotal liabilities Current yearAnswer 23 Answer 24 Prior year
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