The income statements for Home Depot, Inc. (HD) spanning the period 2014-2016 are found below: 2014 2015
Question:
The income statements for Home Depot, Inc. (HD) spanning the period 2014-2016 are found below:
2014 | 2015 | 2016 | |
Earnings before interest and taxes | $7,316,000 | $9,700,000 | $9,425,000 |
Interest expense | (696,000) | (392,000) | (143,000) |
Income before tax | $6,620,000 | $9,308,000 | $9,282,000 |
Income tax expense | (2,410,000) | (3,547,000) | (3,444,000) |
Net Income | $4,210,000 | $5,761,000 | $5,838,000 |
a. Calculate the time's interest earned ratio for each of the years for which you have data. What does this ratio tell you about Home Depot?
b. What is your assessment of how the firm’s ability to service its debt obligations has changed over this period?
c. How does the change in debt affect the firm’s cost of capital?
d. What are some other things that might impact your assessment?
Expert Answer:
a 2014 2015 2016 Earnings before interest and taxes 7316000 9700000 9425000 Interest Expense 696000 392000 143000 Times Interest Earned ratio 1051 247... View the full answer
Financial Management Principles and Applications
ISBN: 978-0133423822
12th edition
Authors: Sheridan Titman, Arthur Keown, John Martin
