Financial Statement part 2 - Essay Example

The main operation is carried out in the United States but there are also several Home Depots located in Mexico, Canada, People’s Republic of China. Focusing on a long term scenario the industry is unpredictable, but the development of the home industry can lead to a promising future if the housing market remains stable (Roush, 1999). The current ratio indicates whether the current assets of the company are able to pay off its short term liabilities and obligations. The current ratio of the company that is 1.

15 is good. As too high current ratio or too low current ratio is not a good indicator of the liquidity position of the company. Here the ratio indicates that the company has a sound liquidity condition to meet its short term liabilities. Current assets are 0.3 which indicates that the company should increase the current ratio to 1 because a higher current ratio indicates the liquid position of the company. The return on asset is 20% is fairly good as it indicates the profitability position of the company.

A company with high return on asset indicates that how a company is able to generate profit by employing the asset of the company. The higher return signifies that the management is able to well utilize its asset. The return on capital employed is 63% which indicates that the company is has a strong asset base. It signifies the ability to generate revenue from its current capital base. The debt ratio that is the debt equity ratio indicates or compares the shareholders equity with that of the total liabilities of the company.

It identifies and compares the commitment of the company with the commitment done by the shareholders. Here the ratio is 1.50 which is a result of a good scenario. It signifies less difference in the total liabilities and the shareholders equity. The debt capitalization ratio plays an important role in focusing the growth of the company. As it delivers an insight into the company’s leverage, the asset turnover ratio