14th Edition

ISBN: 9781337515498

Author: WARREN

Publisher: Cengage

Concept explainers

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Balance Sheet

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Textbook Question

Chapter 1, Problem 2ADM

Home Depot: Ratio of liabilities to stockholders' equity

The Home Depot, Inc., is the world’s largest home improvement retailer and one of the largest retailers in the United States based on sales volume. Home Depot operates over 2,200 stores that sell a wide assortment of building, home improvement, and lawn and garden items. Home Depot recently reported the following end-of-year balance sheet data (in millions):

	Year 3	Year 2	Year 1
Total assets	$40,518	$41,804	$40,518
Total stockholders’ equity	12,522	17,777	17,898

A. Determine the total liabilities at the end of Years 1, 2, and 3.
B. Compute the ratio of liabilities to stockholders’ equity for all three years. (Round to two decimal places.)
C. What conclusions regarding the margin of protection to creditors can you draw from the trend in this ratio for the three years?

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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Chapter 1 Solutions

Financial & Managerial Accounting

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Solution Summary: The author calculates the total liabilities at the end of the years 2 and 1 for Company THD.

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