Home Depot Financial Analysis
Overview
Office Depot, Inc. (“Office Depot”), a supplier of a broad assortment of office products and business services throughout the United States and worldwide, announced on February 20, 2013 a merger agreement with OfficeMax, Inc., which will better equip them to compete in the rapidly-changing industry. In fiscal year 2012 alone, Office Depot generated $10.7 billion of revenues from its products and services, yet industry reviews of this company seem unfavorable.
In this FSA Case Analysis, our team takes a careful look at Office Depot’s most recent financial statements; and, using the FSA spreadsheet, performs an internal environment analysis of its liquidity, solvency, operating efficiency and capital structure. In order to make the analysis complete, prior period reported information is compared with the latest information, along with industry standards. For the liquidity analysis, we assess Office Depot’s current ratios, quick ratios, inventory turn rate based on COGS, and Altman Z-scores, as well as examine its accounts receivable collection. Its solvency is investigated using cash flows from operations, from investing activities, and from financing activities, while, as measures of operating efficiency, its return on assets (ROA), return on sales (ROS), and asset turnover are evaluated. ROA and ROS are used for the DuPont Equation. Economic profit, breakeven, and capital structure analyses are performed, as debt-to-equity ratio and leverage ratio are computed given the ROA and ROE. Lastly, some interesting findings are enumerated and explored at the end of the report. Liquidity Analysis
In assessing an organization’s financial health, one of the most important measures that investors look at is liquidity. Since it indicates the organization’s ability to ward off short-term threats, it is especially important for an organization to maintain a certain level of liquidity that will assure its survival, in case the need arises.
Office
Office Depot, Inc. (“Office Depot”), a supplier of a broad assortment of office products and business services throughout the United States and worldwide, announced on February 20, 2013 a merger agreement with OfficeMax, Inc., which will better equip them to compete in the rapidly-changing industry. In fiscal year 2012 alone, Office Depot generated $10.7 billion of revenues from its products and services, yet industry reviews of this company seem unfavorable.
In this FSA Case Analysis, our team takes a careful look at Office Depot’s most recent financial statements; and, using the FSA spreadsheet, performs an internal environment analysis of its liquidity, solvency, operating efficiency and capital structure. In order to make the analysis complete, prior period reported information is compared with the latest information, along with industry standards. For the liquidity analysis, we assess Office Depot’s current ratios, quick ratios, inventory turn rate based on COGS, and Altman Z-scores, as well as examine its accounts receivable collection. Its solvency is investigated using cash flows from operations, from investing activities, and from financing activities, while, as measures of operating efficiency, its return on assets (ROA), return on sales (ROS), and asset turnover are evaluated. ROA and ROS are used for the DuPont Equation. Economic profit, breakeven, and capital structure analyses are performed, as debt-to-equity ratio and leverage ratio are computed given the ROA and ROE. Lastly, some interesting findings are enumerated and explored at the end of the report. Liquidity Analysis
In assessing an organization’s financial health, one of the most important measures that investors look at is liquidity. Since it indicates the organization’s ability to ward off short-term threats, it is especially important for an organization to maintain a certain level of liquidity that will assure its survival, in case the need arises.
Office