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1、ConfirmingPagesLEARNINGOBJECTIVESAfterstudyingthischapter,youshouldbeableto:1.Explainhowacompany’sbusinessstrategyaffectsfinancialanalysis.p.6972.Discusshowanalystsusefinancialstatements.p.6983.Computeandinterpretcomponentpercentages.p.700LecturePresentationLP-14www.mhhe.com/libby7e4.Comput
2、eandinterpretprofitabilityratios.p.7025.Computeandinterpretliquidityratios.p.7076.Computeandinterpretsolvencyratios.p.7127.Computeandinterpretmarkettestratios.p.713lib11021_ch14_690-738.indd69008/07/101:57PMConfirmingPagesCHAPTERFOURTEENANALYZINGFINANCIALSTATEMENTShehistoryofTheHomeDepotisa
3、nunusualsuccessstory.Foundedin1978inAtlanta,TheHomeDepothasgrowntobeAmerica’slargesthomeimprovementretailer,withTover2,200storesintheUnitedStates,Canada,China,andMexico.AccordingtoFortunemagazine,TheHomeDepotisoneofthenation’s30largestretailers.FinancialstatementsforTheHomeDepotarepresented
4、inExhibit 14.1.Asyoucansee,TheHomeDepot’srapidgrowthhasslowedinrecentyearsdueprimarilytoadifficulteconomicenvironment.SalesrevenuefortheyearendedFebruary1,2009,wasnearly10percentlowerthanin2007,andthecompany’snetearningsdecreasedbymorethan60percent.Withdisappointingfinancialresults,wouldyou
5、wanttoinvestinTheHomeDepot?Anumberofprofessionalana-lyststhinkyoushould,includingthoseFOCUSCOMPANY:whoworkforEdwardJones,alargebrokeragefirm.InareportinwhichTheHomeDepottheyrecommendedbuyingstockinTheHomeDepot,theywrote:“Despiteshort-termpressuresonthecompanyFINANCIALANALYSIS:BRINGINGITduet
6、oamorechallengingconsumerALLTOGETHERspendingenvironmentandaweakwww.homedepot.comhousingmarket,weviewHomeDepot’smarketdominance,long-termgrowthoutlook,andcompellingvaluationasreasonstorateitssharesaBuy.”Professionalanalystsconsideralargenumberoffactorsindevelopingthetypeofrecom-mendationcont
7、ainedintheEdwardJonesreport,includinginformationreportedinacom-pany’sfinancialstatements.Inthischapter,weuseaccountinginformationandavarietyofanalyticaltoolstostudyTheHomeDepotanditsmajorcompetitor,Lowe’s.UNDERSTANDINGTHEBUSINESSCompaniesspendbillionsofd
