Applied Finance Home Depot analysis, due last week of course Fall 2020 Write a 1500-word Financial Analysis Report in which you are invited to apply the data analysis, as provided during the course, to The Home Depot Company during years of your choice, other than 2012 and 2013. I. Risks and returns Extract from financial sites available to the public such as NYSE, https://www.nyse.com/quote/XNYS:HD, Google Finance, Yahoo Finance, Bloomberg, historic data of The Home Depot company, thereafter The Company, over TWO years. Obtain for the same time the S&P500 Index. Calculate and present the average daily holding period returns and the standard deviation of these returns for the SP500 index and The Company. Date S&P 500 The Company ….. ………….. ……………………. ….. ………….. ……………………. ….. ………….. ……………………. … a. Plot the holding period returns from the Company against the SP500 Index b. From the graphs in part b) describe the nature of the correlation between the stock returns of The Company and the returns for the SP500 index. c. Obtain from Standard and Poor or alternative source such as Yahoo Finance, https://finance.yahoo.com/quote/HD/key-statistics/ the beta of The Company. d. Assume that the Treasury bill rate is 2% and that the expected market return is 6%. In consideration of the betas for The Company, estimate an appropriate rate of return, using CAPM, for the Company II. Financial statement analysis To complete this section, access the 10-K yearly report of The Company, registered with the SEC for the year of your choice, from The Company’s site or directly from SEC filing site, https://www.sec.gov/edgar/searchedgar/companysearch.html II.a Review items 1 and 3 of the 10K as well as the Report of Independent Registered Public Accounting Firm. Write a concise summary of the important items from reading these items. II.b Analyze the balance sheet of The Company provided by 10K form. Write a summary that includes important points that an analyst would use in assessing the financial condition of The Company. II.c Using The Company’s income statement provided in the 10K form, analyze the profitability of The Company by calculating any ratios deemed necessary for the past three years. Ensure to calculate sales growth and operating expenses evolution for each two-year period presented. II.d Using the consolidated statements of stockholders’ equity for The Company, explain the key reasons for the changes in the common stock, accumulated other comprehensive income, and retained earnings accounts. Evaluate these changes. II.e Prepare a summary analysis of the Statements of Cash Flows for all years available in The Company’s 10K form over the years selected. Include important points used in assessing the ability of The Company to generate cash flows and the appropriateness of the use of cash flows by The Company. III. Comprehensive analysis III.a Using The Company annual report, calculate key financial ratios for all years presented. Find industry averages to compare to the above calculations. III.b Write a report as if dedicated to the management of The Company. Your report should include an evaluation of short-term liquidity, operating efficiency, capital structure and long-term solvency, profitability, market measures, and a discussion of any quality of financial reporting issues. III.c Identify strengths and weaknesses and provide your opinion about the investment potential and the creditworthiness of The Company
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