“This is a 3 step problem which utilizes the information that is in the attachment. Part IInstructions: Answer each of the following questions and briefly explain where in the statements, notes, or other sections of the annual report you located the information used in your answer.a. How many years are covered in each of the primary comparative financial statements? Were all of these statements audited? Name the auditors. What were the auditors’ conclusions concerning these statements?b. Home Depot combines its statement of retained earnings with another financial statement. Where are details about changes in the amount of retained earnings fund?c. Over the three years presented, have the company’s annual net cash flows been positive or negative from 1) operating activities, 2) investing activities, and 3) financing activities? Has the company’s cash balance increased or decreased during each of these three years?Part IIHome Depot wants to make credit purchases from your company, with payment due in 60 days assuming you are a credit manager of a medium sized supplier.a. read the first note to the financial statements, “Summary of Significant Accounting Policies”. Compute the following for the fiscal years ending feb. 3, 2008, and jan. 28, 2007 (round percentages to the nearest tenth of 1 percent, and other computations to one decimal place):1. Current Ratio2. Quick Ratio3. Amount of Working Capital4. Percentage change in working capital from the prior year5. Percentage change in cash and cash equivalents from the prior year.B. Based upon your analysis in part a, does teh company’s liquidity appear to have increased or decreased during the most recent fiscal year? Explain.C. Other than the ability of Home Depot to pay for it’s purchases, do you see any major considerations that should enter into your company’s decision? Explain.D. Your company assigns each customer one of the four credit ratings listed below. Assign a credit rating to Home Depot and write a memorandum explaining your decision.Possible Credit Ratings:A- OutstandingB- GoodC- MarginalD- UnacceptablePart IIIa. compute the following for the fiscal years ending Feb. 3, 2008 and jan. 28, 2007 (round percentages to the nearest tenth):1. percentage change in net sales (relative to the prior year)2. Percentage change in net earnings3. Gross profit rate.4. Net income as a percentage of sales.5. Return on average total assets.6. Return on average total equity.B. Write a statement that describes your conclusion(s) concerning rends in Home Depot’s profitability during the period covered in your analysis in part a above.”
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