Chapter 28 Financial Analysis 735
bre44380_ch28_732-758.indd 735 10/06/15 09:49 AM
The assets are listed in declining order of liquidity. For example, the accountant lists first
those assets that are most likely to be turned into cash in the near future. They include cash
itself, marketable securities and receivables (that is, bills to be paid by the firm’s customers),
and inventories of raw materials, work in process, and finished goods. These assets are all
known as current assets.
The remaining assets on the balance sheet consist of long-term, usually illiquid, assets
such as warehouses, stores, fixtures, and vehicles. The balance sheet does not show up-to-date
market values of these long-term assets. Instead, the accountant records the amount that each
asset originally cost and deducts a fixed annual amount for depreciation of buildings, plant,
and equipment. The balance sheet does not include all the company’s assets. Some of the most
valuable ones are intangible, such as reputation, skilled management, and a well-trained labor
force. Accountants are generally reluctant to record these assets in the balance sheet unless
they can be readily identified and valued.^1
Now look at the right-hand portion of Home Depot’s balance sheet, which shows where
the money to buy the assets came from. The accountant starts by looking at the liabilities, that
is, the money owed by the company. First come those liabilities that need to be paid off in the
near future. These current liabilities include debts that are due to be repaid within the next
year and payables (that is, amounts owed by the company to its suppliers).
(^1) Home Depot’s balance sheet does include an entry for “goodwill.” This reflects the difference between the price paid to acquire a
company and that company's book value.
End of Fiscal End of Fiscal
Assets 2013 2012 # Liabilities and Shareholders’ Equity 2013 2012 #
Current assets
Cash and marketable securities $ 1,929 $ 2,494 Current liabilities
Receivables 1,398 1,395 Debt due for repayment $ 33 $ 1,321
Inventories 11,057 10,710 Accounts payable 9,379 8,871
Other current assets 895 773 Other current liabilities 1,337 1,270
Total current assets $ 15,279 $ 15,372 Total current liabilities $ 10,749 $ 11,462
Fixed assets Long-term debt $ 14,691 $ 9,475
Tangible fixed assets Deferred income taxes 514 319
Property, plant, and equipment $ 39,064 $ 38,491 Other long-term liabilities 2,042 2,051
Less accumulated depreciation 15,716 14,422
Net tangible fixed assets $ 23,348 $ 24,069 Total liabilities $ 27,996 $ 23,307
Intangible asset (goodwill) $ 1,289 $ 1,170 Shareholders’ equity:
Other assets 602 473 Common stock and other paid-in capital $ 8,536 $ 8,433
Retained earnings 23,180 20,038
Treasury stock −19,194 −10,694
Total assets $ 40,518 $ 41,084 Total shareholders’ equity $ 12,522 $ 17,777
Total liabilities and shareholders’ equity $ 40,518 $ 41,084
❱ TABLE 28.1^ Balance sheet of Home Depot, fiscal 2013 and 2012 (figures in $ millions).
- Year ending February 2, 2014#
Year ending February 3, 2013