week 3 paper team - Key Financial Relationships Paper 1...

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Key Financial Relationships Paper 1 April Fortuna, Deborah Barot, Dennis Kurian, Christopher Wall and Maureen Moreno University of Phoenix FINANCIAL ACCOUNNTING FOR MANAGER FIN/324 Key Financial Relationships Paper Arlene Murphy February 4, 2008
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Key Financial Relationships Paper 2 The purpose of this key financial relationships paper is to review and establish Home Depot and Lowes relationship elements. Home Depot, being the world's biggest home improvement vendor, has earned and estimated sales of $81.5 billion in the last fiscal year, (Argus, October 2006). The company, which is stationed in Atlanta, Georgia, offers customer the ability to shop for appliances, tools, paint, lumber, plumbing, and electrical, garden and other home-improvement materials in their stores with an expandable facility that average 105,000 square feet. In the midst of July in 2006, Home Depot had established 2,079 stores through out the United States and 10% of their locations are in Canada and Mexico. Their competitor, Lowes has become Home Depot's principal competitive risk. Both companies have been taking pleasure in a firm monetary performance with Home Depot reporting record profit for the third quarter of 2005 and Lowe’s racking up profits that handily beat analysts’ estimates for the same period. Industry watchers are guardedly optimistic on prospects for both of these home-improvement giants in 2006, (CNBC.com, 2008). The home-improvement business continues sturdy besides the increase in interest rates and gas price which can be a burden to consumer’s expenditure. The key components to obtain financial relationships of the basic accounting equation are assets, liabilities, and owners’ equity. The basic equation is assets equal liabilities plus owners’ equity. Assets are items that have an economic value and can be turned into cash owned by an individual or controlled by a company or borrowed from a bank. Assets can be cash, accounts receivable, inventory, inventory, buildings,
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Key Financial Relationships Paper 3 patents, and other properties (Albrecht, Stice, Stice, & Swain, 2005). Liabilities are financial obligations or debts. Assets may be used to pay off the money owed. Owners’ equity, also known as shareholders’ equity, is the total assets of a company minus the liabilities. Home Depot and its competitor, Lowe’s Home Improvement used these key components in their financial reports. Home Depot used assets, liabilities, and stockholders’ equity in the financial reports. In the beginning of the report, a performance summary showed the increase or decrease of the total assets, total liabilities, and stockholders’ equity for a three- year period (Home Depot, 2007). The balance sheets detailed the company’s assets,
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This note was uploaded on 04/27/2010 for the course MBA 128798 taught by Professor Jenings during the Spring '10 term at University of South Pacific.

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week 3 paper team - Key Financial Relationships Paper 1...

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