Dr. Paz,
Home Depot was enjoying the early years of the 21st century when the United States housing market was booming. However, due to the slow down in the real estate market in 2006, they announced that revenues for the first half of 2007 were 3 percent lower than revenues for the first six months of 2006. In addition, their earnings for the first half of 2007 were 21 percent lower than for the same period in the prior year. I will explain how a 3 percent decline in sales could cause a 21 percent decline in profits.
First, the accounting concept utilized to compare year to year figures was horizontal analysis of the income statement from 2006 and 2007. This type of analysis allows financial items to be compared between two or more periods
Home Depot was enjoying the early years of the 21st century when the United States housing market was booming. However, due to the slow down in the real estate market in 2006, they announced that revenues for the first half of 2007 were 3 percent lower than revenues for the first six months of 2006. In addition, their earnings for the first half of 2007 were 21 percent lower than for the same period in the prior year. I will explain how a 3 percent decline in sales could cause a 21 percent decline in profits.
First, the accounting concept utilized to compare year to year figures was horizontal analysis of the income statement from 2006 and 2007. This type of analysis allows financial items to be compared between two or more periods