You are on page 1of 4

According to the financial ratios there are always ways to find out the financial strengths and

weaknesses of a company. With a quick glance at Office Depot’s ratios you notice that they stay

well below the industry average in most areas. There are a few ratios like Debt/Equity, Current,

and Quick Ratios where Office Depot is not too far off from the industry average, so those

would be considered their strengths.

Ratios (per Office Depot, Inc Industry Average

Debt/Equity Ratio .81 .76

Current Ratio 1.40 1.25

Quick Ratio .76 .95

According to MSN Money, Office Depot, Inc’s biggest weakness at the moment would be their

interest coverage ratio. Office Depot’s ratio checks in at 5.82 compared to the industry average

of 14.37. That is approximately two and a half times less than the industry average.

Raising Short-Term Capital

Office Depot would struggle in raising short-term capital. The quickest way to tell is

through the Debt to Equity ratio. According to the textbook, this ratio measures how quickly

items become liquid, in order to turn tangible items into cash. When the ratio score below a 1,

it is an indicator that the company struggles to find extra capital.

Raising Long-Term Capital

Stock Debt 50/50

EBIT $341,000,000.00 $341,000,000.00 $341,000,000.00
Interest $- $40,000,000.00 $20,000,000.00
EBT $341,000,000.00 $301,000,000.00 $321,000,000.00
Taxes $136,400,000.00 $120,400,000.00 $128,400,000.00
EAT $204,600,000.00 $180,600,000.00 192,600,000.00
# of Shares 522,000,000 522,000,000 522,000,000
EPS .39 .35 .37

Judging by the chart above it is best for Office Depot to raise Long-Term Capital through the

equity method. That presents the company with the highest earning per share rate.

Working Capital

When it comes to working capital Office Depot, Inc has approximately $181,000,000 of

working capital following the 2017 fiscal year. This is a big dip from what they had the previous

year, $529,000,000. All of this is a very vast improvement from 2014, where they did not have

any working capital to deal with. Office Depot is seeing a lot of improvements over the past

couple years.

Capital Budget Procedures

Office Depot, Inc has seen significant financial improvements over the past 5 years. A lot

of this can be attributed to their improved budgeting methods. Their ratios are improving each

year, and bring Office Depot closer and closer to the industry average according MSN Money.

Investor and Stockholder Relationship

The relationship between Office Depot, Inc and their shareholders has been seeing

significant improvement over the past few years. The relationship was not very good a few

years ago, because there was not much benefit to the stockholders. They were unsure if the

company was even going to make it. Now the company has released dividends the past two

years, something they had not been able to do in a long time. They paid out .05 dividends per

share in 2016, and in 2017 they were able to pay out .10 DPS.
Financial Managers

In the start of the first quarter Office Depot, Inc made the announcement that Joseph T.

Lower will take over as the Chief Financial Officer for Office Depot, Inc. Over the past 22 years

Mr. Lower has experience as CFO at B/E Aerospace, business development for The Boeing

Company, and other financial roles at Credit Suisse. Mr. Lower will be taking over for Stephen

Hare, who is retiring, and helped turn the company around over the four years he served as

CFO. Mr. Lower will assume all financial roles, while he prepares to help Office Depot to

continue to make big strides towards the future (Leland, 2018). This is a great find for Office

Depot, as Mr. Hare made great improvements to turn around a company. Mr. Lower brings a

lot of knowledge to the table, and has prior experience as a CFO.