Chapter 6, Problem 1FSC

Use Foot Locker. Inc.’s balance sheet and other information provided on the next page to answer the following questions

1. a. Compute Foot Looker's working capital in 2015 and 2014.
2. b. Compute Foot Looker’s current ratio in 2015 and 2014.
3. c. Comment on what the working capital and current ratio indicate about Foot Locker in 2015 and 2014.
4. d. Compute Foot Locker’s debt-to-equity ratio for 2015 and 2014 Comment on what the debt-to-equity ratio indicates about Foot Locker in 2015 and 2014.
5. e. Use DuPont analysts to decompose Foot Locker’s return on equity into return on assets and financial leverage Foot Locker’s net income in 2015 was $541 million. Comment on the effect of financial leverage on return on equity.

Foot Locker, Inc. CONSOLIDATED BALANCE SHEETS
	2015	2014
ASSETS	(in millions)
Current Assets
Cash and cash equivalents	$1,021	$ 967
Merchandise inventories	1,285	1.250
Other current assets	300	239
Total Current Assets	2,606	2.456
Property and Equipment - net	661	620
Deferred Taxes	234	221
Goodwill	166	157
Other Intangible Assets - net	45	49
Other Assets	73	74
Total Assets	$3,775	$3.577
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable	$ 279	$ 301
Accrued and other liabilities	420	393
Current portion of capital lease obligations	1	2
Total Current Liabilities	700	696
Long-Term Debt and Obligations under Capital Leases	129	132
Other Liabilities	393	253
Total Liabilities	1,222	1,081
Total Shareholders' Equity	2,553	2,496
Total Liabilities and Shareholders' Equity	$3,775	$3,577