Every figure below is The Home Depot's own, taken from the accounts it filed for the year ended 2026-02-01. Nothing is rounded into tidiness and nothing is invented, because the point is to read a real set of statements rather than a clean example that never existed.
A company could tell you one number: how much money it made. It does not, because that single number cannot answer three different questions that all matter, and answering them separately is what the three statements are for.
Did it trade profitably? That is the income statement. What does it own and owe? That is the balance sheet. Where did the cash actually go? That is the cash flow statement. A business can be profitable and run out of money. It can be losing money and be awash with cash. Only reading all three together tells you which you are looking at.
This one covers a period, in the way a video does: it records what happened over the twelve months. It works downwards, starting with everything customers paid and subtracting each layer of cost until what is left belongs to the owners.
| Net sales | 164.683 | what customers paid, once the sale is earned |
| Cost of sales | (109.818) | what the goods themselves cost |
| Gross profit | 54.865 | 33.3% of sales |
| Selling, general & administrative | (30.702) | staff, stores, advertising |
| Depreciation & amortisation | (3.273) | this year's slice of past capex |
| Operating income | 20.890 | 12.7% of sales |
| Interest expense, net | (2.288) | the cost of borrowing |
| Pre-tax income | 18.602 | |
| Income tax | (4.446) | effective rate 23.9% |
| Net income | 14.160 | 8.6% of sales |
| Diluted earnings per share | $14.23 | net income divided across the shares |
Read it as a series of survivals. Of $164.7bn taken from customers, the goods themselves consumed most of it. Running the stores took another slice. Lenders and the taxman took theirs. $14.2bn survived to the bottom, which is a little under nine pence in every pound.
One line deserves suspicion: depreciation and amortisation. No money left the business this year for it. It is this year's share of cash spent building stores in earlier years, spread across the period they will be used. That is accrual accounting doing its job, and it is also the first place profit and cash part company.
Where the income statement is a video, this is a photograph: everything owned and owed at one instant, the last day of the year. It cannot help but balance, and that is not a coincidence but an identity.
| Cash and equivalents | 1.389 | |
| Receivables | 5.597 | sales made but not yet collected |
| Merchandise inventory | 25.817 | stock sitting in stores and depots |
| Total current assets | 34.391 | expected to turn into cash within a year |
| Total assets | 105.095 | everything the company controls |
| Accounts payable | 11.491 | bills owed to suppliers |
| Total current liabilities | 32.424 | due within a year |
| Long-term debt and leases | 46.341 | |
| Total liabilities | 92.282 | everything the company owes |
| Shareholders' equity | 12.813 | assets less liabilities — 12.2% of assets |
Everything a company controls was funded by somebody: either by people it owes (liabilities) or by its owners (equity). There is no third source. So equity is not a valuation. It is a residual, whatever remains once every obligation is met, and here it is just 12.2% of the assets. That figure is going to matter shortly.
The one hardest to argue with. Profit involves judgement about when a sale is earned and how quickly a building wears out. Cash either arrived or it did not.
| Net income | 14.160 | the starting point, taken from above |
| Depreciation & amortisation | 3.514 | added back: no cash left the business |
| Cash from operations | 16.325 | 115% of net income |
| Capital expenditure | (3.679) | cash spent on new stores and kit |
| Cash used in investing | (8.980) | |
| Dividends paid | (9.152) | |
| Share buybacks | — | none this year |
| Cash used in financing | (7.714) | |
| Free cash flow | 12.646 | operations less the capex needed to stay in business |
Notice where it starts: net income, carried down from the income statement. Then the non-cash charges are added back, depreciation first, because that cost never left the bank. What emerges is $16.3bn of cash from operations, 115% of reported profit. Above 100% is generally a good sign: the profits are real and arriving.
Then the money that keeps the business alive is subtracted: $3.7bn of capital expenditure on new stores and equipment. What remains, $12.6bn, is free cash flow, the amount genuinely available for dividends, buybacks and debt repayment. It is the number most investors care about most.
They are not three documents. They are one system, and each links into the next at fixed points.
This is why a made-up set of accounts falls apart under inspection. Change one figure and it must move in three places at once. It is also why the small discrepancy here is worth pointing at: depreciation is $3.273bn on the income statement and $3.514bn in the cash flow. Not an error. The two statements are capturing slightly different scopes, and noticing the gap is the difference between reading accounts and glancing at them.
Ratios are not separate data. Every one below is two numbers from the statements above, divided.
Of every pound taken, this much survives the cost of the goods.
What survives after running the shops as well.
What is left for owners after lenders and the taxman.
Profit against the owners' stake. Flattered here, and the next section explains why.
The shelves empty and refill this many times a year. Retail lives or dies on it.
Short-term assets against short-term bills.
Operating profit against the interest bill.
Cash from operations against reported profit.
Return on equity is 110.5%. That looks extraordinary until you notice the denominator: equity is only 12.2% of assets. A small denominator makes any ratio large. The business is genuinely good, but ROE here measures the financing as much as the operations, which is exactly why return on capital is the more honest cousin.
Revenue rose +3.2% while net income fell -4.4%. Costs grew faster than sales. One line up from the bottom would never have shown you that; you have to read the statement as a whole.
$25.8bn sits in stock, turning over 4.3 times a year. For a retailer that single figure drives everything: buy the wrong things and it becomes cash you cannot get back.
They look backwards. Every figure describes a year already finished. Nothing here promises the next one.
Judgement is embedded throughout. How long a building lasts, when a sale counts as earned, what a lease is worth. All estimates, all made by the company, all within the rules and all capable of flattering.
Comparison needs care. These statements are consistent with themselves, not necessarily with a rival's. Different fiscal years, accounting choices and definitions of the same word are the reason like-for-like is harder than it looks.