Petsmart: Financial Analysis

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Abstract This paper covers PetSmart and undertakes a financial analysis of this company. The company's cash flow is analyzed, including its working capital, NOPAT and its EVA. There is also a qualitative analysis that leads to the conclusion that PetSmart has reliable financial statements and would make a good investment. Body a. The statement of cash flows provides valuable, reliable information about the nature of PetSmart's cash flows. Overall, this analysis reveals that PetSmart is a reasonably safe investment. b. Free cash flow is the net cash flow from operations less the capital expenditures (Peavler, 2012). Free cash flow is important because it is the cash flow that is "beyond what is necessary to maintain assets in place and to finance expected new investments (Richardson, 2006). Free cash flow is used to finance existing operations, expand existing operations, pay down debt, pay out dividends and to maintain existing assets in place. The free cash flow of PetSmart is $400.263 million, according the PetSmart's 10-K for the year ended January 29, 2012. This information is found on page 30. c. PetSmart's operating current assets are found on the balance sheet on the latest 10-K (p.41). They are defined as the current assets that are used to finance the firm's activities, therefore excluding short-term investments. For PetSmart, they are as follows: Cash & equivalents 342892 Receivables, net 53899 Merchandise inventories 644864 Total $

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