pter5 Analyahg an LOWE\'S COM HOME DEPOT, INC. Balance Sheets Balance Sheets 201
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pter5 Analyahg an LOWE'S COM HOME DEPOT, INC. Balance Sheets Balance Sheets 2014 2013 2013 2014 $ millions) $ 1.723 $-1,929 $ 466 85 8,911 9,127 010,298 20,034 20,834 279 1,398 ....1,484 895 578 Other curent assets. " Total current assets Property and equipment, net.... .._. 22,720 23,348 1,353 1,289 1,3591,323 Long-term investments other a Liabilities and shareholders' equity Short-term debt and current maturties of long-term debt .. 552 773 979 $ 328 S33 5,1245,008 5,797 1,428 1,391 1,337 2,142 1,269 10,749 514 Accrued compensation and related expenses.............. Deferred revenue Income taxes payable Other current liabilities. . Total current liabilities. .. Long-term debt, excluding current maturities 35 1,920 1,756 9,348 8,876 10,815 10,086 2,240 . . . . 642 Deferred income taxes. 1,599 1,626 30,624 27,996 21,85920,879 2,042 9,322 12,522 9,96811,853 . Total stockholders' equity Total liabilities and shareholders' equity ..$39,946 $40,518 $31,827 $32,732 1nconie giaienients Income Statements S millions) 2013 Net sales. Gross profit. Depreciation and amortization Operating income Interest expense 51,422 36,665 34941 9,55818,476 16,597 13,281 12,865 1,627 4,149 28,954 ....16,834 1,651 27,390 . . .. 9,166 4,792 830 9,976 3,631 . . 6,345 522 480 8,467 4,276 3,673 3,082 1,578 Net earnings 5,385 $2,698 $ 2,286 REQUIRED a. Compu te return on equity (ROE), return on assets (ROA), and return on financial leverage b. Disaggregate the ROA's computed into profit margin (PM) and asset turnover c. Compute the gross profit margin (GPM) and operating expense-to-sales ratios for (ROFL) for each company in 2014 nents. Which of these factors drives ROA for each company? pany. How do these companies' profitability measures compare? each com- Scanned by CamScannerExplanation / Answer
a. 1 Return on Equity = Net Earning ÷ shareholders’ equity
2. Return on Asset = Net Earning ÷ Total Assets
3. Return on Financial Leverage = Return on Equity - Return on Asset
b. Disaggregate the ROA's into Profit Margin (PM) and Asset Turnover (AT) = Profit Margin x Asset Turnover
Profit Margin = Net Earning/ Total Sales
Asset Turnover = Sales / Total Asset
c 1. Gross Profit Margin = (sales - cost of sales)/sales
2. Operating Expecnes to Sales ratio
Company Home Depot Lowe's Companies Year 2014 2013 2014 2013 Net Earning 6,345 5,385 2,698 2,286 Stockholders Equity 9,322 12,522 9,968 11,853 Return on Equity 68.06% 43.00% 27.07% 19.29%Related Questions
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