Financial Analysis: Home Depot and Lowes
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Assess the financial position of Lowes 2011 financial statement in comparison to Home depot the competitor. The emphasis is on cash flow for this analysis.
1. Compute the return on assets, profit margin and asset utilization rate of both companies.
2. Assess Lowes competitive financial position.
3. Compute the free cash flow of both companies.
4. Assess Lowes relative cash position and comment on its receipt and use of cash during the year.
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Solution Summary
This solution looks at computing return on assets, profit margin and asset utilization rate of two competitive companies: Lowes and Home Depot. Assessing Lowes competitive financial position, computing the free cash flow of both companies. Looking at Lowes relative cash position and comments on its receipt and use of cash. The solution is supported with a Word document and an Excel Worksheet.
Solution Preview
1. Return on Assets, Profit Margin and Asset utilization are presented below:
Lowes Home Depot
Return on Assets 0.05 0.10
Profit Margin 0.04 0.06
Asset Utilization 1.50 1.74
2. Lowes competitive financial position is compared with Home Depot.
Lowes Home Depot
Solvency 0.70 0.82
COGS % 65.4 % 65.5 %
These 2 ratios give a glimpse into the financial position of Lowes and Home Depot.
In comparison:
Lowes solvency is .70 versus Home Depot of .82 and this means that Lowes would go bankrupt ...
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