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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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https://brainmass.com/business/wto-and-gatt/financial-analysis-home-depot-and-lowes-505657

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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 ...

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.

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Analysis of financial statement: Lowes vs Home Depot

Analyze the ratios of both companies using the ratios below (see data attached in excel). Refer to the financial statements for this section in order to expand the information base and gain insight into the numbers and the ratios. Explain your conclusion about their financial status using the ratios and consider how the ratios are related.

Home Depot
PROFITABILITY

Return On Assets
Return On Invested Capital
Cash Flow To Sales
Cost of Goods Sold To Sales
Gross Profit Margin
Operating Profit Margin
Pretax Margin
Net Margin

Lowes
PROFITABILITY

Return On Assets
Return On Invested Capital
Cash Flow To Sales
Cost of Goods Sold To Sales
Gross Profit Margin
Operating Profit Margin
Pretax Margin
Net Margin

Home Depot
ASSET UTILIZATION

Assets Per Employee
Assets Turnover
Inventory Turnover
Capital Expend Pct Total Assets
Capital Expend Pct Sales

Lowes
ASSET UTILIZATION

Assets Per Employee
Assets Turnover
Inventory Turnover
Capital Expend Pct Total Assets
Capital Expend Pct Sales

Home Depot
LEVERAGE

Total Debt Pct Common Equity
LT Debt Pct Common Equity
LT Debt Pct Total Capital
Equity Pct Total Capital
Total Debt Pct Total Assets
Common Equity Pct Total Assets
Total Capital Pct Total Assets
Dividend Payout
Cash Dividend Coverage Ratio
Working Cap Pct Total Capital

Lowes
LEVERAGE

Total Debt Pct Common Equity
LT Debt Pct Common Equity
LT Debt Pct Total Capital
Equity Pct Total Capital
Total Debt Pct Total Assets
Common Equity Pct Total Assets
Total Capital Pct Total Assets
Dividend Payout
Cash Dividend Coverage Ratio
Working Cap Pct Total Capital

Home Depot
LIQUIDITY

Quick Ratio
Current Ratio
Cash Ratio
Receivables Pct Current Assets
Accounts Receivable Days
Inventories Days Held

Lowes
LIQUIDITY

Quick Ratio
Current Ratio
Cash Ratio
Receivables Pct Current Assets
Accounts Receivable Days
Inventories Days Held

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