Question

Please solve and show the work for this problem below. This is how the problem was listed exactly.

Lowe's Companies, Inc. Common Size Statement of Earnings	12 Months Ended in Millions $			Percentages
	Feb. 01, 2019	Feb. 02, 2018	Feb. 03, 2017	Feb. 01, 2019	Feb. 02, 2018	Feb. 03, 2017
Net sales	$ 71,309	$ 68,619	$ 65,017
Cost of sales	48,401	46,185	43,343
Gross margin	22,908	22,434	21,674
Expenses:
Selling, general and administrative	17,413	14,444	14,375
Depreciation and amortization	1,477	1,404	1,453
Operating income	4,018	6,586	5,846
Interest - net	624	633	645
Loss on extinguishment of debt	0	464	0
Pre-tax earnings	3,394	5,489	5,201
Income tax provision	1,080	2,042	2,108
Net earnings	$ 2,314	$ 3,447	$ 3,093

Answer 1

For making the common size statement of earnings we will take the base for each year as its net sales amount. So for example the line item of selling, general and administrative expense for 2019 = 17,413/71,309 = 24.42%. The line item depreciation and amortization for 2018 will be = 1404/68619 = 2.05%. The line item interest for 2017 = 645/65017 = 0.99%

The results are shown below:

	2019	2018	2017
Net sales	100.00%	100.00%	100.00%
Cost of sales	67.88%	67.31%	66.66%
Gross margin	32.12%	32.69%	33.34%
Expenses:
Selling, general and administrative	24.42%	21.05%	22.11%
Depreciation & amortization	2.07%	2.05%	2.23%
Operating income	5.63%	9.60%	8.99%
Interest - net	0.88%	0.92%	0.99%
Loss on extinguishment of debt	0.00%	0.68%	0.00%
Pre-tax earnings	4.76%	8.00%	8.00%
Income tax provision	1.51%	2.98%	3.24%
Net earnings	3.25%	5.02%	4.76%