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Analysis and Interpretation of Return on Investment for Competitors Balance sheets and income statements for The Home Depot, Inc., and Lowes Companies, Inc., follow. Refer to these financial statements to answer the requirements. P5-38.
Analyzing and Interpreting Financial Statemen HOME DEPOT, INC. LOWES 2014 2013 2014 ..$ 1,723 $1,929 466s 11,079 11,0578,911 Balance Sheets S millions) 125 1,398911 9,127 Cash and cash equivalents Short-term investments.... Receivables, net 1.016 95578 15,302 15,27910,080 22,720 23,348 20,034 1,289 BO10.296 Other current assets Total current assets Property and equipment, net.. 1.353 354 1,359 1323 $39,046 $40.518 $31.827$32,72 Total assets. 552 s Liabilities and shareholders equity Short-term debt and current maturities of long-term debt Accounts payable Accrued compensation and related expenses Deferred revenue Income taxes payable Other current liabilitios s 328 $ 33 5,797 1,391 1428 1,468 1,337 435 785 892 1,920 1,756 8,876 5,124 773 979 5,807 35 2,240 2.142 9.348 11,26910,749 16,869 14,691 10,815 97 Total current liabilities Long-term debt, excluding current maturities 842 2.042 ase 291 1,5991,626 Deferred income taxes 30,624 27,99621,859 20,879 9,96811,853 Other long-term liabilities Total liabilties Total stockholders equity 9.322 12.522 9968 $40,518 $31,827 $32,732 $39,946 Total iabilties and shareholders equity HOME DEPOT, INC. Income Statements 20142013 LOWES COMPAN Income Statements 2014 2013 S millions) Net sales. Cost of sales. .. Gross profit 54,222 51,422 36,665 34,941 28,954 27.390 19,558 18,476 16,834 16,597 13,281 12,865 1,627 1,485 1462 9,166 4,792 4,149 and amortization 1,651 Operating income Investment and other income. Interest expense .10,469 337 830 12 711 6 522 8,467 4,276 3,082 1,578 Earnings before income taxes Provision for income taxes 9,976 3,631 3,673 1,387 Net earnings S 6,345 5,385 2,698 $ 2.286 REQUIRED Compute return on equity (ROE), return on assets (ROA), and return on financial leverage a. b. Disaggregate the ROAs computed into profit margin (PM) and asset turnover (AT) compo c. Compute the gross profit margin (GPM) and operating expense-to-sales ratios f (ROFL) for each company in 2014. nents. Which of these factors drives ROA for each company? pany. How do these companies profitability measures compare? or each com-
Compute the accounts receivable turnover (ART), inventory turnover (INVT), and property, plant, and equipment turnover (PPET) for each company. How do these companies turnover measures compare? Compare and evaluate these competitors performance in 2014. d. e.
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