Question

12 Months Ended in Millions $ Percentages Lowe's Companies, Inc. Common Size Statement of Earings Feb. 01, 2019 Feb. 02, 2018 Feb. 03, 2017 Feb 01, 2019 Feb. 02, 2018 Feb. 03, 2017 You must us references to Net Sales Cost of sales Gross $71,309 48,401 22,908 $ 68,619 46,185 22,434 $ 65,017 43,343 21,674 Song general and admi Depreciation and amo Operating income Interest - het Loss on extinguishment of debt Pre-tax Barnings Income tax provision Net earings 17,413 1,477 4,018 624 0 3,394 1,080 $2.314 14,444 1,404 6,586 633 464 5.489 2,042 $ 3.447 14,375 1,453 5,846 645 0 5,201 2,108 $ 3.093 a. Review the vertical analyses and provide major differences over the three years. Discuss pattems that emerge? You should be focusing on specific accounts and not subtotals or totals. b. What are the company's 2 largest major expenses for the current year? c. Discuss the fluctuations in interest expense and income taxes. What are the cause of these changes? Was the company more or less profitable when compared to the prior year? What caused the change in income from the prior year?

Answer 1

The following are the major differences for the three years:+

The major difference is the increase in  Selling, general and administration expenses in the year 2019 of $2969 which is more than the increase in sales in 2019 $2690 compared to the previous year 2018. Because increase in the above expenses the net earnings are less in 2019 compared to years 2018 & 2017. The pattern that emerge are the sales in the year 2018 increase $3602 compared to Year 2017. Based on the increase in sales expenses also increase proportionately to sales. So the expenses and incomes are almost in same pattern of increase in profit. However coming to Year 2019 the selling & administration expenses is more. The loss on sale of extinguishment of debt is a extrodinary item.

In the current year two largest major expenses are Cost of sales and Selling, general and administration expenses;

Fluctuations in Interest expense is due to decrease in the outstanding debt for every year and the income tax changes occured due to change in the Pre tax earnings and change in income tax rates.

The company is less profitable compared to prior year as the net earnings are less though the sales are increased and the major change to decrease the income in the current year is increase in the expenses.