Selected financial data of two competitors, Home Depot and Lowe%u2019s, are pres

Question

Selected financial data of two competitors, Home Depot and Lowe%u2019s, are presented    here. (All dollars are in millions.) Suppose the data were taken from the 2014 financial    statements of each company.   Home    Depot    Lowe%u2019s   Income Statement Data for Year   Net sales    $77,349    $48,283   Cost of goods sold    51,352    31,556   Selling and administrative expenses    18,570    12,022   Interest expense    696    239   Other income    74    45   Income taxes    2,410   1,702   Net income    $   4,395    $   2,809
Home Depot   Lowe%u2019s   Balance Sheet Data (End of Year)   Current assets    $14,674    $ 8,686   Noncurrent assets    29,650    22,183   Total assets    $44,324    $30,869   Current liabilities    $12,706    $ 7,751   Long-term liabilities    13,904    7,020   Total stockholders%u2019 equity    17,714    16,098   Total liabilities and stockholders%u2019 equity    $44,324    $30,869   Net cash provided by operating activities    $5,727    $4,347   Cash paid for capital expenditures    $3,558    $4,010   Dividends paid    $1,709    $428   Average shares outstanding    1,849    1,481   Instructions For each company, compute these values and ratios.   (a) Working capital.   (b) Current ratio. (Round to two decimal places.)   (c) Debt to assets ratio.   (d) Free cash flow.   (e) Earnings per share.   (f)    Compare liquidity, profitability and solvency of the 2 companies

SHOW ALL WORK

Explanation / Answer

(a) Working capital.=

Current Assets - Current libilities

44324-30869=13455

b) Current ratio=

Current Assets/current libilities=

44324/30869

=1.43

(c) Debt to assets ratio=

current libilities/current Assets

30869/44324

=0.696

(d) Free cash flow

Net cash Provide by operating services

Less:Capital expenditure

        Free Cash Floe

5727-3558-1709= 460

e) Earnings per share

Net income-dividend on Preferd stock/average out standing shares=

4395/1849=2.37

(f)    Compare liquidity, profitability and solvency of the 2 companies

The solution computes the ratios and compares Company A to Company B with three paragraphs of narrative data.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.