Lowes Companies, Inc (LOW) and its subsidiaries operate as a home imporvement re

Question

Lowes Companies, Inc (LOW) and its subsidiaries operate as a home imporvement retailer in the US and Canada. As of February 1, 2008, it operated 1,534 stores in 50 states and Canada. The companys balance sheet for February 1, 2008 is:

a. Calculate the values of Lowes debt ratio?

And interest-bearing debt ratio?

b. If the market value of Lowes common equity is $35.86 billio and Lowes has no excess cash, what is the firms debt-to-enterprise-value ratio?

In Thousands of Dollars Financial Structure Liabilities Current liabilities Accounts payable $4,137,000 Short/current debt $1,104,000 Other current liabilities $2,510,000 Total current liabilities $7,751,000 Long-term debt $5,576,000 Other long-term liabilities $670,000 Long-term liabilities $6,246,000 Stockholder equity $16,098,000 Total $30,095,000

Explanation / Answer

a. Debt ratio = (Total Current Liabilities + Long term Liablities)/Total Assets

= ($7,751,000+ $6,246,000)/$30,095,000 = 46.51%.

Interest Bearing ratio = (Short term debt + Long term debt ) /Total Assets

= ($1,104,000+ $5,576,000)/$30,095,000 = 22.20%

b. Debt-to-enterprise-value ratio = (Short term debt + Long term debt ) /[(Short term debt + Long term debt ) +Common Equity]

= ($1,104,000+ $5,576,000)/[($1,104,000+ $5,576,000)+$35,86,000 ] = 15.70%

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