Question

Following are income statements for Lowe’s and The Home Depot for the years ended
February 3, 2012, and January 29, 2012, respectively:
Lowe’s
(in millions)
Net sales ................. $50,208
Cost of sales ............... 32,858
Gross profit ................. 17,350
Selling, general, and administrative ...... 12,593
Depreciation ............... 1,480
Interest, net ............... 371
Total operating expenses .......... 14,444
Pretax earnings .............. 2,906
Income tax provision ............ 1,067
Net earnings ................ $ 1,839
The Home Depot
(in millions)
Net sales ................. $70,395
Cost of sales ............... 46,133
Gross profit ................ 24,262
Selling, general, and administrative ...... 16,028
Depreciation and amortization ........ 1,573
Total operating expenses ........... 17,601
Operating income ............. 6,661
Interest and investment income ....... (13)
Interest expense .............. 606
Other .................... —
Interest and other, net ........... 593
Earnings before provision for income taxes ... 6,068
Provision for income taxes ........... 2,185
Net earnings ................ $ 3,883
1. The companies do not use exactly the same account titles. Align the accounts across the two companies in the manner you believe to be most appropriate. Then prepare common-size income statements for Lowe’s and The Home Depot.
2. Compare the two companies by using the common-size statements.



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  • CreatedFebruary 20, 2015
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