Question

Lowe’s Companies, Inc. (LOW) and its subsidiaries operate as a home improvement retailer in the United States and Canada. As of February 1, 2008, it operated 1,534 stores in 50 states and Canada. The company’s balance sheet for February 1, 2008, included the following sources of financing:
In Thousands of Dollars Financial Structure
Liabilities
Current liabilities
Accounts payable ........... $ 4,137,000
Short-term/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
a. Calculate the values of Lowe’s debt ratio and interest-bearing debt ratio.
b. If the market value of Lowe’s common equity is $35.86 billion and Lowe’s has no excess cash, what is the firm’s debt-to-enterprise-value ratio?
c. (Optional) Compare your analysis of Lowe’s capital structure to that of Home Depot (HD) in Study Problem. Can you assess which of the two firms is more highly levered (i.e., uses the most financial leverage)? If so, what is your assessment of the two firms’ capital structure?
d. What is the credit rating for Lowe’s, and how does it compare to that of Home Depot?



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  • CreatedOctober 31, 2014
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