Lumber Liquidators, Inc., competes with Lowes in product lines such as hardwood flooring, moldings, and noise-reducing underlay.

Lumber Liquidators, Inc., competes with Lowe’s in product lines such as hardwood flooring, moldings, and noise-reducing underlay. The two companies reported the following financial results in fiscal 2010:

Required:
1. Explain how Lowe’s could have a higher gross profit percentage than Lumber Liquidators but a nearly identical net profit margin. What does this suggest about the relative ability of the two companies to control operating expenses?
2. Explain how Lumber Liquidators could have a higher return on equity but lower earnings per share. What does this suggest about the companies’ relative number of outstanding shares?
What other explanations could account for this seemingly contradictorypattern?

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Lumber Liquidators 34.8% 42% 14.6% $0.96 Lowe's Gross profit percentage Net profit margin Return on equity Earnings per share 35.1% 4.1 % Vo 1.42