Question

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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  • CreatedFebruary 27, 2015
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