answer & provide information for the following

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case study 2 - lowes
read the information on the following website. then answer the questions below in a word document and/or excel spreadsheet.
lowes’s, inc.

1) describe the nature of lowe’s business. in other words, based on the financial statement presented, how does lowe’s “make money?”
2) what financial statements are commonly prepared for external reporting purposes? what titles does lowe’s give these statements? what does the word “consolidated” mean?
3) who is responsible for the preparation of the financial statements?
4) who are potential users of the lowe’s financial statements? in what information might they be interested?
5) who are lowe’s external auditors? what two opinion letters did lowe’s receive in 2012? what is the significance of these opinions? why are these letters dated several months after year-end?

1) refer to lowe’s balance sheet for the fiscal year ended february 1, 2013.
a. verify the accounting equation for lowe’s, i.e., assets = liabilities + equity.
b. describe lowe’s major assets. calculate the proportion of short-term and long-term assets (of total assets).
c. what is the meaning of current maturities of long-term debt (as opposed to long-term debt)?
d. what does the word “deferred” mean? why is “deferred revenue” on the balance sheet?
e. would you say that lowe’s is financed more by “debt = liabilities to non-owners” or “equity = owners?” explain your answer.
f. the balance presented in the annual report is considered “common-sized” because of the percentage columns.” explain how to arrive at the percentages, i.e., what is the denominated that is used in calculating the percentages?
g. refer to note 1 in the footnotes to the financial statement. what inventory method does lowe’s use? why does lowe’s record an “inventory reserve?” (2 reasons)
h. what are the components of “other current liabilities = $1,510 as of feb 1, 2013?” where did you find this information?
2) refer to lowe’s statement of earnings for the period ending february 1, 2013.
a. what is the gross margin for the fiscal year? explain how this ratio is computed. compare it to the gross margin of home depot for year ending 2012. comment on similarities or differences.
b. was lowe’s profitable during 2012? during 2011? explain what you mean by “profitable.”
c. what are lowe’s major selling and administrative expenses?
d. review the revenue recognition policies of lowe’s discussed in note 1: summary of significant accounting policies. what is installation service revenue recognized? describe the accounting treatment for revenues from stored-value cards. how does lowe’s recognize revenue from extended protection plans?
e. compute the percentage change in net earnings from february 3, 2012 to february 1, 2013 and from january 28, 2011 to february 3, 2012.
f. what was the product category that yielded the largest amount of sales for both 2012 and 2011? what percentage of total sales did this product comprise?

3) refer to lowe’s statement of cash flow for the period ending february 1, 2013.
a. compare lowe’s net earnings to net cash provided by operating activities. explain the difference.
b. what was the amount of capital expenditures for the fiscal years ended on feb 1, 2013? feb 3, 2012?
c. what amount of dividends did lowe’s pay during the year ending february 1, 2013?
d. what amount appears for “cash and cash equivalents, end of year –feb 1, 2013? on what other statement do you find this amount?

4) review the 10-year financial information given on the website. describe the company’s sales growth over this 10-year period. explain what caused the differences between the fiscal years ending 2004-2006, 2008-2010, and today.

5) what was the stock price per share of lowe’s common stock on february 1, 2013? how did this compare to basic earnings per share? would you invest(buy stock) in lowe’s? why or why not?
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