Refer to the financial statements of The Home Depot in Appendix A and Lowe’s in Appendix B at the end of this book, or download the annual reports from the Cases section in the Connect library.
1. What method of depreciation does Lowe’s use?
2. What is Lowe’s fixed asset turnover ratio for the year ended January 31, 2014? Compare this ratio to that of The Home Depot for the same period and describe what it implies about the operations of the two companies.
3. Lowe’s estimated useful life of buildings is shorter than that estimated by The Home Depot . How will this affect the fixed asset turnover ratios of the two companies?
4. What amount of Depreciation Expense was reported on Lowe’s income statement for the year ended ended January 31, 2014? What percentage of net sales is it? Compare this percentage to that of The Home Depot for the same period and describe what this implies about the two companies’ operations.