Compute the following ratios for the companies’ 2017 fiscal years (years ending in January 2018): (1) Current ratio.

(2) Average days to sell inventory. (Use average inventory.)

(3) Debt-to-assets ratio.

(4) Return on investment. (Use average assets and use “earnings from continuing operations” rather than “net earnings.”)

(5) Gross margin percentage.

(6) Asset turnover. (Use average assets.)

(7) Return on sales. (Use “earnings from continuing operations” rather than “net earnings.”)

(8) Plant assets to long-term debt ratio.

b. Which company appears to be more profitable? Explain your answer and identify which ratio(s) from Requirement a you used to reach your conclusion.

c. Which company appears to have the higher level of financial risk? Explain your answer and identify which ratio(s) from Requirement a you used to reach your conclusion.

d. Which company appears to be charging higher prices for its goods? Explain your answer and identify which ratio(s) from Requirement a you used to reach your conclusion.

e. Which company appears to be the more efficient at using its assets? Explain your answer and identify which ratio(s) from Requirement a you used to reach your conclusion.

  

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LOWE'S COMPANIES INC. Selected Financial Information (amounts in millions except per share data) January 24, January 25, 2018 2017 Total current assets $12,000 $10,561 Merchandise inventory 10,458 9,458 Property and equipment, net of depreciation 19,949 19,577 Total assets 34,408 31,266 Total current liabilities 11,974 10,492 Total long-term liabilities 16,000 9,120 Total liabilities 27,974 23,612 Total stockholders' equity 6,434 7,654 Revenues 65,017 59,074 Cost of goods sold 42,553 38,504 Gross profit 22,464 20,570 Operating income 5,846 4,971 Earnings from continuing operations before income taxes 5,201 4,419 Income tax expense 2,108 1,873 Net earnings 3,093 2,546 Basic earnings per share $ 3.48 $ 2.73 LOWE'S COMPANIES INC. Selected Financial Information (amounts in millions except per share data) January 24, January 25, 2018 2017 Total current assets $12,000 $10,561 Merchandise inventory 10,458 9,458 Property and equipment, net of depreciation 19,949 19,577 Total assets 34,408 31,266 Total current liabilities 11,974 10,492 Total long-term liabilities 16,000 9,120 Total liabilities 27,974 23,612 Total stockholders' equity 6,434 7,654 Revenues 65,017 59,074 Cost of goods sold 42,553 38,504 Gross profit 22,464 20,570 Operating income 5,846 4,971 Earnings from continuing operations before income taxes 5,201 4,419 Income tax expense 2,108 1,873 Net earnings 3,093 2,546 Basic earnings per share $ 3.48 $ 2.73

Answer rating: 100% (QA)

b To determine which company appears more profitable we can compare their Re... View the full answer