Lowes Companies, Inc. (LOW) and its subsidiaries operate as a home improvement retailer in the United States

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Lowe’s Companies, Inc. (LOW) and its subsidiaries operate as a home improvement retailer in the United States and Canada. As of February 1, 2008, it operated 1,534 stores in 50 states and Canada. The company’s balance sheet for February 1, 2008, included the following sources of financing:

In Thousands of Dollars Financial Structure

Liabilities

Current liabilities

Accounts payable ...........$ 4,137,000

Short-term/current debt ........ 1,104,000

Other current liabilities ........ 2,510,000

Total current liabilities ........$ 7,751,000

Long-term debt .......... 5,576,000

Other long-term liabilities ...... 670,000

Long-term liabilities .........$ 6,246,000

Stockholder equity ..........$16,098,000

Total ..............$30,095,000

a. Calculate the values of Lowe’s debt ratio and interest-bearing debt ratio.

b. If the market value of Lowe’s common equity is $35.86 billion and Lowe’s has no excess cash, what is the firm’s debt-to-enterprise-value ratio?

c. (Optional) Compare your analysis of Lowe’s capital structure to that of Home Depot (HD) in Study Problem. Can you assess which of the two firms is more highly levered (i.e., uses the most financial leverage)? If so, what is your assessment of the two firms’ capital structure?

d. What is the credit rating for Lowe’s, and how does it compare to that of Home Depot?


Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Capital Structure
Capital structure refers to a company’s outstanding debt and equity. The capital structure is the particular combination of debt and equity used by a finance its overall operations and growth. Capital structure maximizes the market value of a...
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Related Book For  answer-question

Financial Management Principles and Applications

ISBN: 978-0133423822

12th edition

Authors: Sheridan Titman, Arthur Keown, John Martin

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