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 2016:

Required:

1. Calculate the difference in gross profit percentage between Lumber Liquidators and Lowe’s. What does this indicate about the extent to which the companies mark up their selling prices over cost?

2. Calculate the difference in net profit margin between Lumber Liquidators and Lowe’s. Use this analysis along with your calculation in requirement 1 to identify the company that best controls operating expenses other than cost of goods sold.

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Lumber Liquidators Lowe's Gross profit percentage Net profit margin Current ratio Earnings per share 31.6% 34.6% (7.1)% 4.8% 1.93 1.00 $(2.51) $3.48