Management at D$.$E$.$ Shaw & Co$.,$ a New York based hedge fund are concerned that Lowe$$s is underperforming, compared to their primary competitor, Home Depot. You have been tasked with analyzing the financial statements for Lowe$$s and Home Depot to determine the source of the problem.

Amounts in millions

Assets

Current Assets

Cash & Equivalents Receivables

Inventory

Other Current Assets Total Current Assets Net Plant and Equipment Other Assets

Total Assets

Liabilities & Equity Current Liabilities Short$-$term Debt

Accounts Payable

Other Current Liabilities Current Installment of LTD Total Current Liabilities Long$-$term Debt

Total Liabilities

Total Shareholders' Equity

Total Liabilities & Shareholders' Equity

Home Depot

$29-$Jan$-17$

Balance Sheet Lowe's

$03-$Feb$-17$

$658$

$10,45812,549$

$88412,00019,9492,45934,408$

$5106,6514,01879511,97416,00027,9746,43434,408$

$60817,72421,9143,32842,966$

$7107,0005,88154214,13324,50038,6334,33342,966$

$2,5382,029$

Amounts in millions

Net Sales

Cost of Sales

Gross Profit

Selling, General, & Admin Expense Depreciation

Operating Income

Interest Expense

Pre$-$tax Earnings

Income Tax

Net Income

Fiscal Year Ended

Home Depot

Income Statement

Lowe$$s

$03-$Feb$-17$

$65,01742,55322,46415,129$

$29-$Jan$-1794,595$

$62,28232,31317,132$

$1,4891,754$

$5,8466455,2012,1083,093$

$13,42793612,4914,5347,957$

Use the above financial statements to compute the following ratios for Lowe$$s and Home Depot. Provide a brief discussion of any problems you can identify with Lowe$$s financial performance.

Lowe$$s

Home Depot

Profitability

Profit Margin

Return on Assets $($ROA$)$

Return on Equity $($ROE$)$

Asset Management

Inventory Turnover

Days$$ Sales in Inventory

Receivables Turnover

Days$$ Sales in Receivables

Fixed Asset Turnover

Total Asset Turnover

Liquidity

Current Ratio

Quick Ratio

Leverage

Total Debt Ratio

Debt to Equity Ratio

Stock Performance $($Feb $2016-$ August $2017)$

Management Performance Evalua$2$on

$(1$ Point for be$=$er performance; $0$ for worse performance$)$

Home Depot

Lowes$$s

Profit Margin

Return on Assets $($ROA$)$

Return on Equity $($ROE$)$

Inventory Turnover

Fixed Asset Turnover

Total Asset Turnover

Current Ratio

Quick Ratio

Debt Ratio

Debt to Equity Ratio

Stock Performance

Total Score

Conclusion: