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Part $1$

$(Analyzing$ the quality $of$ earnings and sustainability $of$ capital expenditures$)$ Look $up$ the statement $of$ cash flows for both Home Depot and Lowes using Yahoo! Finance.

$a.$ Compute the quality $of$ earnings ratio for both firms and all three years $of$ data provided $in$ the popup window: LOADING....

$b.$ Compare the quality $of$ earnings ratio for the two firms. For which firm $do$ you feel most comfortable about the reported earnings quality? Explain.

$c.$ Compute the capital acquisitions ratios for the latest three years for both firms.

$d.$ Compare Home Depot's and Lowes' abilities $of$ using operating cash flow $to$ finance their capital expenditures. Which firm has relied more $on$ the capital markets?

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Part $1$

$a.$ Compute the quality $of$ earnings ratio for both firms and all three years $of$ data provided.

What $is$ Home Depot's quality $of$ earnings ratio $in2011?$

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$137\mathrm{.}4\%(Roundto$ one decimal place.$)$

Part $2$

What $is$ Home Depot's quality $of$ earnings ratio $in2012?$

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$171\mathrm{.}3\%(Roundto$ one decimal place.$)$

Part $3$

What $is$ Home Depot's quality $of$ earnings ratio $in2013?$

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$153\mathrm{.}8\%(Roundto$ one decimal place.$)$

Part $4$

What $is$ Lowes' quality $of$ earnings ratio $in2011?$

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$191\mathrm{.}6\%(Roundto$ one decimal place.$)$

Part $5$

What $is$ Lowes' quality $of$ earnings ratio $in2012?$

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$236\mathrm{.}5\%(Roundto$ one decimal place.$)$

Part $6$

What $is$ Lowes' quality $of$ earnings ratio $in2013?$

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$192\%(Roundto$ one decimal place.$)$

Part $7$

$b.$ Compare the quality $of$ earnings ratio for the two firms. For which firm $do$ you feel most comfortable about the reported earnings quality? $(Select$ the best choice below.$)$

$A.$

Lowes' quality $of$ earnings ratio $is$ fairly stable over time, this suggests that the firm's earnings and cash flows are $insync$ and that reported earnings provide a high$-$quality indicator $of$ the firm's future performance potential.

$B.$

The information $is$ not sufficient $to$ tell which firm's quality $of$ earnings ratios $is$ more stable.

$C.$

Both Home Depot's and Lowes' quality $of$ earnings ratios are fairly stable over time, this suggests that the firm's earnings and cash flows are $insync$ and that reported earnings provide a high$-$quality indicator $of$ the firm's future performance potential.

$D.$

Home Depot's quality $of$ earnings ratio $is$ fairly stable over time, this suggests that the firm's earnings and cash flows are $insync$ and that reported earnings provide a high$-$quality indicator $of$ the firm's future performance potential.

Part $8$

$c.$ Compute the capital acquisitions ratios for the latest three years for both firms.

What $is$ Home Depot's average capital acquisitions ratio over the three$-$year period?

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enter your response here $\%(Roundto$ one decimal place.$)$

Part $9$

What $is$ Lowes' average capital acquisitions ratio over the three$-$year period?

$$

enter your response here $\%(Roundto$ one decimal place.$)$

Part $10$

$d.$ Compare Home Depot's and Lowes' abilities $of$ using operating cash flow $to$ finance their capital expenditures. Which firm has relied more $on$ the capital markets? $(Select$ the best choice below.$)$

$A.$

Consequently, for the past three years, Home Depot had $on$ average more operating cash flows $to$ finance its new expenditures for plant and equipment.

$B.$

The information $is$ not sufficient $to$ tell which firm $is$ more sufficiently $on$ using the operating cash flows $to$ finance its new expenditures for plant and equipment.

$C.$

Consequently, for the past three years, Lowes had $on$ average more operating cash flows $to$ finance its new expenditures for plant and equipment.

$D.$

Consequently, for the past three years, both Home Depot and Lowes had $on$ average about the same amount $of$ operating cash flows $to$ finance its new expenditures for plant and equipment.