Refer to the fi nancial statements of The Home Depot in Appendix A and Lowe's in Appendix B at the end of this book, or download the annual reports from the Cases section of the text's Web site at www.mhhe.com/phillips4e .

1. Does Lowe's report higher or lower Net Sales than The Home Depot during the year ending near January 31, 2011?

2. Assuming that Cost of Sales is the same thing as Cost of Goods Sold, compute Lowe's gross profit percentage for the most recent two years. Is it greater or less than The Home Depot's? Based on this, where are consumers likely to find lower mark-ups?

3. Assume that Lowe's and The Home Depot experienced no shrinkage in the most recent year. Using the balance sheet and income statement, estimate the amount of purchases in the 2010-2011 year. How much greater (or less) were Lowe's purchases than The Home Depot's in that year?

4. Refer to the "Report of Independent Registered Public Accounting Firm" in The Home Depot's annual report and Lowe's annual report. Were the two companies' internal controls operating effectively? What are the "inherent limitations" of internal control to which KPMG is referring?