1) Home Depot and Lowes have similar gross margins (~34%) however Home Depot's operating margin has increased significantly over the time period presented in the Excel file. How do you explain this difference? This question does not require a paragraph answer and can be answered in ONE sentence.

2) You are an analyst for a mutual fund that wants to include a home improvement store in its portfolio. Given that Home Depot and Lowes are the dominant players in the industry, which firm would you recommend buying? Explain. Your answer should be limited to a paragraph.

3) Examine the return on equity (ROE) of both firms in the excel file. What is driving the variation of returns to shareholders between the firms. You should break this down along two dimensions; operational and financial. This is a Dupont equation question

4) Focusing on the last three years reported in the excel file, Home Depot's ROE increased significantly. While the firm did increase its leverage (debt), this is not the sole reason for the increase in the financial leverage of the firm. What other actions could cause an increase in financial leverage? Hint: The answer can be found in Home Depot's cash flow statement.

A B D E F G H J M N o P R R S S T HOME DEPOT Financials 2010-01 2011-01 2012-01 2013-01 2014-01 2015-01 2016-01 2017-01A B C D E F G H J K L M N o P Q R S T HOME DEPOT Key Ratios -> Growth 2010-01 2011-01 2012-01 2013-01 2014-01 2015-01 2016-01B C D E F H 1 K L M N O P Q R S T 2010-01 2011-01 2012-01 2013-01 2014-01 2015-01 2016-01 2017-01 1.32 1.4 1.28 1.27 1.16 1