1. Prepare vertical common-size income statements and balance sheets for both companies. Note: Use Total Sales and Total Assets as the denominators for income statement and balance sheet, respectively. Compute for 2018, 2017, and 2016.

2. Prepare horizontal analysis on income statements and balance sheets for both companies.

Home Depot

Lowe

F F B C D NOTE: 2015 BALANCE SHEET INFORMATION SHOULD BE USED ONLY FOR RATIOS 2 Report Date 2018 2017 2016 2015 Avg. $1,778 $1,936 $13,925 $890 $18,529 $3,595 $1,952 $12,748 $638 $18,933 $2,538 $2,029 $12,549 $608 $17,724 $2,216 $1,890 $11,809 $569 $16,484 $2,532 $1,952 $12,758 $676 $17,918 $22,375 $2,252 $847 $44,003 $22,075 $2,275 $1,246 $44,529 $21,914 $2,093 $1,235 $42,966 $22,191 $2,102 $1,196 $41,973 $22,139 $2,181 $1,131 $43,368 4 $ in Millions 5 ASSETS 6 Current assets: 7 Cash and cash equivalents 8 Receivables, net 9 Merchandise inventories 10 Other current assets 11 Total current assets 12 13 Net property and equipment 14 Goodwill 15 Other assets 16 Total assets 17 18 rent Liabilities: 19 Short-term debt 20 Accounts payable 21 Accrued salaries and related expenses 22 Sales taxes payable 23 Deferred revenue 24 Income taxes payable 25 Current installments of long-term debt 26 Other accrued expenses 27 Total current liabilities 28 Long-term debt, excluding current installments 29 Deferred income taxes 30 Other long-term liabilities 31 Total liabilities 32 Common stock, par value $0.05; authorized: 10,000 shares; issue 33 Paid-in capital 34 Retained earnings 35 Accumulated other comprehensive loss 36 Treasury stock, at cost, 677 shares at February 3, 2019 and 622 37 Total stockholders' (deficit) equity 38 Total liabilities and stockholders' equity 39 40 $1.339 $7,755 $1,506 $656 $1,782 $11 $1,056 $2,611 $16,716 $26,807 $491 $1,867 $45,881 $89 $10,578 $46,423 $772 $58,196 $1,878 $44,003 $1,559 $7,244 $1,640 $520 $1,805 $54 $1,202 $2,170 $16,194 $24,267 $440 $2,174 $43,075 $89 $10,192 $39,935 $566 -$48, 196 $1,454 $44,529 $710 $7,000 $1,484 $508 $1,669 $25 $542 $2,195 $14,133 $22,349 $296 $1,855 $38,633 $88 $9,787 $35,519 $350 $6,565 $1,515 $476 $1,566 $34 $77 $1,941 $12,524 $20,789 $379 $1,965 $35,657 $88 $9,347 $30,973 $898 $33,194 $6,316 $41,973 $867 -$40,194 $4,333 $42,966 42 Additional Information 43 * No allowance account is created for receivables, i.e. Net receivables is equal to gross receivables 44 45 **Property and Equipment, at cost: 46 Land $8,363 8352 47 Buildings 18199 $18,073 Balance Sheet Income Statement + Ready $8,207 $17,772 8,149 17,667 10ozo 2 Additional Information 3 * No allowance account is created for receivables, i.e. Net receivables is equal to gross receivables 5 **Property and Equipment, at cost 6 Land -7 Buildings 8 Furniture, Fixtures and Equipment 9 Leasehold Improvements 0 Construction in Progress 1 Capital Leases 2 Less Accumulated Depreciation and Amortization 3 Net Property and Equipment $8,207 $17,772 11,020 1,519 $8,363 18199 12460 1705 820 1392 20564 22375 8352 $18,073 11506 1637 538 1308 19339 22075 8,149 17,667 10,279 1,481 670 1,020 17,075 22, 191 739 1,169 18,512 21,914 C B 2018 2017 D 2016 $108,203 71,043 37,160 $100,904 66,548 34,356 $94,595 62,282 32,313 17,864 1,811 17,132 1,754 19,513 1,870 247 21,630 15,530 19,675 14,681 18,886 13,427 1 shares in Millions, $ in Millions 2 Income Statement 3 Net Sales 4 Cost of sales 5 Gross profit 6 Operating expenses: 7 Selling, general and administrative 8 Depreciation and amortization 9 Impairment loss 10 Total operating expenses 11 Operating income 12 Interest and other (income) expense: 13 Interest and investment income 14 Interest expense 15 Other 16 Interest and other, net 17 Earnings before provision for income taxes 18 Provision for income taxes 19 Net earnings 20 21 Additional Information 22 Basic weighted average common shares 23 Cash dividend per share 24 Operating cash flow for the year -93 -74 1,057 -36 972 1,051 16 974 14,556 3,435 $11,121 983 13,698 5,068 $8,630 936 12,491 4,534 $7,957 1,137 4.12 13,038 1,178 3.56 12,031 1,229 2.76 9,783 46 47 Balance Sheet Income Statement E F G 2015 NOTE: 2015 BALANCE SHEET INFORMATION SHOULD BE USED ONLY FOR RATIOS 2 Report Date 2018 2017 2016 3 $ in Thousands 4 Cash & cash equivalents $511,000 $588,000 $558,000 5 Short-term investments $218,000 $102,000 $100,000 6 Merchandise inventory, net $12,561,000 $11,393,000 $10,458,000 7 Other current assets $938,000 $689,000 $884,000 8 Total current assets $14,228,000 $12,772,000 $12,000,000 9 Property, less accumulated depreciation $18,432,000 $19,721,000 $19,949,000 10 Long-term investments $256,000 $408,000 $366,000 11 Deferred income taxes - net $294,000 $168,000 $222,000 12 Goodwill $303,000 $1,307,000 $1,082,000 13 Other assets $995,000 $915,000 $789,000 14 Total assets $34,508,000 $35,291,000 $34,408,000 15 $405,000 $307,000 $9,458,000 $391,000 $10,561,000 $19,577,000 $222,000 $241,000 $0 $665,000 $31,266,000 16 17 Liabilities 18 Short-term borrowings 19 Current maturities of long-term debt 20 Accounts payable 21 Accrued compensation & employee benefits 22 Deferred revenue 23 Other current liabilities 24 Total current liabilities 25 Long-term debt, excluding current maturities 26 Deferred revenue - extended protection plans 27 Other liabilities 28 Total liabilities 29 30 Stockholders' Equity 31 Common stock 32 Capital in excess of par value 33 Retained earnings 34 Accumulated other comprehensive income (loss 35 Total shareholders' equity 36 Total liabilities and stockholders' equity $722,000 $1,110,000 $8,279,000 $662,000 $1,299,000 $2,425,000 $14,497,000 $14,391,000 $827,000 $1,149,000 $1,137,000 $294,000 $6,590,000 $747,000 $1,378,000 $1,950,000 $12,096,000 $15,564,000 $803,000 $955,000 $29,418,000 $510,000 $795,000 $6,651,000 $790,000 $1,253,000 $1,975,000 $11,974,000 $14,394,000 $763,000 $843,000 $27,974,000 $43,000 $1,061,000 $5,633,000 $820,000 $1,078,000 $1,857,000 $10,492,000 $11,545,000 $729,000 $846,000 $23,612,000 $401,000 $433,000 $0 $3,452,000 $209,000 $3,644,000 $34,508,000 $415,000 $22,000 $5,425,000 $11,000 $5,873,000 $35,291,000 $6,241,000 $240,000 $6,434,000 $34,408,000 $455,000 $0 $7,593,000 $394,000 $7,654,000 $31,266,000 38 Additional Information 39 **Property and Equipment, at cost: 40 Land 41 Buildings & building improvements 42 Equipment 43 Construction in progress 44 Total cost 45 Less: accumulated depreciation $7,196,000 $18,052,000 $10,090,000 $525,000 $35,863,000 $17,431,000 $7,414,000 $18,521,000 $10,475,000 $530,000 $7,329,000 $18,147,000 $10,978,000 $464.000 $36,918,000 $16,969,000 $7,086,000 $17,451,000 $10,863,000 $513,000 $35,913,000 $16,336,000 $36,940,000 $17,219,000 26 Balance sheet Income Statement 1 As Reported Annual Income Statement 2 Report Date 3 Scale 4 Net sales 5 Cost of sales 6 Gross margin 7 Selling, general & administrative expense 8 Depreciation & amortization 9 Operating income (loss) 10 Interest income (expense), net 11 Loss on extinguishment of debt 12 Pre-tax earnings (losses) 13 Income tax provision 14 Net earnings 2018 2017 2016 Thousands Thousands Thousands $71,309,000 $68,619,000 $65,017,000 $48,401,000 $45,210,000 $42,553,000 $22,908,000 $23,409,000 $22,464,000 $17,413,000 $15,376,000 $15, 129,000 $ 1,477,000 $ 1,447,000 $ 1,489,000 $ 4,018,000 $ 6,586,000 $ 5,846,000 $ (624,000) $ (633,000) $ (645,000) $ - $ (464,000) $ $ 3,394,000 $5,489,000 $5,201,000 $ 1,080,000 $2,042,000 $2,108,000 $ 2,314,000 $3,447,000 $3,093,000 16 Additional Information 17 Weighted average shares outstanding - basic 18 Cash dividends per share 19 Net cash flows from operating activities 811,000 1.85 $ 6,193,000 839,000 1.58 $ 5,065,000 880,000 1.33 $ 5,617,000