a. Compute return on equity (ROE) for Lowe's Companies Inc. for fiscal 2017 to 2019.

b. Refer to the common-sized income statement and your ROE decomposition from part a.

1. What trends do you notice in the expense line items as a percentage of sales and in ROE subcomponents for the company over time?

c. Assess the company's asset efficiency. Consider efficiency in terms of total asset turnover, receivables turnover, (and average time to payment), cash conversion cycle (i.e., receivable days + inventory days - payable days), and fixed asset turnover.

d. Assess the company's liquidity and solvency. Is the company likely to meet its debts as it comes due? Consider ratios such as the current ration, the quick ratio, the debt-to-assets ratio, and the liabilities-to-equity ratio. Also consider interest costs and the times interest earned ratio. Is there any "off-balance-sheet" financing that will constrain future cash flow?

e. Assess the cash flow of Lowe's Companies Inc. are cash flows from operations a source or a use of cash? How are operations and investments being financed?

Income Statement January 31, 2020 Current Earnings Amount Net sales $ 72,148 Cost of sales 49,205 Gross margin 22,943 Expenses: Selling, general and administrative 15,367 Depreciation and amortization 1,262 Operating income 6,314 Interest - net 691 Loss on extinguishment of debt Pre-tax earnings 5,623 Income tax provision 1,342 Net earnings $ 4,281 Balance sheet January 31, 2020 Current assets: Cash and cash equivalents $ 716 Short-term investments 160 Merchandise inventory - net 13,179 Other current assets 1,263 Total current assets 15,318 Property, less accumulated depreciation 18,669 Operating lease right-of-use assets 3,891 Long-term investments 372 Deferred income taxes - net 216 Goodwill 303 Other assets 702 Total assets $ 39,471Income Statement February 1, 2019 Current Earnings Amount Net sales 71,309 Cost of sales 48,401 Gross margin 22,908 Expenses: Selling, general and administrative 17,413 Depreciation and amortization 1,477 Operating income 4,018 Interest - net 624 Loss on extinguishment of debt Pre-tax earnings 3,394 Income tax provision 1,080 Net earnings $ 2,314 Balance Sheet February 1, 2019 Current assets: Cash and cash equivalents $ 511 Short-term investments 218 Merchandise inventory - net 12,561 Other current assets 938 Total current assets 14,228 Property, less accumulated depreciation 18,432 Operating lease right-of-use assets Long-term investments 256 Deferred income taxes - net 294 Goodwill 303 Other assets 995 Total assets $ 34,508Income Statement February 2, 2018 Current Earnings Amount Net sales $ 68,619 Cost of sales 46,185 Gross margin 22,434 Expenses: Selling, general and administrative 14,444 Depreciation and amortization 1,404 Operating income 6,586 Interest - net 633 Loss on extinguishment of debt 464 Pre-tax earnings 5.489 Income tax provision 2,042 Net earnings $ 3,447 Balance Sheet + February 2, 2018 Current assets: Cash and cash equivalents $ 588 Short-term investments 102 Merchandise inventory - net 11,393 Other current assets 689 Total current assets 12,772 Property, less accumulated depreciation 19,721 Operating lease right-of-use assets Long-term investments 408 Deferred income taxes - net 168 Goodwill 1,307 Other assets 915 Total assets $ 35,291