a. Compute return on equity (ROE), return on assets (ROA), and return on nancial leverage (ROFL) for each company in 2014.

b. Disaggregate the ROAs computed into prot margin (PM) and asset turnover (AT) components. Which of these factors drives ROA for each company?

c. Compute the gross prot margin (GPM) and operating expense-to-sales ratios for each company. How do these companies protability measures compare?

HOME DEPOT, INC. LOWE'S COMPANIES Income Statements Income Statements ($ millions) 2014 2013 2014 2013 . . $83,176 54,222 $78,812 51,422 $56,223 36,665 $53,417 34,941 III III 1 1 1 1 28,954 16,834 1,651 27,390 16,597 1,627 19,558 13,281 1,485 Net sales ....... Cost of sales. ....... Gross profit. ....... Selling, general and administrative.... Depreciation and amortization.. Operating income..... Investment and other income..... Interest expense Earnings before income taxes.... Provision for income taxes..... Net earnings...... 18,476 12,865 1,462 4,149 IIIIIIIIIIIIIIII 4,792 IIIIIIIIIIIIIIIIIIIIIIIIIIIII 10,469 337 830 9,166 12 711 522 480 IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII ESIIIIIIIIIIIIIIIIIIIIIII 9,976 3,631 8,467 3,082 4,276 1,578 es,.LIIIIIIIIIIIIIIIIIIIII 3,673 1,387 $ 2,286 $ 6,345 $ 5,385 $ 2,698 HOME DEPOT, INC. LOWE'S COMPANIES Income Statements Income Statements ($ millions) 2014 2013 2014 2013 . . $83,176 54,222 $78,812 51,422 $56,223 36,665 $53,417 34,941 III III 1 1 1 1 28,954 16,834 1,651 27,390 16,597 1,627 19,558 13,281 1,485 Net sales ....... Cost of sales. ....... Gross profit. ....... Selling, general and administrative.... Depreciation and amortization.. Operating income..... Investment and other income..... Interest expense Earnings before income taxes.... Provision for income taxes..... Net earnings...... 18,476 12,865 1,462 4,149 IIIIIIIIIIIIIIII 4,792 IIIIIIIIIIIIIIIIIIIIIIIIIIIII 10,469 337 830 9,166 12 711 522 480 IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII ESIIIIIIIIIIIIIIIIIIIIIII 9,976 3,631 8,467 3,082 4,276 1,578 es,.LIIIIIIIIIIIIIIIIIIIII 3,673 1,387 $ 2,286 $ 6,345 $ 5,385 $ 2,698