Disaggregate the ROAS computed into profit margin (PM) and asset tumover (AT) Compute the gross profit margin ( GPM) and operating expense-to-sales ratios for 2016 $ 1,723 $ 1.929 $486 S 125 1,398 11,057 895 1.484 11,079 1,016 15.302 22.720 1,353 15.279 23.348 1.289 578 10.080 20.034 602 571 $39.946 354 1,350 $31.821 $40,518 PS $ 33 5.797 1,428 1,337 $ 552 5,124 773 979 So 1792 Compute return on equity (ROE). rctum on assets (ROA), and return on financial (5 millions Assets Cash and cash equivalents Short-term investments Receivables, net Merchandise inventories Other current assets Total current assets Property and equipment, net Goodwill... Long-term investments Other assets Total assets Liabilities and shareholders' equity Short-term debt and current maturities of long-term debt Accounts payable.. Accrued compensation and related expenses Deferred revenue Income taxes payable Other current liabilities Total current liabilities Long-term debt, excluding current maturities Deferred income taxes Other long-term abilities. Total liabilities Total stockholders' equity Total liabilities and shareholders' equity. 15 millions Net sales Cost of sales Gross prot Selling, general and administrative Depreciation and amortization Operating income Investment and other income Interest expense Earnings before income taxes Provision for income REQUIRED $ 328 5,807 1.391 1.468 35 2,240 11,269 16 869 642 1.844 30,624 9,322 2.142 10,749 14,691 514 2,042 27.996 12.522 1.920 9.348 10,815 97 1,599 21,859 9.968 100 20 1. 20 PS $39.946 $40,518 $31.827 2013 19.558 TRON HOME DEPOT, INC. LOWE'S COMPANIES Income Statements Income Stateme 2014 2013 2014 $83,176 $78,812 $56.223 54.222 51,422 36,665 28,954 27,390 16,834 16,597 13.281 1,651 1,627 10.469 9,166 337 12 830 711 9.976 8,467 3.631 3,082 $ 6,345 $ 5,385 1,485 4.792 . 522 4.276 1,578 $ 2.690 $ 21 (ROFL) for each company in 2014 b. nents. Which of these factors drives ROA for each company? pumy How do these companies' profitability measures compare? 18,476 12,865 1,462 4,149 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 28,954 16,834 1,651 10,469 337 830 9,976 3,631 $ 6,345 27,390 16,597 1,627 9,166 12 711 8,467 3,082 $ 5,385 19,558 13,281 1,485 4,792 6 522 4,276 1,578 $ 2,698 480 3,673 1,387 $ 2,286 a. REQUIRED Compute return on equity (ROE), return on assets (ROA), and return on financial leverage (ROFL) for each company in 2014. b. Disaggregate the ROA's computed into profit margin (PM) and asset turnover (AT) compo nents. Which of these factors drives ROA for each company? C. Compute the gross profit margin (GPM) and operating expense-to-sales ratios for each com pany. How do these companies' profitability measures compare? HOME DEPOT, INC. LOWE'S COMPANIES Balance Sheets Balance Sheets 2014 2013 2014 2013 $ 1,723 $ 1,929 $ $ P5 466 125 391 185 1,398 11,057 895 8,911 578 1,484 11,079 1,016 15,302 22,720 1,353 9,127 589 10,298 20,834 15,279 23,348 1,289 10,080 20,034 354 1,359 571 602 279 1,323 $32,732 $39,946 P $40,518 $31,827 ($ millions) Assets Cash and cash equivalents Short-term investments Receivables, net. Merchandise inventories Other current assets.. Total current assets Property and equipment, net Goodwill... Long-term investments Other assets. Total assets.. Liabilities and shareholders' equity Short-term debt and current maturities of long-term debt Accounts payable..... Accrued compensation and related expenses. Deferred revenue Income taxes payable Other current liabilities Total current liabilities......... Long-term debt, excluding current maturities Deferred income taxes. Other long-term liabilities Total liabilities Total stockholders' equity $ $ 435 552 5,124 773 979 5,008 785 892 1,920 $ 328 5,807 1,391 1,468 35 2,240 11,269 16,869 642 1,844 30,624 9,322 33 5,797 1,428 1,337 12 2,142 10,749 14,691 514 2,042 27,996 12,522 1,756 8,876 10,086 9,348 10,815 97 1,599 21,859 9,968 291 1,626 20,879 11,853 Total liabilities and shareholders' equity... $39,946 $40,518 $31,827 $32,732 bilities and shareholders' equity..... $39,946 $40,518 $31,827 $32,732 HOME DEPOT, INC. LOWE'S COMPANIES Income Statements Income Statements 2014 2013 2014 2013 ($ millions) 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. $83,176 54,222 28,954 16,834 1,651 10,469 337 830 9,976 3,631 $ 6,345 $78,812 51,422 27,390 16,597 1,627 9,166 12 711 8,467 3,082 $56,223 36,665 19,558 13,281 1,485 4,792 $53,417 34,941 18,476 12,865 1,462 4,149 . 522 480 4,276 1,578 $ 2,698 3,673 1,387 $ 2.286 $ 5,385 REQUIRED Compute return on equity (ROE), return on assets (ROA), and return on financial leverage (ROFL) for each company in 2014. muted into profit margin (PM) and asset turnover (AT) compo