The specific purposes of the projects are: 1. Apply to actual companies the knowledge and analytical techniques learned from our course. 2. Perform vertical and horizontal analysis and various ratios on the financial statements. 3. Compare the calculated results with competitor and across different years. 4. Summarize the analyses and make investment recommendations. You will be analyzing the following firms: a. Home Depot (HD) b. Lowes (LOW). Please check the blackboard for the financial statements. 2 Project The required tasks are detailed below: (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. (3) Prepare ratio analyses (for 2018, 2017, and 2016) for both companies. You should include the following ratios in your computations: Profitability ratios o Gross Profit margin o Profit margin o Return on assets o Return on equity Productivity o Accounts Receivable Turnover o Average Collection Period o Inventory Turnover o days inventory outstanding o PPE Turnover o Asset Turnover Solvency o Debt-to-equity o Times interest earned o Return on Financial leverage Liquidity o Current Ratio o Quick Ratio o Working capital (3) Comment on the analytical results of the two companies based on your work in excel. In addition to contrasting the ratios between the companies, you should interpret the numbers and make suggestions as to why the ratio of one company might be higher/lower than the other. Note: General discussions of the ratios are given in our textbook, which will help you structure your comments. 3 (4) Write an conclusive summary on the firms you have studied. Based upon your conclusions, recommend the better performing firm for potential investment. Your conclusions should be based upon, and specifically reference, the analyses prepared in this report. Report Format Requirements: A. Report body requirements: 1. Create an Covers page. List the title of the project, your name, and semester/year. 2. Main body. Use the following sequence for report content: a. Introduction to the two companies and to the purpose of the report b. Analytical section. This should include all your numerical analyses. This is where you will discuss the results of, comments on, and conclusions about, the Common Size, ho rizontal, and the ratio analyses for both companies. c. Comparisons of companies and all other analysis (observations and/or interpretations). (You may combine b and c if you wish, as long as both are well covered.) d. Conclusions and recommendation for investment. 3. References. List all major reference sources. 4. Appendices. Include tables and graphs of your numerical analyses. For reference convenience, assign a title to each separate item, such as Table 1, Exhibit 1, etc. B. Typesetting requirements: 1. Use size 12 font. Time New Roman is preferred. 2. Double-space between lines. 3. Number pages. 4. One inch on all sides. C. Miscellaneous The total report should be approximately 20-pages.