To complete the through-time analysis, obtain the financial data for Lowe's for the year 2011 and the prior two years of data. Calculate the financial ratios for each year and present these ratios in a table format. Select key ratios to emphasize by presenting them in a graphical/chart format. Discuss each ratio with respect to how it has adjusted across time and explain what conclusions you generate from each.

To complete the relative analysis, obtain the financial data for Lowe's for the year 2011 and selected data for competing firm(s) for 2011, in this case Home Depot. Calculate the financial ratios for each company and present these ratios in a table format. Select key ratios to emphasize by presenting them in a graphical/chart format. Discuss each ratio with respect to how the Lowe's ratio differs from the competing firm and what conclusions you generate from each.Note: If you compare your company's data with more than one competing firm, present each firm's ratios plus an average ratio of the competing firm collectively. Even if you have more than one competing firm in your analysis, you likely will want to compare Lowe's directly to its single closest competitor. The Financial Ratios Analysis Example, located in the Resources, using Home Depot data provides guidance on how to proceed. A summary of the basic data needed for this project has been provided.

LOWE'S Income Statements 2/3/2012 1/28/2011 50,208 32,858 17,350 48,815 31,663 17,152 12,593 1,480 14,073 3,277 12,006 1,586 13,592 3,560 371 2,906 1,067 1,839 332 3,228 1,218 2,010 Weighted average common shares Basic earnings per share Diluted weighted average common shares Diluted earnings per share 1,271 1.43 1,273 1.43 1,401 1.42 1,403 1.42 Number of stores Capital expenditures Square feet Number of customer transactions Average ticket 1,745 1,829 197 810 62 1,749 1,329 197 786 62.07 0.53 0.42 Sales Cost of goods sold Gross profit Operating expenses Selling, general and administrative Depreciation and amortization Total operating expenses Operating income Interest income (expense) Interest, net Earnings before taxes Provision for income taxes Net income Annual dividends LOWE'S Balance Sheets 2/3/2012 1/28/2011 Assets Current assets Cash and cash equivalents Short term investments Merchandise inventory - net Deferred income taxes - net Other current assets Total current assets 1,014 286 8,355 183 234 10,072 652 471 8,321 193 330 9,967 Property and equipment, at cost Land Buildings an building improvements Equipment Construction in progress Gross property and equipment Less accumulated depreciation and amortization Net property and equipment 6,936 16,640 9,835 921 34,332 12,362 21,970 6,742 16,531 9,142 930 33,345 11,256 22,089 Long-term Investments Other assets Total assets 504 1,013 33,559 1,008 635 33,699 592 4,352 613 801 1,533 7,891 36 4,351 667 707 1,358 7,119 Long term debt - excluding current Other long term liabilities Deferred revenue - extended protection plans Deferred income taxes Total liabilities 7,035 865 704 531 17,026 6,537 833 631 467 15,587 Stockholders' Equity Preferred Stock - $5 par value, none issued Common Stock - $.50 par value; Shares issued and outstanding February 3,2012 1,241 January 28,2011 1,354 Capital in excess of par value Retained earnings Accumulated other income Total Stockholders' Equity 621 14 15,852 46 16,533 677 11 17,371 53 18,112 33,559 33,699 Liabilities and Shareholders' Equity Current liabilities Short term debt Accounts payable Accrued salaries and related expenses Deferred revenue Other current liabilities Total current liabilities Total liabilities and stockholders' equity Lowe's Basis Income Statements 2/3/2012 Sales Cost of goods sold Gross profit Operating expenses Selling, general and administrative Depreciation and amortization Total operating expenses Operating income Interest income (expense) Interest and investment income Interest expense Interest, net Earnings before taxes Provision for income taxes Net income 1/28/2011 (Gross profit rate or per (Return on sales ratio) The common size income statement shows each income statement item as a percentage of the total sales revenue. This analysis controls for size effects by examing the ratios which allow you to compare the company expenses across years without the effects of the variability from sales revenue moving up and down through time. For example, the (Gross profit rate or percentage CGS%ratio) shows that for each $1 in sales revenue, $0.6658 goes toward the CGS expense. If the company can reduce this percentage across time, then it will result in an improved Gross profit, operating income and net income. (Return on sales ratio) tement item ntrols for are the variability example, the s toward the cross time, ome and net Lowe's Basis Balance Sheets 2/3/2012 Assets Current assets Cash and cash equivalents Short term investments Receivables, net Merchandise inventory Other current assets Total current assets Property and equipment, at cost Land Buildings Furniture, fixtures and equipment Leasehold improvements Construction in progress Capital leases Gross property and equipment Less accumulated depreciation and amortization Net property and equipment Notes receivable Cost in excess of fair value acquired Other assets Total assets Liabilities and Shareholders' Equity Current liabilities Short term debt Accounts payable Accrued salaries and related expenses Sales taxes payable Deferred revenue Income taxes payable Current installment of long term debt Other accrued expenses Total current liabilities Long term debt - excluding current Other long term liabilities Deferred income taxes Total liabilities Stockholders' Equity Common stock (par=0.05, authorized: 10,000; issued 2,401 as of 1/29/06, 2385 as of 1/30/05; outstanding 2,124 as of 1/29/06, 2,185 as of 1/30/05) Paid in capital Retained earnings Accumulated other income Unearned compensation 1/28/2011 Treasury stock, at cost (277 shares at 1/29/06 200 shares at 1/30/05) Total Stockholders' Equity Total liabilities and stockholders' equity 1/29/2010 The common size balance sheet shows each balance sheet item as a percentage of the total assets of the firm. This analysis allows for a comparison across time by the firm without the effects of size that fluctuate across the years. The asset percentages show the mix of assets that comprise the firm. The liability and shareholder equity percentage show the mix of asset funding sources. For example, the firm holds 36.58% of the assets as short term or current assets. Moreover, the total assets are funded by 38.09% liabilities, the remaining funding comes from stockholders' equity. (Total debt to assets ratio) Lowe's Financial Ratios 2/3/2012 1/28/2011 1/29/2010 Short term ratios Current ratio Average collection period in days Inventory turnover Inventory days Total asset turnover The current ra (current asse The average c it takes (on a The inventory indicates too days (on aver The total asse means a stron Debt-to-equity ratios Total debt to equity Total debt to assets Equity multiplier (using averages) The debt to e funding will t problems due total debt fun levels of debt Profitability ratios Gross profit rate or percentage Return on sales Return on assets Return on stockholders' equity Decomposition of return on stockholders' equity Return on stockholders' equity Return on assets Equity multiplier (using averages) Return on stockholders' equity Return on sales Total asset turnover Equity multiplier The gross pro measure. The better The return th on all expenses, The return on assets are fun turnover (a re The return on stockholders 1. First, the r 2. Second, th second decomposi be the driver. 1. If the ca 2. If the ca 3. If the ca Valuation ratios Shares Outstanding Earnings per share Stock Price per share Price earnings (from www.bigcharts.com) The price ear strong marke strengthen. A purchasing th firm. In this c strong apprec Dividend ratios Annual dividend Dividend yield Dividend payout The price ear strong marke strengthen. A purchasing th firm. In this c strong apprec The current ratio measures the ability of the firm to meet short term obligations (current liabi (current assets). However, while more current assets improves the current ratio, those assets The average collection period measures the ability of the firm to manage credit sales to custo it takes (on average) to collect account receivables. The inventory turnover measures the number of times during the year that inventory has turn indicates too little inventory while a low inventory turnover indicates too much inventory. The days (on average) that inventory is held. The total asset turnover measures the ability of the firm to generate sales revenue given an a means a stronger ability to generate sales. Sales generation is of course a marketing metric. The debt to equity ratio measures the debt funding as a percentage of the equity funding use funding will tend to support firm valuation due to the tax deductibility of interest payments w problems due to the contractual nature of the funding which can potentially lead to bankruptc total debt funding as a percentage of assets. The equity multiplier is also a debt measure wh levels of debt. The equity multiplier is also useful in the decomposition of the return on share The gross profit rate shows the percentage of sales dollars that remain after paying the cost o measure. The return better the firm is at controlling the cost goods sold,that the remain higher this ratio will all be.expense The on sales shows the percentage ofof sales dollars after paying all expenses, the higher this ratio will be. The return on assets measures the ability of the firm to create net income given the asset bas assets are funded. The return on assets can be decomposed into the return on sales (an expe turnover (a revenue creation ratio). The return on stockholders' equity takes the net income (which the stockholder claim) as a pe stockholders have historically contributed to the firm. The ratio can be decomposed in two di 1. First, the ratio can be decomposed into the return on assets TIMES the equity multiplier. 2. Second, the ratio can be decomposed into the return on sales TIMES the total asset turnove second decompositon is especially useful to understand. It shows the drivers to the return on stoc be the driver. 1. If the cause of the ROE for being high or low is due to the return on sales, then the prima 2. If the cause of the ROE for being high or low is due to the total asset turnover then the p 3. If the cause of the ROE for being high or low is due to the equity multiplier then the prim w.bigcharts.com) The price earnings ratio measures the market pricing of the stock relative to the earnings gen strong market pricing relative to earnings. High PE ususally are associated with strong belief strengthen. An existing stockholder likes to see the PE strong and increasing. A potential sto purchasing the stock would like to see a relatively low PE COMBINED with other fundametal m firm. In this case, the potential stockholder would look at the low PE as an indication of an un strong appreciation in the future. The price earnings ratio measures the market pricing of the stock relative to the earnings gen strong market pricing relative to earnings. High PE ususally are associated with strong belief strengthen. An existing stockholder likes to see the PE strong and increasing. A potential sto purchasing the stock would like to see a relatively low PE COMBINED with other fundametal m firm. In this case, the potential stockholder would look at the low PE as an indication of an un strong appreciation in the future. obligations (current liabilities) by using the short term assets urrent ratio, those assets are less profitable. nage credit sales to customers. The number shows the days that ar that inventory has turned over. A high inventory turnover too much inventory. The inventory days shows the number of sales revenue given an asset base. A high total asset turnover urse a marketing metric. of the equity funding used by the firm. A high level of debt y of interest payments while debt can also create potential entially lead to bankruptcy. The debt to asset ratio takes the s also a debt measure which is larger if the firm uses higher on of the return on shareholders' equity. ain after paying the cost of goods sold. It is an expense control rn this ratio will all be.expenses. The better the firm is at controlling after paying come given the asset base and without the effects of how the return on sales (an expense control ratio) and the total asset tockholder claim) as a percentage of the funds that be decomposed in two different ways. S the equity multiplier. ES the total asset turnover TIMES the equity multiplier. This vers to the return on stockholders' equity. One of 3 effects can n on sales, then the primary issue is the control of expenses. asset turnover then the primary issue is a sales revenue one. y multiplier then the primary issue is the choice of funding. ative to the earnings generated. A high PE ratio indicates ciated with strong beliefs that the future earnigns will creasing. A potential stockholder who is considering with other fundametal metrics/ratios that indicate a health as an indication of an undervalued stock that should have ative to the earnings generated. A high PE ratio indicates ciated with strong beliefs that the future earnigns will creasing. A potential stockholder who is considering with other fundametal metrics/ratios that indicate a health as an indication of an undervalued stock that should have