Using the results of ratio analysis and common-size vertical analyses to explain your answer.  provide specific comments on your analysis you have performed in this part of the case analysis for both companies.

a. Compare the common size balance sheet statements of each company.  Explain and identify two major differences over time and/or between the companies using the common-size balance sheet statement analyses.  You need to be provide at least two common-size percentages for each company in your comparison comments. 

 

b. Which company is more profitable?  Discuss specifically which accounts impacted profitability.   Provide at least two common-size percentages for each company in your comparison comments.   Which statement are you using to make your assessment on profitability?   Compare the percentage of profit margin ratio in your ratio analysis in #3 over the past 2 years.  Have there been changes in this ratio from the past year?

 

c. Explain how the Return on Equity (ROE) has changed over time for each company? Explain how the profit margin, asset turnover, and financial leverage impacted ROE for each company. Provide the amount of the ratios for each of the companies in your explanation.  Include a discussion of changes in profit margin, asset turnover, and financial leverage.   Explain what each ratio is measuring.   You need to identify the specific company ratios you computed in #3. 

 

d. Explain what liquidity means.  Which company is more liquid? Why? You must discuss the relevant ratio(s) that support your answer to this question from the work you completed in #3.

 

e. Explain what solvency means.  Which company is more solvent?  Why? You must discuss the relevant ratio(s) that support your answer to this question from the work you completed in #3.

 

#1

Name:					***You must use cell references  to earn credit.
Home Depot Inc.	Dollar amounts in Millions		Percentages
Common-Size Balance Sheets	Jan. 30, 2022	Jan. 31, 2021	Jan. 30, 2022	Jan. 31, 2021
Current assets:
Cash and cash equivalents	$ 2,343	$ 7,895	3.26%	11.19%
Receivables, net	3,426	2,992	4.77%	4.24%
Merchandise inventories	22,068	16,627	30.70%	23.56%
Other current assets	1,218	963	1.69%	1.36%
Total current assets	29,055	28,477	40.42%	40.35%
			0.00%	0.00%
Net property and equipment	25,199	24,705	35.06%	35.00%
Operating lease right-of-use assets	5,968	5,962	8.30%	8.45%
Goodwill	7,449	7,126	10.36%	10.10%
Other assets	4,205	4,311	5.85%	6.11%
Total assets	71,876	70,581	100.00%	100.00%
Current liabilities:
Short-term debt	1,035	0	1.44%	0.00%
Accounts payable	13,462	11,606	18.73%	16.44%
Accrued salaries and related expenses	2,426	2,463	3.38%	3.49%
Sales taxes payable	848	774	1.18%	1.10%
Deferred revenue	3,596	2,823	5.00%	4.00%
Income taxes payable	158	193	0.22%	0.27%
Current installments of long-term debt	2,447	1,416	3.40%	2.01%
Current operating lease liabilities	830	828	1.15%	1.17%
Other accrued expenses	3,891	3,063	5.41%	4.34%
Total current liabilities	28,693	23,166	39.92%	32.82%
Long-term debt, excluding current installments	36,604	35,822	50.93%	50.75%
Long-term operating lease liabilities	5,353	5,356	7.45%	7.59%
Deferred income taxes	909	1,131	1.26%	1.60%
Other long-term liabilities	2,013	1,807	2.80%	2.56%
Total liabilities	73,572	67,282	102.36%	95.33%
Shareholders' (deficit)/equity:
Common stock, par value $0.05; authorized: 10,000 shares; issued: 1,792 shares at January 30, 2022 and 1,789 shares at January 31, 2021; outstanding: 1,035 shares at January 30, 2022 and 1,077 shares at January 31, 2021	90	89	0.13%	0.13%
Paid-in capital	12,132	11,540	16.88%	16.35%
Retained earnings	67,580	58,134	94.02%	82.36%
Accumulated other comprehensive loss	(704)	(671)	-0.98%	-0.95%
Treasury stock, at cost, 757 shares at January 30, 2022 and 712 shares at January 31, 2021	(80,794)	(65,793)	-112.41%	-93.22%
Total stockholders' (deficit) equity	(1,696)	3,299	-2.36%	4.67%
Total liabilities and stockholders' equity	$ 71,876	$ 70,581	100.00%	100.00%

Lowe's Companies, Inc.	Dollar amounts in Millions		Percentages
Common-Size Balance Sheets	Jan. 28, 2022	Jan. 29, 2021	Jan. 28, 2022	Jan. 29, 2021
Current assets:
Cash and cash equivalents	$ 1,133	$ 4,690	2.54%	10.04%
Short-term investments	271	506	0.61%	1.08%
Merchandise inventory - net	17,605	16,193	39.44%	34.65%
Other current assets	1,051	937	2.35%	2.00%
Total current assets	20,060	22,326	44.94%	47.77%
Property, less accumulated depreciation	19,071	19,155	42.72%	40.99%
Operating lease right-of-use assets	4,108	3,832	9.20%	8.20%
Long-term investments	199	200	0.45%	0.43%
Deferred income taxes - net	164	340	0.37%	0.73%
Other assets	1,038	882	2.33%	1.89%
Total assets	44,640	46,735	100.00%	100.00%
Current liabilities:
Current maturities of long-term debt	868	1,112	1.94%	2.38%
Current operating lease liabilities	636	541	1.42%	1.16%
Accounts payable	11,354	10,884	25.43%	23.29%
Accrued compensation and employee benefits	1,561	1,350	3.50%	2.89%
Deferred revenue	1,914	1,608	4.29%	3.44%
Other current liabilities	3,335	3,235	7.47%	6.92%
Total current liabilities	19,668	18,730	44.06%	40.08%
				0.00%
Long-term debt, excluding current maturities	23,859	20,668	53.45%	44.22%
Noncurrent operating lease liabilities	4,021	3,890	9.01%	8.32%
Deferred revenue - Lowe's protection plans	1,127	1,019	2.52%	2.18%
Other liabilities	781	991	1.75%	2.12%
Total liabilities	49,456	45,298	110.79%	96.93%
Shareholders' (deficit)/equity:
Common stock - $0.50 par value: Authorized - 5.6 billion shares; Issued and outstanding - 670 million and 731 million, respectively	335	366	0.75%	0.78%
Capital in excess of par value	0	90	0.00%	0.19%
(Accumulated deficit)/retained earnings	(5,115)	1,117	-11.46%	2.39%
Accumulated other comprehensive loss	(36)	(136)	-0.08%	-0.29%
Total shareholders' (deficit)/equity	(4,816)	1,437	-10.79%	3.07%
Total liabilities and shareholders' (deficit)/equity	$ 44,640	$ 46,735	100.00%	100.00%