question archive Look up the statement of cash flows for both Home Depot and Lowes using? Yahoo! Finance
Look up the statement of cash flows for both Home Depot and Lowes using? Yahoo! Finance
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Look up the statement of cash flows for both Home Depot and Lowes using? Yahoo! Finance.
a. Compute the quality of earnings ratio for both firms and all three years of data provided in the popup? window:
b. Compare the quality of earnings ratio for the two firms. For which firm do you feel most comfortable about the reported earnings? quality? Explain.
c. Compute the capital acquisitions ratios for the latest three years for both firms.
d. Compare Home? Depot's and? Lowes' abilities of using operating cash flow to finance their capital expenditures. Which firm has relied more on the capital? markets?
|
Home Depot |
Lowes |
|||||
|
2011 |
2012 |
2013 |
2011 |
2012 |
2013 |
|
|
Net Income |
?$3,338,000 |
?$3,883,000 |
?$4,535,000 |
?$2,010,000 |
?$1,839,000 |
?$1,959,000 |
|
Cash Flow from Operations |
?$4,585,000 |
?$6,651,000 |
?$6,975,000 |
?$3,852,000 |
?$4,349,000 |
?$3,762,000 |
|
Capital Expenditures? (CAPEX) |
?$1,096,000 |
?$1,221,000 |
?$1,312,000 |
?$1,329,000 |
?$1,829,000 |
?$1,211,000 |
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Answer:
| Particulars | Home Depot | Lowes | |||||
| Year 2011 | Year 2012 | Year 2013 | Year 2011 | Year 2012 | Year 2013 | ||
| a | Net Income | $ 3,338,000 | $ 3,883,000 | $ 4,535,000 | $ 2,010,000 | $ 1,839,000 | $ 1,959,000 |
| b | Cash Flow from Operations | $ 4,585,000 | $ 6,651,000 | $ 6,975,000 | $ 3,852,000 | $ 4,349,000 | $ 3,762,000 |
| c | Capital Expenditures | $ 1,096,000 | $ 1,221,000 | $ 1,312,000 | $ 1,329,000 | $ 1,829,000 | $ 1,211,000 |
| Home Depot | Lowes | ||||||
| Year 2011 | Year 2012 | Year 2013 | Year 2011 | Year 2012 | Year 2013 | ||
| Ans a. | Quality of Earning =Cash Flow from Operations/Net Income =b/a= | 1.374 | 1.713 | 1.538 | 1.916 | 2.365 | 1.920 |
| Ans b. | Comparing Quality of Earning of Two Companies | ||
| Quality Of Earning | |||
| Year | Home Depot | Lowes | |
| 2011 | 1.374 | 1.916 | |
| 2012 | 1.713 | 2.365 | |
| 2013 | 1.538 | 1.920 |
| Lowes have a better Quality of Earning across three years over Home Depot. |
| Ans c . | Home Depot | Lowes | |||||
| Ratio | Year 2011 | Year 2012 | Year 2013 | Year 2011 | Year 2012 | Year 2013 | |
| Capital Acquisitions Ratio=Cash flow from Operations/Capital Expenditure=b/c= | 4.183 | 5.447 | 5.316 | 2.898 | 2.378 | 3.107 |
| Ans d. | Comparing Capital Acquisitions ratio or the ability to use operating cash flow to finance the Capital Expenditure. | ||||
| Capital Acquisitions Ratio | |||||
| Year | Home Depot | Lowes | |||
| 2011 | 4.183 | 2.898 | |||
| 2012 | 5.447 | 2.378 | |||
| 2013 | 5.316 | 3.107 | |||
| Home Deport has better Capital Acquisitions ratio over Lowes across three years. | |||||
| That means Home Depot is in a better position to use its internal cash flow for | |||||
| funding the capital expenditure needs. | |||||
| Lowes has comparatively lower Capital Acquisitions ratio , so it has relied more | |||||
| on Capital Market to fund the Capital Expenditures. |
