Ratio analysis ; Home Depot and Lowe's
Response to the following problem:
The table below contains selected information from recent financial statements of The Home Depot, Inc., and Lowe's Companies, Inc., two companies in the home improvement retail industry ($ in millions):
|
|
Home Depot
|
Lowe's
|
|
2/2/14 2/3/13
|
1/31/14
|
2/1/13
|
|
Not sales
|
$78,812 $74,754
|
$53,417
|
$50,521
|
|
Cost of goods sold
|
51,422 48,912
|
34,941
|
33,194
|
|
Year end inventory
|
11,057 10,710
|
9,127
|
8,600
|
|
Industry averages:
|
|
|
Gross profit ratio
|
33%
|
|
Inventory turnover ratio
|
3.7 times
|
|
Average days in inventory
|
99 days
|
Required:
Calculate the gross profit ratio, the inventory turnover ratio, and the average days in inventory for the two companies for their fiscal years ending in 2014. Compare your calculations for the two companies, taking into account the industry averages.