Lowes Financial Analysis - Essay Example

Lowe’s Financial Analysis Part Analyzing a publicly traded company. Lowe Companies, Inc. is a publicly traded company founded in 1946. It is a US-chain store specializing in retail and home improvements.. As of January 2011, Lowe Companies stores are located in 1,749 locations in several areas of United States, Canada and Mexico that employs 161,000 personnel. (Yahoo Finance) Company website: Lowes.com. 1. Horizontal analysis of Lowe’s five years financial statement. (Calculations attached as Annex 5). This study analyzes the trend of the operation of Lowe Company for the past 5 years from 2007 to 2011 on a horizontal basis wherein changes in the financial position of the company is presented. (See Annex 5) A trend analysis is one way of presenting financial data explaining the changes that took part between years in dollar and percentage terms. A horizontal analysis, according to Accounting Management allows the analysts to look at the factors that cause the changes in the operation. 2. Vertical analysis Accounting Coach describes vertical analysis as a method of examining accounts as a percentage of another item and will be shown as a common-size balance sheet. This kind of analysis permits me to compare Lowe’s balance sheet to another company. Thus, analysis of the balance sheet of Lowe Company is stated as a percentage of total asset. (See Annex 6) In the financial statement, vertical analysis of Lowe Company (See Annex 7) will be presented as a percentage of sales, and allows me to compare it with competition and industry average. 3. Calculation of at least five significant liquidity ratios for each of the five years analyzed. The five liquidity ratios used for analysis in Lowe are the current ratio, quick ratio, debt/equity ratio, accounts payable to sales and inventory turnover (See Annex 1 for calculations) 4 .Calculation of at least five significant profitability ratios for each of the five years analyzed. (See Annex 2) Ratios used are gross profit margin, net profit margin, return on sales, return on assets and return on equity. 5. Investor ratios used in this study are the earnings per share, price to earning ratio and dividend yield (See Annex3). 6 Following guidelines of Accounting Management, long term debt paying ratios used in the study are debt coverage ratios, cash flow to current maturity of long term debt ratio and debt to equity, Ratio of fixed assets to shareholders funds and Proprietary of equity ratio (Accounting for Management) See Annex 4 Part 2. Analysis of the financial strengths and weaknesses of the Lowe Company Strength and weaknesses of the Lowe Company Based on the Horizontal analysis of Lowe’s financial statement (see Annex 5) revenue in 2011 increased by $1,595million or by 0.03% as compared to sales & revenue in 2010. This change is accompanied by an increase in cost of sales which is equal to the 3% increase in 2011. In other years, from 2007 to 2009, sales are not enough to cover operating expenses so much so that profitability was down. It was only in 2011 and 2010 that change registered 13% profitability. The change of gross profit from 2010 to 2011 is 4%, while change from 2009 to 2010 is negative 0.02%. Change from 2008 to 2009 is only 1% while biggest transformation was in 2007 to 2008 with 7% gross profit. The change in the growth of operating income of Lowe came in 2011 coming from 4-year negative operating income of 2007 to 2010. As a result, Lowe recovered its profitability only in 2011. Despite hardship in operations, Lowe issued dividends to shareholders that showed changed increases in five years. However, changes in the EPS showed a trend of slowing, probably because it is also relative of company’s income. In the balance sheet, changes in the cash position were slow as shown in the trend of position. It has no accounts receivables indicative of good collection performance. Inventory changes show an upward trend indicating that a lot of asset is tied up with unsold items. This is also an indication of policy direction to reduce unsold items. . In total, accumulation of assets has been low in 2008 to 2011 with only 0.01% and 0.02% respectively, as compared in 2007 where it invested 0.6%. Total Liabilities and Equity showed an increasing trend from 2007 to 2011. Accounts payable changes showed an upward trend from 2007 to 2011. A 0.06% rising change in other current liabilities was observed between 2011 and 2010. In other years, current liabilities showed downward percentage of changes with exception of 2007 that showed big difference of other current liabilities. This means that they have reduced their accounts payments. Vertical analysis In this discussion, vertical analysis of Lowe’s balance sheet is shown as a restated percentage of total assets, while income statement is presented as a percentage of sales (See Annex 6 & 7) Vertical analysis shows that cash in 2011 is $1,123million and total assets is $33,699 million, it is presented as 3.324% of total assets ($1,123 divided $33,699). All items in the total assets are presented as a percentage of total assets, and will now add up to 100 percent. Same procedure of percentage presentations is also done in the liabilities and equity section of the balance sheet. The result of the vertical analysis is presented as a common size balance sheet and a common size income statement that becomes comparable to another company within the industry structure. A one year common size balance sheet and financial statement is presented in the analysis. Common Size Balance Sheet 2011 (in million dollars) Balance sheet Common size Balance sheet ASSETS Cash 1,123.00 3.324 Inventory 8,321.00 24.6913 Other current assets 523.00 1.55975 Property/Plant/Equipment, Total – Net 22,089.00 65.54794 long term investments 1,008.00 2.9911867 other long term assets 635.00 1.8843289 Total assets 33,699.00 99.9907306 LIABILITIES & EQUITY Accounts payable 4351.00 0.611181346 Accrued Expenses 667.00 0.093692934 Current Port. of LT Debt/Capital Leases 36.00 0.00505689 Other Current Liabilities, Total 2,065.00 0.2900688 Total liabilities 7,119.00 100 Common stock 677.00 0.037378534 Additional Paid-In Capital 11.00 0.000607332 Retained Earnings (Accumulated Deficit) 17,371.00 0.959087898 Other equity 53.00 0.002926237 Total equity 18,112.00 100 COMMON SIZE Income Statement (in million dollars 2011 Income Statement Common Income statement TOTAL REVENUE 48,815.00 100% Cost of revenue 31,663.00 64.863 Gross profit 17,152.00 35.137 SGA 12,006.00 24.594 Operating income 5,146.00 10.543 Depreciation/amortization 1,586.00 3.249 Extra items 2,010.00 4.117 Provision for taxes 1,218.00 2.459 Net income 332.00 0.718 Source of data: Lowe 2011 Annual Report Ratio analysis Four types of ratio analyses have been used in the study to know the financial strength of the company. The ratios are then compared to the industry average to know the relative standing of Lowe. Formula and computations are attached as annexes. 1. Profitability. Ratios used to test profitability are gross profit margin, net profit margin, return on sales, return on assets and return on equity. These ratios helped me to measure the earning capacity of Lowe, and know the actual performance of the business. a. Gross margin of Lowe showed an increase in 2011 of 35% as compared to 34% gross margin in previous years b. Profit margin. Industry average for profit margin is 0.16 (Credit Guru) while Lowe’s profit margin was lower in all of the years analyzed. Lowe’s profit margin in 2011 is 0.04% and stayed on the same trend for the rest of the years reviewed. 2. Liquidity. Ratios used here are current assets, quick ratio, debt equity ratio, accounts payables to sales and inventory turnover. Liquidity ratios are often times called solvency ratios as it shows the relationship between assets and liabilities of the company, thus helping in the measurement solvency of the company (Credit guru) If the external liabilities are found to be more than the assets of the company, this means that the business position is unsound and the business has to make strategies to repay its loans. A company that has enough assets to cover for its obligation is liquid. a. Current asset ratio. Industry norms show that current asset ratio for retail business should be 2.14%. (Creditguru). Analysis showed CA of Lowe is lower than the industry average; that is 1.4% in 2011, 1.37% in 2010, 1.21% in 2009, 1.12% in 2008 and 1.27% in 2007. However, it is still in a position to pay i8 ts loans since it its CA is still positive and is a liquid company. b. Quick asset ratio. Same norms stated industry average for quick ratio should be 0.15%, upon which, Lowe presented strength as its average was higher. For 2011, Lowe’s quick ratio is 27% and 20% in 2010. In 2009 and 2008, which was lower than industry average that is: 12% and 13% respectively. A high quick ratio indicates readiness of company to pay maturing obligations. c. Debt equity ratio. Industry norm of debt equity ratio is 0.59, whereupon, analysis showed Lowe’s D/E is lower in all the years of study. According to Investopedia, D/E is a measure that indicates what proportion of debt and equity Lowe Company is using to finance its assets and, a high D/E suggests that company has been aggressive in financing its growth with debt. d. Inventory turnover. Industry average ratio for inventory turnover is 3.81 times while Lowe has 3.80 times in 2011, 3.72 in 2010, 4.14 in 2008 and 4.30 in 2007 (Credit Guru) Inventory turnover is the number of days the company is able to sell its merchandise. According to Mirle, Jacob that quoted the Industry Week/Manufacturing Performance Institutes 2003 Census of Manufacturers that said “the top 25% of all manufacturers achieved only 25 inventory turns for finished product inventory in a year” Compared to this, Inventory of Lowe is quite low since it has only achieved times 3 to 4 times turnover in a year. This means they are keeping a lot of cash and assets tied up with the inventory. Part 2. COMPETITOR ANALYSIS Financial Performance of Lowe Company is compared with a competitor, the Home Depot and industry benchmark. Comparative performance is a useful analysis because management of Lowe will understand its weak points relative to the performance of competitor and industry and thus be able to improve it. A comparative analysis (See Table 1) is shown for discussion. Table 1. Comparative Analysis LOWE HOME DEPOT INDUSTRY GROWTH RATES SALES 1.3 4.2 7.9 PRICE RATIOS Current P/E ratio 13.7 15.5 14.9 Price/sales ratio 0.53 0.79 0.93 Price/Book Value 1.53 2.98 2.47 Price/Cash Flow Ratio 7.3 10.4 9.4 Profit Margins % Gross Margin 35.1 34.4 34.4 Pre-Tax Margin 6.5 8.3 7.1 Net Profit Margin 4.1 5.2 4.3 Financial Condition Debt/Equity Ratio 0.39 0.59 0.52 Current Ratio 1.2 1.4 1.4 Quick Ratio 0.2 0.5 0.4 Interest Coverage 10.2 12.1 11.2 Leverage Ratio 2 2.3 2.2 Book Value/Share 13.32 11.62 12.06 Investment Returns % Return On Equity 10.9 19.1 8.6 Return On Assets 10.9 8.5 0.6 Return On Capital 7.6 11.8 2.8 Source: MSN Money central A. Sales Growth . Lowe showed a lower sales growth than Home Depot and Industry. At this point, Lowe should find out reasons why competitors have higher sales. B. The Price ratios. The P/E ratio of Lowe is much lower than Home Depot and industry. P/E tells us what the investors are willing to pay for the company’s earnings (Little, Ken n.d.) P/E is the most important stock valuation tool. For example, Lowe’s P/E is 13.7, this means investors are willing to pay 13.7 times its earnings for the stock. Generally, as Little suggests, it would be more useful to compare P/E ratios of one company to other companies in the same industry because it has same growth levels. C. Profit margins. Profit margin is the ratio that tells the investor of the percentage of revenues left after deducting the cost of manufacturing (Kennon, J.) It is also a measure of knowing company’s efficiency to endure competition and unfavorable situations like increases of prices, decline of sales and going down of prices. This is often shown as a gross margin and net profit margin. Analysts often compare gross margin ratios to know the efficient company within the industry structure is. In our analysis, we find Lowe’s gross margin to be higher than competitors which means it is more efficient in controlling manufacturing costs. This becomes a strength of Lowe because investors tend to invest in companies that have higher efficiency ratings than competitors. However, upon further analysis, it is observed that after deducting overhead expenses, Lowe obtained a lower net profit margin than the rest. Thus this is seen as a weakness that should be corrected by management. D. Financial conditions. As to debt/equity condition, Lowe has not been too aggressive in financing its growth through debt and this is an advantage to the company as it is not exposed in too much interest expense. In the analysis, the current ratio of Lowe is lower than Home Depot and the industry, however, it is still able to pay its maturing obligations. On the quick asset ratio, Lowe’s ratio is lower than competitors. A quick ratio is a more conservative way of determining liquidity of the company since it does not include inventory in the calculation because some companies find it difficult to quickly dispose of it (Investopedia). Leverage ratio is one of the strengths of Lowe, the competitive analysis shows it has lower leverage than competitors. Stocks 300 explains that leverage ratio is another measure of financial condition of the company as it shows how much debt it owes. This means when the company has more debt, the stock becomes risky since in case of bankruptcy, debt holders have to be paid first, and there is a possibility that nothing may be left for its stockholders. In the interest coverage, Lowe’s performance is lower than Home Depot and the industry. It is not having difficulty however in the interest coverage because according to Stocks 300, an “interest coverage close to or less than one” signifies that the company is having difficulty in paying interest. An interest coverage ratio is a measure of the company’s ability to pay its interest obligations with income earned from the business, and a higher ratio is considered better. Book value per share as explained in Investopedia is the amount of money that a common stockholder would get in case company dissolves. This is a strength on Lowe Company, as comparison shows it has a higher book value than competitors. D. Investment returns. Comparison between Lowe and competitors shows ROE of Lowe to be lower. Return on Equity is a ratio used to measure the ability of the company in generating profit from the funds invested by stockholders (InvestorWords.com). Generally, investors look for companies that give higher ROE, which in our case is Home Depot. The Return on Assets ratio is strength of Lowe as it gives out higher ROA. This means Lowe has been effective and efficient in managing the assets of the company to earn a good return. Return on capital employed is lower for Lowe as competitors are much better here. ROCE, according to moneyterms.co. is “a better measure of how efficiently the actual business is run and is more comparable across companies” because it considers the business operations only and ignores the outcome of cash holdings and provision. Part 3. A summary identifying whether the company would be attractive to investors and/or creditors.. The comparative analysis shows that in overall ratio standing, Lowe Company is below in terms of financial performance with Home Depot, its closest competitor. However, this does not mean that company is in financial difficulty although it is rated lower. The accounting ratios gathered in this analysis can be used for determining future strategies to strengthen the profitability of the company to make it attractive to investors and creditors. Analysis is able to pinpoint the strength and weaknesses of the company that may be used in forecasting expenses and control. The weaknesses could be addressed by strategies to correct them and turn it into strengths. Creditors would be attracted to lend to Lowe on the basis of the strength of its financial conditions. It has a current ratio of more than 1 which means it can pay its maturing obligations as it comes due. Quick ratio also indicates readiness of the company in meeting its creditors. Lowe is able to pay interests of loans from internal business operation which is an interesting factor to creditors, and has an interest coverage ratio of 13% which is more than the general average ratio of 1. It has not defaulted in payments of obligations but is not keen in financing its assets from loans. So far, it has not maximized debt financing as its D/E has remained low. Cautious investors would not be interested in Lowe as Home Depot offers a better alternative. Investors are prepared to pay a higher share price of stock because of expectations of higher profit from their investments which are offered by competitors. As a publicly traded company, Lowe should work on to strengthen its profitability to paint a better financial picture of the company in the stock market. Lowe is more inclined to finance its assets through equity than debts and should continue with the efficiency measures that are considered one of its strengths. However, one thing to consider is that Lowe declared dividends which is the most important thing for investors. Overall consideration is that Lowe remains to be a liquid company, particularly shown in changes in 2010 and 2011 wherein growth in revenues corresponded to growth in net profit. Its net profit at this time runs very close to the industry. It is not clear however if the lean years of 2008 and 2009 were due to economic crisis which was intense during those years. Yes, I will recommend the company to investors because its efficiency in the long run will work to its advantage and turn the weaknesses into profitability. It has a lower cost of share price and investors realize savings in the price difference that they could use to buy more shares. Annex 1 LIQUIDITY RATIOS  Current assets divided by current liabilities 1. Current ratio 2011 2010 2009 2008 2007 current asset 9967 9732 9190 8686 8314 current liabilities 7119 7355 7560 7751 6539 Current ratio 1.400056 1.323182 1.215608 1.12063 1.271448             2. Quick ratio Total quick assets divided by current liabilities Total quick assets = Total current assets minus inventory  2011 2010  2009 2008  2007  Current assets 9967 9732 9190 8686 8314 inventory 8321 8249 8209 7611 7144 Total quick assets 1646 1483 981 1075 1170             current liabilities 7119 7355 7560 7751 6539 Current quick ratio 0.273353 0.201632 0.129762 0.138692 0.178926             3. Debt/equity ratio Long term debt divided by total equity   long term debt 6537 4528 5039 5576 4325 total equity 18112 19069 18055 16098 15725  D/E 0.360921 0.237453 0.279092 0.346378 0.27504             4. Accounts payables to sales Accounts payables divided by net sales x100   Accounts payables 4351 4287 4109 3713 3524 net sales 17512 16463 1651 16727 16198   0.248458 0.260402 2.488795 0.221976 0.217558         5. Inventory turnover  Cost of goods sold divided by inventory Cost of goods sold 31663 30757 31729 31556 30729 Inventory 8321 8249 8209 7611 7144   3.805192 3.728573 3.865148 4.146104 4.301372 Annex 2 PROFITABILITY RATIOS                 2011 2010 2009 2008 2007 1. Gross profit margin Gross profit divided by total revenue Gross profit   17152 16463 16501 16727 16198 Total revenue   48815 47220 48230 48283 46927     0.351367 0.348645 0.342131 0.346437 0.345174               2. Net profit margin Net income after taxes divided by revenue net profit   2010 1783 2195 2809 3105 Sales   48815 47220 48230 48283 46927     0.041176 0.037759 0.045511 0.058178 0.066167               3. RETURN ON SALES             Return on Sales or Profit Margin = (Net Profit / Net Sales) x 100      2011 2010 2009 2008 2007 Net profit   2010 1783 2195 2809 3105 Net sales   17152 16463 16501 16727 16198     0.117188 0.108303 0.133022 0.167932 0.19169               4. Return on assets = (net profit/total assets) x 100   net profit   2010 1783 2195 2809 3105 total assets   33699 33005 32625 30869 27767     0.059646 0.539486 0.672282 0.090997 0.111823     5.9646 53.9486 6.72282 9.0997 11.1823               5. Return on Equity or Net Worth = (Net Profit / Net Worth or Owners Equity) x 100 Net Worth or Owners Equity = Total Assets (minus) Total Liabilities net profit   2010 1783 2195 2809 3105 Total assets   33699 33005 32625 30869 27767 Total Liability   15587 13936 14570 14771 12042 Networth   18112 19069 18055 16098 15725 Annex 3 INVESTOR RATIOS 1. EARNINGS PER SHARE Net income -dividends on preferred stocks divided by average outstanding shares YEAR 2011 2010 2009 2008 2007 net income 2010 1783 2195 2809 3105 Ave. shares 1401 1462 1457 1481 1535 EPS 1.43469 1.219562 1.50652 1.896691 2.022801 2. PRICE TO EARNING RATIO Price divided by EPS 2011 2010 2009 2008 2007 Price 20.38 25.25 26.30 No data 26.24 EPS 1.434 1.21 1.506 1.896 2.022 P/E 14.187 20.8677 17.4634 12.9772 3. DIVIDEND YIELD Latest dividend per ordinary share / current market price of share) x 100 Latest dividend 0.42 0.46 0.34 0.29 0.18 Market price/share 20.38 25.25 26.30 No data 26.24 Dividend yield 2.0651 1.8218 1.2928 - 0.686 Annex 4 LONG TERM DEBT PAYING RATIOS 1. DEBT COVERAGE RATIOS Net income plus non cash expenses divided by total debt 2011 2010 2009 2008 2007 Net income 2010 1783 2195 2809 3105 Depreciation 1586 1614 1539 1366 1162 Net income & non-cash 3596 3397 3734 4175 4267 Total debt 6537 4528 5039 5576 4325 Debt coverage 0.550099 0.750221 0.74102 0.748745 0.98659 2. Cash Flow to Current Maturity of Long-Term Debt Ratio Net income plus non-cash expenses divided by current portion of long term debt Net income & non cash 3596 3397 3734 4175 4267 Current Port. Of LT debt 36 552 34 40 88 99.88889 6.153986 109.8235 104.375 48.48864 3. Debt to equity Short term debt plus long term debt divided by total equity short term debt 0 0 987 164 23 long termdebt 6537 4528 5039 5576 4325 6026 5740 4348 total equity 18112 19069 18055 16098 15725 D/E 0.360921 0.237453 0.333758 0.356566 0.276502 4. Ratio of fixed assets to shareholders funds Fixed assets 22089 22499 22722 21361 18971 total equity 18112 19069 18055 16098 15725 1.219578 1.179873 1.258488 1.326935 1.206423 5. Proprietary of equity ratio = Shareholders funds / total assets Shareholders funds 18112 19069 18055 16094 15725 Total assets 33699 33005 32625 30869 27767 0.537464 0.577761 0.55341 0.521364 0.56632 Annex 57 HORIZONTAL ANALYSIS OF BALANCE SHEET 2011 2010 Amount change Percent change Assets (in millions $) Cash & short term investments 1,123.00 1,057.00 66.00 0.06 Total Inventory 8,321.00 8,249.00 72.00 0.01 Other Current Assets, Total 523.00 426.00 97.00 0.2276995 Total Current Assets 9,967.00 9,732.00 235.00 0.2 Property/Plant/Equipment, Total - Net 22,089.00 22,499.00 -410.00 -0.02 Long Term Investments 1,008.00 277.00 731.00 2.63898917 Other Long Term Assets, Total 635.00 497.00 138.00 0.277666 Total Assets 33,699.00 33,005.00 694.00 0.02 Liabilities & Shareholders equity Accounts Payable 4,351.00 4,287.00 64.00 0.01 Accrued Expenses 667.00 577.00 90.00 0.1559792 Current Port. of LT Debt/Capital Leases 36.00 552.00 -516.00 0.9347826 Other Current Liabilities 2,065.00 1,939.00 126.00 0.06 Total Current Liabilities 7,119.00 7,355.00 -216.00 -0.03 Total LONG TERM DEBT 6,537.00 4,528.00 2,009.00 0.44 Deferred income tax 467.00 598.00 -131.00 0.2190635 Other Liabilities, Total 1,464.00 1,455.00 9.00 0.01 Total Liabilities 15,587.00 13,936.00 1,651.00 0.12 Common Stock 677.00 729.00 -52.0 0.0713306 Additional Paid-In Capital 11.00 6.00 5.00 0.8333333 Retained Earnings (Accumulated Deficit) 17,371.00 18,37.00 -936.00 -0.05 Other Equity, Total 53.00 27.00 26.00 0.962963 Total equity 18,112.00 19,069.00 -957.00 -0.05 Total Liabilities & Shareholders’ Equity 33,699.0 33,005.00 694.00 0.02 Annex 7 VERTICAL ANALYIS 2010 2009 2008 2007 Amount change Percent change Amount Change Percent change Amount change Percent Change Assets (in millions $) Cash & short term investments 1,057.00 661.00 396.00 59.909 530.00 131 24.71 796 -266 33.41 Total Inventory 8,249.00 8,209.00 40.00 0.487 7,611.00 598 7.85 7,144.00 467 6.53 Other Current Assets, Total 426.00 320.00 106.00 66.25 545.00 -225 -41.28 374.00 171 45.72 Total Current Assets 9,732.00 9,190.00 542.00 5.897 8,686.00 504 5.87 8.314.00 372 4.47 Property/Plant/Equipment, Total - Net 22,499.00 22,722.0 -223.00 -0.981 21,361 1361 6.37 18.971.00 2,390 12.59 Long Term Investments 277.00 253.00 24.00 9.486 509.00 -256 -50.29 165.00 344 208.44 Other Long Term Assets, Total 497.00 460.00 37.00 8.043 313.00 147 46.96 317 -4 -1.26 Total Assets 33,005.00 32,625.0 380.00 1.164 30,869.00 1756 5.68 27,767.00 3102 11.17 Liabilities & Shareholders equity Accounts Payable 4,287.00 4,109.00 178.00 4.331 3,713.00 396 10.66 3,524.00 189 5.63 Accrued Expenses 577.00 4,109.00 -3532.00 -85.957 467.00 3642 88.63 425 42 9.88 Notes Payable/Short Term Debt 987.00 23 964 4191 Current Port. of LT Debt/Capital Leases 552.00 34.00 518.00 153.52 40.00 -6 -15 88 -48 -54.55 Other Current Liabilities 1,939.00 1,996.00 -57.00 -2.855 2,467.00 -471 2,479.00 -12 -0.48 Total Current Liabilities 7,355.00 7,560.00 -205.00 -2.711 7,751.00 -191 2.0 6,539.00 1212 18.53 Total LONG TERM DEBT 4,528.00 5,039.00 -513.71 --10.196 5,576.00 -537 -9.63 4,325.00 1251 28.29 Deferred income tax 598.00 599.00 -11.194 -3.705 670.00 -71 -10.59 735.00 -65 -8.84 Other Liabilities, Total 1,455.00 1,372.00 83.00 6.049 2,467.00 -1095 -88.71 443.00 2024 913.79 Total Liabilities 13,936.00 14,570.00 -634.00 -4.351 14,771.00 -201 -2.71 12,042.00 2729 22.66 Common Stock 729.00 735.00 -6.00 -0.816 729.00 6 0.82 762.00 -33 -4.33 Additional Paid-In Capital 6.00 277.00 -271.00 -97.833 16.00 261 3262 102.00 -86 -84.31 Retained Earnings (Accumulated Deficit) 18,307.00 17,049.00 1,258.00 7.335 15,345.00 1704 11.10 14,860.00 485 3.26 Other Equity, Total 27.00 -6 8 1 7 700 Total equity 19,069.00 18,055.00 1,014.00 5.616 16,098.00 1957 12.15 15,725.00 373 2.37 Total Liabilities & Shareholders’ Equity 33,005.00 32,625.00 380.00 1.164 30,869.00 1756 5.68 27,767.00 3102 11.17 2011 Percent 2010 Percent 2009 percent 2008 percent 2007 percent Total assets 33699 100 33,005 32,625 30,869 27,767 Cash 1123 3.324 1,057 3.205 661 20.245 530 1.71 796 2.86 Total inventory 8321 24.6913 8,249 24.93 8,209 2.516 7,611 24.65 7,144 25.72 Other C/A 523 1.55197 426 1.29 320 0.009 545 1.765 374 1.345 Property/Plant Equip, total-net 22,089 65.5479 22,499 68.16 22,722 69.645 21,361 69.198 18,971 68.32 Long term investments 1,008 2.99118 277 0.839 253 0.775 509 1.648 165 0.594 Other long term assets 635 1.88432 497 1.505 460 1.409 313 1.013 317 1.27 Total Liab. 7,119 7,355 7,560 7,751 6,539 Accts. Payable 4,351 4,287 58.28 4,109 54.35 3,713 47.90 3,524 53.89 Notes Payable/ short term 987 13.05 1,064 1.372 23 0.351 Accrued expenses 667 577 7.845 434 5.740 467 6.025 425 6.499 Current Port. of LT Debt/Capital Leases 36 552 7.505 34 0.449 40 0.516 88 1.345 Other C/L Total 2065 1939 26.30 1,996 26.40 2,467 31.82 2479 37.91 Total equity 18,112 % 19,069 18,055 16,098 15725 Common stock 677 4.29 729 0.382 735 4.07 729 4.52 762 4.845 Addt’l. paid in cap. 11 0.06 6 0.031 277 13.87 16 0.09 102 0.64 Retained earnings 17,371 95.90 18,307 96.00 17,049 94.28 15,345 95.32 14860 9.45 Other equity 53 0.29 27 0.141 -6 -0.033 8 0.049 1 0.006 VERTICAL ANALYSIS OF FINANCIAL STATEMENT   2011 2010 2009 2008 2007 Presented as a percentage of revenue             Total revenue   48,815.00 47,220.00 48,230.00  48283 46,927.00 Cost of revenue   31,663.00 30,757.00 31,729.00  31536 30,729.00 Percentage    64.86  65.13  65.78  65.31 65.48         Selling/General/Administrative Expenses, Total 12,006.00 11,737.00 11,176.00  10656 9,884.00 Percentage of revenue    24.59  24.85  23.17  22.06 21.06     , Depreciation/Amortization 1,586.00 1,614.00 1,539.00 1366  1,162.00 Percentage of revenue    3.24  3.41  3.91  2.89  2.47     Income tax   1,218.00 1,042.00 1,311.00  1702 1,893.00 Percentage of revenue   2.49 2.22 2.71  3.52 4.03 Source of data: MSN Money Central REFERENCES Accounting for Management. (n.d.) Horizontal or Trend Analysis Retrieved 20 Sept. 2011 from http://www.accountingformanagement.com/horizontal_analysis_or_trend_analysis.htm Accounting Coach. (n.d) What is the difference between vertical analysis and horizontal analysis. Retrieved 20 Sept. 2011 from http://blog.accountingcoach.com/vertical- analysis-horizontal-analysis/ Credit Guru. Ratios. Retrieved 20 Sept. 2011 from http://www.creditguru.com/ratios/inr.htm Investopedia. Quick ratio definition. Retrieved 20 Sept. 2011 from http://www.investopedia.com/terms/q/quickratio.asp#axzz1YBMJXHA3 Investopedia. Price-earning ratio. Definition. Investopedia.com Retrieved 20 Sept. 2011 from http://www.investopedia.com/terms/p/price-earningsratio.asp#ixzz1YOMiuiAv InvestorWords.com Return on equity. Definition and meaning. Retrieved 20 Sept. 2011 from http://www.investorwords.com/4248/Return_on_Equity.html Little, Ken (n.d.) Investors expect higher returns from Home Depot that explains why it has higher P/E ratio. Retrieved 20 Sept 2011 from http://stocks.about.com/od/understandingstocks/a/061107PEimp.htm. Stocks 300. (n.d) Leverage ratios definition. Stocks 300. Retrieved 20 Sept 2011http://news.morningstar.com/classroom2/course.asp?docId=145093&page=5&CN= COM Long term debt paying ratio Definition. Ehow.com. Retrieved 20 Sept. 2011 from http://www.ehow.com/facts_6751436_long_term-debt-paying-ability-ratios_.html Accounting for Management. Long Term Solvency or Leverage Ratios. Definition. Retrieved 20 Sept. 2011 from http://www.accountingformanagement.com/accounting_ratios.htm MSN Money Central. Key Financial Ratios: Lowe Company. Retrieved 20 Sept. 2011 Read More