Lowes Ratio Analysis
Lowe’s Ratio Analysis
In the period from 1997-2001 Lowe’s showed a steady increase in working capital. It went from being $2110 million in 1997 to $4920 million in 2001. This shows the company had good amount of liquid assets to conduct and build its business. Lowe’s fixed assets went from $3005 million in 1997 to $8653 million in 2001. Total capital is found by taking working capital and adding it to fixed assets. Lowe’s total capital increased from $5219 million in 1997 to $13736 million in 2001. The company’s tax rate remained at 37.5% from 1997 to 2001. NOPAT means net operating profit after taxes. It is a measure of operating efficiency. Lowe’s NOPAT increased from $390 million in 1997 to $1123.75 million in 2001. This shows that they were operating more efficiently in each year.
There are two profitability ratios that are important, they are return on capital and return on equity. Return on capital measures the return that an investment generates for stock and bondholders. It indicates how good a company is at turning capital into profits. Lowe’s return on capital increased from 7.47% in 1997 to 8.18% in 2001. The second profitability measure is return on equity. It measures how profitable a company is by comparing net income to average shareholders’ equity. It also shows how efficient or inefficient a company is at utilizing its equity. It increased from 13.73% in 1997 to 15.34% in 2001. So Lowe’s was making a profit.
There are 6 margin ratios that are important for Lowe’s. The first is the gross margin. Gross margin is gross profit/sales or (revenue-cost of goods sold)/revenue. It represents the proportion of each dollar of revenue that the company retains as gross profit. The higher the %, the more the company retains on each dollar of sales to use for other costs and obligations. Lowe’s gross margin increased from 26.54% in 1997 to 28.8% in 2001. The next ratio is cash operating expenses/sales it is also called the operating ratio. This ratio shows
In the period from 1997-2001 Lowe’s showed a steady increase in working capital. It went from being $2110 million in 1997 to $4920 million in 2001. This shows the company had good amount of liquid assets to conduct and build its business. Lowe’s fixed assets went from $3005 million in 1997 to $8653 million in 2001. Total capital is found by taking working capital and adding it to fixed assets. Lowe’s total capital increased from $5219 million in 1997 to $13736 million in 2001. The company’s tax rate remained at 37.5% from 1997 to 2001. NOPAT means net operating profit after taxes. It is a measure of operating efficiency. Lowe’s NOPAT increased from $390 million in 1997 to $1123.75 million in 2001. This shows that they were operating more efficiently in each year.
There are two profitability ratios that are important, they are return on capital and return on equity. Return on capital measures the return that an investment generates for stock and bondholders. It indicates how good a company is at turning capital into profits. Lowe’s return on capital increased from 7.47% in 1997 to 8.18% in 2001. The second profitability measure is return on equity. It measures how profitable a company is by comparing net income to average shareholders’ equity. It also shows how efficient or inefficient a company is at utilizing its equity. It increased from 13.73% in 1997 to 15.34% in 2001. So Lowe’s was making a profit.
There are 6 margin ratios that are important for Lowe’s. The first is the gross margin. Gross margin is gross profit/sales or (revenue-cost of goods sold)/revenue. It represents the proportion of each dollar of revenue that the company retains as gross profit. The higher the %, the more the company retains on each dollar of sales to use for other costs and obligations. Lowe’s gross margin increased from 26.54% in 1997 to 28.8% in 2001. The next ratio is cash operating expenses/sales it is also called the operating ratio. This ratio shows