Accounting Paper
Accounting 211- Ratio Project
23 November 2010 Home Depot has three basic strategies: assortment, price, and service. They carry the broadest range of merchandise priced below every competitor in every market where they compete. Lowe’s reported similar values when it came to their customers. They said that their top values are customer focused, respect, and passion for execution. In their letter to shareholders, Lowe’s said, “We know that providing great service is the driving force behind profitable sales and market share growth, and we feel our commitment to delivering great service has Lowe’s uniquely positioned to capitalize as the economy bottoms and home improvement demand improves.” After reading about all that each company reported about themselves we decided to see for ourselves. When we went to Home Depot and asked for help in a specific category the salesman pointed us in the right direction but did not help us out. He was not as helpful as he could have been. At Lowe’s one salesman helped us and showed us around the whole store. Therefore, we concluded that Lowe’s employees have a broader base of knowledge in all aspects while Home Depot hires past tradesmen who have knowledge in one specified area.
Ratios:
The first ratio that we found was Return on Assets or ROA. ROA is computed by taking net income and dividing it by average total assets. This is an indicator of how profitable a company is with regards to their assets. It gives an idea into how efficient management is using their assets to generate earnings. Over the two years that we looked into Home Depot’s ROA rose by 1.2%. This rising trend is a result of good use of their assets in 2010 and they were able to generate more revenue than in 2009. On the other hand Lowe’s ROA went down by 1.48% over the course of the two years. They were not able to generate as much revenues in fiscal year 2010 as 2009 and therefore there ROA suffered. Even though Lowe’s ROA went down, its average ROA over the
23 November 2010 Home Depot has three basic strategies: assortment, price, and service. They carry the broadest range of merchandise priced below every competitor in every market where they compete. Lowe’s reported similar values when it came to their customers. They said that their top values are customer focused, respect, and passion for execution. In their letter to shareholders, Lowe’s said, “We know that providing great service is the driving force behind profitable sales and market share growth, and we feel our commitment to delivering great service has Lowe’s uniquely positioned to capitalize as the economy bottoms and home improvement demand improves.” After reading about all that each company reported about themselves we decided to see for ourselves. When we went to Home Depot and asked for help in a specific category the salesman pointed us in the right direction but did not help us out. He was not as helpful as he could have been. At Lowe’s one salesman helped us and showed us around the whole store. Therefore, we concluded that Lowe’s employees have a broader base of knowledge in all aspects while Home Depot hires past tradesmen who have knowledge in one specified area.
Ratios:
The first ratio that we found was Return on Assets or ROA. ROA is computed by taking net income and dividing it by average total assets. This is an indicator of how profitable a company is with regards to their assets. It gives an idea into how efficient management is using their assets to generate earnings. Over the two years that we looked into Home Depot’s ROA rose by 1.2%. This rising trend is a result of good use of their assets in 2010 and they were able to generate more revenue than in 2009. On the other hand Lowe’s ROA went down by 1.48% over the course of the two years. They were not able to generate as much revenues in fiscal year 2010 as 2009 and therefore there ROA suffered. Even though Lowe’s ROA went down, its average ROA over the