Question

Using the attached information (titled "CH 2 Cont Assignment" in this week's resources) from Lowe's 10K, please calculate the following ratios and address the related questions. For full credit, please show your work and calculations. This assignment may be turned in using Word or Excel, whichever you prefer.

a)What were Lowe's Net Profit Margins for 2021 and 2020? How do they compare with one another and what affected the margin? (Hint: Net earnings = Net Income)
b)What were Lowe's Current Ratios for 2021 and 2020? How do they compare with one another?
c)What is Lowe's Debt Ratio for 2021?
d)Lowe's current stock price is $223.03. Using the Basic earnings per common share price, what is the company's P/E Ratio? If Home Depot's e)P/E Ratio is 30xs, would Lowe's be overvalued or undervalued relative to its largest competitor?
f)How much in Dividends did Lowe's pay out to investors in 2021?

Answer 1

Without the specific financial data from Lowe's 10K report, it is not possible to calculate the financial ratios requested. However, the formulas for Net Profit Margin, Current Ratio, Debt Ratio, and P/E Ratio have been provided for when the data is available.

Step-by-step explanation:

The student's question pertains to calculating financial ratios for Lowe's based on the information provided in its 10K report. Unfortunately, the data required to calculate the ratios asked for in the question (Net Profit Margins, Current Ratios, Debt Ratio, Price-Earnings P/E Ratio, and Dividends paid) were not provided within the question. To calculate these ratios, one would need specific numbers from Lowe's financial statements such as net income, total revenue, current assets, current liabilities, total liabilities, total equity, earnings per share, and dividends declared. Without the actual figures from the 10K report, calculating these ratios is not possible within this context.

However, we can define the formulas for the student to use when they have the figures:

• Net Profit Margin = (Net Income / Revenue) x 100
• Current Ratio = Current Assets / Current Liabilities
• Debt Ratio = Total Liabilities / Total Assets
• P/E Ratio = Stock Price / Earnings Per Share

Once the appropriate figures are obtained, they can be substituted into each formula to calculate the respective ratios for Lowe's. To determine if Lowe's is overvalued or undervalued relative to Home Depot, one would compare Lowe's P/E ratio with Home Depot's. If Lowe's P/E ratio is higher than 30xs, it could be considered overvalued; if lower, it could be considered undervalued. The amount of dividends paid can typically be found in the cash flow statement or notes to the financial statements in the 10K report.