Compute liabilities/total assets ratio for both companies

Assignment Help Finance Basics

Reference no: EM131410459

Home Depot and Lowe's are the leading home improvement retail chains in the United States. In 2009, Home Depot reported $41 billion in total assets and $23 billion in total liabilities, while Lowe's reported $33 billion in total assets and $15 billion in total liabilities. Both companies, as is the case with most large retailers, lease most of their stores. At the time, Home Depot incurred about $10.1 billion per year in lease payments, treating about 87 percent of its leases as operating leases for financial reporting purposes. Lowe's incurred about $6.8 billion per year in lease payments and treated about 92 percent of its leases as operating leases. The approximate present values of the future cash flows associated with the operating leases of Home Depot and Lowe's were $2.7 billion and $3.6 billion, respectively.

REQUIRED:

a. Compute the liabilities/total assets ratio for both companies.

b. Assume that both companies accounted for all their leases as capital leases, and recompute their liabilities/total assets ratios.

c. By how much did Lowe's adjusted ratio exceed that of Home Depot? Did the adjustment make much of a difference? Why or why not?

d. Explain why an analyst may wish to make the adjustments required above.

Reference no: EM131410459

Questions Cloud

Conduct an office romance : Given what your read was it a good idea for the characters to conduct an office romance in this particular organizational setting? As you answer, consider the consequences for the characters, their coworkers, and the organization.

Driving force and driving frequency : It is desired to design the beam sensor to operate at resonance with amplitude of 10nm, what driving force and driving frequency should be used?

Determine how much work is too much for your employees : Overwork can contribute to mental and physical health problems as well as interfere with other aspects of employees' lives. As a manager, how do you determine how much work is too much for your employees?

Identify several ways you could improve motivation : A few customers have called you directly to complain about poor treatment from your staff. Use the job characteristics model to identify several ways you could improve motivation, job satisfaction, and performance.

Compute liabilities/total assets ratio for both companies : By how much did Lowe's adjusted ratio exceed that of Home Depot? Did the adjustment make much of a difference? Why or why not?

Identify the client therapeutic needs : Based on the Clinical Case Study of John interactive media presentation, please identify the client's therapeutic needs and examples of impairment or dysfunction

Corresponding wavelength for frequency : The lower frequency limit of hearing for a particular human being is 25.4 Hz. What is the corresponding wavelength for this frequency if the air temperature is 31.5 °C?

How do you motivate yourself when faced with school projects : Do you ever try to relate these tasks to your overall career goals? Are you more motivated by doing your personal best or by outperforming other students?

Electromagnet force exercises : Please show all work, calculations, conversions and other steps to complete these exercises. 1. What is the electric field 0.010 m from an isolated proton? 2. What is the electric field 0.010 m from an isolated helium nucleus (i.e. an alpha particle)..

User Account

All Pages