FIN 550_Worksheet_IO

xlsx

School

Harford Community College *

*We aren’t endorsed by this school

Course

115

Subject

Management

Date

Jan 9, 2024

Type

xlsx

Pages

Uploaded by sleenv

RATIO ANALYSIS Note: change the column names to your industry and selected companies RATIOS Home Improvement Lowe's Gross Margin 34.31% 33.30% EBITDA Margin 16.27% 13.82% Operating Margin 14.10% 12.76% Pre-Tax Margin 13.59% 11.75% Effective Tax Rate 24.78% Financial Strength Quick Ratio 0.14 0.17 Current Ratio 1.28 1.13 LT Debt to Equity Total Debt to Equity 0.17 Interest Coverage 16.23

Valuation Ratios Price/Earnings Ratio 17.21 16.1 Price to Sales P/S 1.69 1.37 Price to Book P/B 87.71 Free Cash Flow per Share 15.56 14.15 Management Effectiveness (%) Return On Assets 18.13% 17.70% Return On Investment 87.11% 31.28% Return On Equity 364.84% Efficiency Receivable Turnover 31.04 Inventory Turnover 4.1 3.44 Total Asset Turnover 1.85 2 Free Cash Flow/Net Income What is Ratio Analysis? Briefly explain and cite your resources: Ratio analysis is a financial a company's profitability, liquidity, solvency, and operational efficiency. Common ratios in decision-making and performance benchmarking.

decision-making and performance benchmarking. References: Brigham, E. F., & Houston, J. F. (2018). Fundamentals of Financial Management. Cengage L Based on the ratio analysis above, in which company would you be willing to invest and w lower P/E ratio which suggestsa more attractively priced stock, a higher inventory and tot Baker, B. (n.d.). What is the price-to-earnings ratio and how is it used?. Bankrate. https://w Beaver, S. (2022). When to use quick ratio. Oracle NetSuite. https://www.netsuite.com/po Beers, B., Costagliola, D., & Howard, E. (2022.). How is asset turnover calculated?. In Fernando, J., Brock, T., & Clarine, S. (2022, July 11). Current ratio explained with formula a Fernando, J., Drury, A., & Ecker, J. (2022, October 18).Price-to-Book ratios Formula, and Ex Fernando, J., Kindness, D., & Munichiello, K. (2022, June 27).Inventory Turnover, hat It Is, Fernando, J., Mansa, J., & Clarine, S. (2022, June 27).Return on Equty and What It Means. Fernando, J., Mansa, J., & Kvilhaug, S. (2022, June 30).Return on Investment, How to Calcu Fernando, J., Mansa, J., & Rathburn, P. (2022, August 10).Debt-to-Equity Formula and How Hargrave, M., James, M., & Eichler, R. (2022, June 14).Return on Assets and "Good" ROA D Hargrave, M., Kindness, D., & Kvilhaug, S. (2022, June 29).Price-to Sales(P/S) Ratio: What I Hayes, A., James, M., & Munichiello, K. (2022, June 17).Interest Coverage Ration Formula, Hayes, A., James, M., & Perex, Y. (2022, June 18).Operating Margin Formula for Calculatin Johnson, S. (2022, June 29).What Is EBITDA?Business News Daily.wsdaily.com/4461-ebitd Kenton, W., & Mansa, J. (2021, May 31).Free Cash Flow Per Share.www.investopedia.com

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Home Depot 33.535 17.21% 15.30% 14.40% 24.49% 0.1 1.11 -71.16 -75.16 18.26

19.1 2.05 1344.65 23.08 22.72% 40.34% 42.47 4.39 2.09 l analysis technique that in nclude the debt-to-equity r

why? Based on the analysis tal assets turnover ratios w www.bankrate.com/inves ortal/resource/articles/fin nvestopedia. https://www. and examples. Investopedi xample. Investopedia. http How It Works, and Formul Investopedia. https://www ulate It and What It Means w to Interpret It. Investope Defined. Investopedia. http It Is, Formula To Calculate , How It Works, an Exampl ng It, With Examples. Invest da-formula-definition.html m/terms/f/freecashflowper

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

ANALYSIS Both Lowe's and Home Depot exhibit gross margins slightly below the prevailing industry standard. The industry benchmark re operating within the home improvement sector, factoring in their operational costs.Furthermore, the data reveals that Home in sales revenues compared to Lowe's in terms of their Gross Profit Margin for the year 2022. The EBITDA margin serves as an indicator of the extent to which a company's operating expenses impact its gross profit. A hig risk associated with a company, as noted by Johnson in 2022. In accordance with this metric, Home Depot is perceived as havi Lowe's. Hayes et al. (2022) elucidate that the operating margin is a measure of a company's profit generated from each dollar of sales costs, such as labor and raw materials, but prior to addressing interest or tax obligations. In the context of the home improvem metric stands at 14.10%. Lowe's reports an operating margin below this average, at 12.76%, while Home Depot exhibits a high implies that Home Depot bears a lower level of financial risk in comparison to Lowe's. Furthermore, it underscores Home Depo each dollar, post the deduction of variable costs, when juxtaposed with its competitor, Lowe's. The pretax profit margin, as described by Liberto and Berry-Johnson in 2020, serves as a financial accounting metric employed This ratio provides insights into the portion of sales revenue that has been successfully converted into profits. The effective tax rate provides a depiction of the tax obligations of each company. According to the metrics, both companies f consistently shouldering a slightly higher average over the trailing twelve-month (TTM) period. As per Beaver (2022), the quick ratio serves as a gauge of a company's capacity to swiftly transform readily available liquid ass short-term financial commitments. A favorable quick ratio suggests the company's capability to navigate unforeseen continge accordance with this definition, both Lowe's and Home Depot exhibit the capacity to effectively convert their liquid assets into stronger inclination in this regard. Beaver (2022) further notes that financial institutions and investors leverage the quick ratio business for loans or investment opportunities. An additional liquidity metric, the current ratio, evaluates a company's capability to meet near-term financial obligations by as relative to its current liabilities, as noted by Fernando, Brock, et al. in 2022. It is evident that both Lowe's and Home Depot pos can be readily converted into cash, thereby ensuring their capacity to fulfill their current liabilities in the event of a requireme The long-term debt to equity ratio is a metric that quantifies the proportion of a company's long-term debt in relation to its st data for Lowe's and the industry benchmark is not available. However, Home Depot reports a long-term debt to equity ratio in incurring higher interest expenses on its debts compared to the return on investment it is currently realizing. The total debt to equity ratio, as elucidated by Fernando, Mansa, et al. in 2022, serves as a metric for assessing a company's fi of the extent to which a company is relying on debt financing as opposed to its internal resources to support its operational ac The interest coverage ratio, according to Hayes, James, and Munichiello in 2022, is a financial metric that evaluates a company its existing debt. Although the specific ratio for Lowe's is not available, Home Depot's interest coverage ratio surpasses the ind

The Price-to-Earnings (P/E) ratio provides insights into the growth expectations of investors when they invest in companies. A paying a premium per share, exceeding the company's current earnings.In comparison, Lowe's boasts a P/E ratio lower than H anticipate a more favorable return on their investment when choosing Lowe's over Home Depot. The Price-to-Sales (P/S) ratio, as explained by Hargrave, Kindness, & Kvilhaug in 2022, is a valuation metric that juxtaposes a co serves as an indicator reflecting the market's assessment of the value assigned to each dollar of a company's sales or revenue. willingness to allocate a higher premium for Home Depot's stock in comparison to Lowe's and other enterprises within the sam The Price-to-Book (P/B) ratio, according to Fernando, Drury, et al. in 2022, gauges the market's valuation of a company in rela particular significance for value investors in their quest to identify potential investment opportunities. Free cash flow per share (FCF) serves as an indicator of a company's financial adaptability, calculated by dividing free cash flow It effectively stands as a surrogate for evaluating alterations in earnings per share, as described by Kenton and Mansa in 2021. share, which stands at 23.08, is a factor that is likely to resonate favorably with investors. Return on assets (ROA) , as delineated by Hargrave, James, et al. in 2022, is a metric that reflects a company's profitability con surpasses Lowe's in ROA, signifying the company's enhanced ability to generate more earnings with a more efficient utilization asset efficiency. Conversely, Lowe's ROA falls below the industry average, highlighting its relative inability to maximize returns Return on Investment (ROI) , as summarized by Fernando, Mansa, & Kvilhaug in 2022, is a widely adopted profitability measur investments. Over a trailing twelve-month (TTM) period, both Lowe's and Home Depot report ROIs that trail the industry aver noteworthy 9% lead over Lowe's, rendering it a more attractive prospect for investors due to its capacity to generate superior Return on equity (ROE) , as defined by Fernando, Mansa, & Clarine in 2022, represents a financial performance gauge calculate equity. This metric is recognized as a reflection of a corporation's profitability and management's efficiency in generating incom higher the ROE, the more effective a company's management is perceived to be in producing income and expansion from its e According to Murphy et al. (2022), the accounts receivable turnover ratio serves as an accounting measure employed to gauge receivables from its clients. The accounts receivable turnover ratio is an indicator of efficiency, with higher values signifying gr accounts receivable turnover ratio surpasses the industry average, suggesting that it operates more efficiently than the typica Unfortunately, specific data for Lowe's in this regard is not available. Inventory turnover, as described by Fernando, Kindness, & Munichiello in 2022, represents a financial ratio that reflects how f its inventory within a defined timeframe. A lower inventory turnover ratio may indicate sluggish sales or an excess of inventor sales but could also signify inadequate inventory management. As outlined by Beers et al. (2022), the asset turnover ratio assesses how proficiently a company employs its assets to generate dollar amount of sales or revenue with the company's total assets to gauge operational efficiency. A higher asset turnover rati company is more effective in generating sales, while a lower ratio implies that the company may not be utilizing its assets opti nvolves the evaluation of a company's financial performance and health by examining various ratios derived from its financial s ratio, return on assets, and the current ratio, among others. Ratio analysis provides valuable insights into a company's financia

References s conducted, I would be willing to invest in home depot. Home depot has a higher ROA and ROE than Lowe's which indicates m which indicate more efficient operations. sting/what-is-the-pe-ratio/ nancial-management/quick-ratio.shtml .investopedia.com/ask/answers/032415/how-asset-turnover-calculated.asp ia. https://www.investopedia.com/terms/c/currentratio.asp ps://www.investopedia.com/terms/p/price-to-bookratio.asp la. Investopedia. https://www.investopedia.com/terms/i/inventoryturnover.asp w.investopedia.com/terms/r/returnonequity.asp s. Investopedia. https://www.investopedia.com/terms/r/returnoninvestment.asp edia. https://www.investopedia.com/terms/d/debtequityratio.asp ps://www.investopedia.com/terms/r/returnonassets.asp It. Investopedia. https://www.investopedia.com/terms/p/price-to-salesratio.asp le. Investopedia. https://www.investopedia.com/terms/i/interestcoverageratio.asp topedia. https://www.investopedia.com/terms/o/operatingmargin.asp rshare.asp

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

FIN 550_Worksheet_IO

Related Documents