Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
1. Is coverage better or worse in the period from 2015-2021? Why?
Transcribed Image Text:**Financial Overview of Lowe's Cos Inc (2015 - 2021)**
The financial data presented in the table provides a comprehensive view of Lowe's Cos Inc's credit metrics over a period spanning from January 30, 2015, to January 29, 2021. All figures are expressed in millions of USD, except per share data.
1. **Debt Structure:**
- **Total Debt:** Shows the total amount of both short-term and long-term debt for each fiscal year.
- **Short-Term Debt:** Indicates the portion of debt that is due within one year.
- **Long-Term Debt:** Reflects the debt maturing in more than one year.
2. **Debt Ratios and Coverage:**
- **Total Debt/12M EBITDA and Net Debt/EBITDA:** These ratios measure the company's ability to pay off its debt using earnings before interest, taxes, depreciation, and amortization (EBITDA).
- **Net Debt/EBIT:** This ratio assesses the company's leverage by comparing net debt to earnings before interest and taxes (EBIT).
3. **Interest Coverage Ratios:**
- **EBITDA to Interest Expense and EBIT to Interest Expense:** These ratios illustrate the company's capacity to cover interest expenses with its earnings.
- **EBITDA-CapEx/Interest Expense:** Evaluates the ability to cover interest expenses after accounting for capital expenditures.
4. **Cash Flow and Equity Analysis:**
- **Cash Interest Paid:** Represents actual cash expenditure on interest, highlighting the cash flow requirement for servicing debt.
- **Common Equity/Total Assets:** Indicates the proportion of assets financed by shareholders' equity.
5. **Debt Ratios to Equity:**
- **Long-Term Debt/Equity and Total Debt/Equity:** These ratios measure the extent of debt financing relative to shareholders' equity.
- **Long-Term Debt/Total Assets:** Provides an overview of how much of the company's assets are financed by long-term debt.
This data enables an in-depth analysis of the company's financial health, its ability to meet obligations, and overall leverage. Through these insights, stakeholders can assess the risk and sustainability of Lowe's fiscal policies.
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