15–10. (Analyzing coverage ratios) The income statements for Lowe's Companies, Inc. (LOW), spanning the period 2014–2016 (just before the housing crash, so these are representative years) are as follows: 2016 2015 2014 Net operating income (EBIT) Interest expense Earnings before taxes Income taxes Net income $4,971,000 (552,000) $4,420,000 (1,870,000) $2,550,000 $4,792,000 (516,000) $4,280,000 (1,580,000) $2,700,000 $4,149,000 (476,000) $3,670,000 (1,390,000) $2,290,000 a. Calculate the times interest earned ratio for each of the years for which you
15–10. (Analyzing coverage ratios) The income statements for Lowe's Companies, Inc. (LOW), spanning the period 2014–2016 (just before the housing crash, so these are representative years) are as follows: 2016 2015 2014 Net operating income (EBIT) Interest expense Earnings before taxes Income taxes Net income $4,971,000 (552,000) $4,420,000 (1,870,000) $2,550,000 $4,792,000 (516,000) $4,280,000 (1,580,000) $2,700,000 $4,149,000 (476,000) $3,670,000 (1,390,000) $2,290,000 a. Calculate the times interest earned ratio for each of the years for which you
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
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Transcribed Image Text:15–10. (Analyzing coverage ratios) The income statements for Lowe's Companies, Inc.
(LOW), spanning the period 2014–2016 (just before the housing crash, so these are
representative years) are as follows:
2016
2015
2014
Net operating income (EBIT)
Interest expense
Earnings before taxes
Income taxes
$4,971,000
(552,000)
$4,420,000
(1,870,000)
$2,550,000
$4,792,000
(516,000)
$4,280,000
$4,149,000
(476,000)
$3,670,000
(1,580,000)
$2,700,000
(1,390,000)
$2,290,000
Net income
a. Calculate the times interest earned ratio for each of the years for which you
have data.
b. What is your assessment of how the firm's ability to service its debt obligations
has changed over this period?
c. (Optional) How does Lowe's compare to Home Depot (HD) in Study Problem
15-9? Is it better able to service its debt than Home Depot? Why or why not?
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