Home Depot Vs Lowes

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If a bank wanted to look at the big picture when making their decision to give out loan to a company, they would look at the Cash Ratio, because cash is the most important of all assets, it provides the bank or creditor an idea of the likelihood of the company being able to pay them back on the loan. In the comparison between Home Depot and Lowe’s we find that the trends are very similar to the quick ratio with Home Depot having more cash to cover its liabilities than Lowe’s. As expected, the cash ratios are lower than the quick ratios, because short-term investments and receivables are taken out of the equation. Over the past six years, both companies’ cash ratios have been declining with an average of 0.186 for Home Depot while the average …show more content…

The higher the ROA the company has, the better because the company is earning more money using less investments. Over the past six years, both companies have improved their ROA, but Home Depot’s values are higher than Lowe’s Companies’, and because they are the same type of business, we can use this ratio to compare the two. Home Depot has improved their ROA from 9.583% to 18.519% over the past six years, whereas Lowe’s Companies has improved their ROA from 5.480% in 2011 to 8.983% in 2016. This means that Home Depot is doing a better job of converting its investments into profit, which is highly desirable to an …show more content…

It compares a company’s stock value to the company’s revenue. The price to sales ratio is an estimation ratio for a company. The lower the price to sales ratio may mean undervaluing in a company, while a higher price to sales ratio value may show overvaluing in a company. The average PSR value is determined by other the lot of companies that comprise a sector. This makes irrelevant to compare a car dealership’s PSR to a bakery’s PSR. Since both the companies we are analyzing are in the hardware sector, it is valid to compare the two. With the numbers rising year to year, Home Depot’s PSR of 1.750 in 2016 is significantly higher than Lowe’s PSR value of 0.973 in the same year. One reason for this may be the sheer size difference between both corporations, another reason may be that Home Depot’s risky strategies are successful and are generating positive results, while Lowe’s Companies are generating modest results. I would expect this PSR value drop if one of Home Depot’s volatile financial tactics, backfires. Either way, in business this ratio is constantly changing which is why most calculations are done on a trailing 12-month

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