Management Science

1641 Words May 7th, 2011 7 Pages
Value Line Publishing, October 2002 1. What do the financial ratios in case Exhibit 7 tell you about the operating performance of Home Depot? What additional information do the different ratios provide? Complete and compare a similar analysis for Lowe’s. 2. How sensitive is return on capital to the forecast assumptions in case Exhibit 8? What independent changes in Carrie Galeotafiore’s estimates are required to drive the 2002 return-on-capital estimate below Home Depot’s cost-of-capital estimate of 12.3 percent? Look specifically at gross margin, cash operating expenses, receivable turnover, inventory turnover, and P&E turnover. What effect does sales growth have on return on capital? Explain your findings. 3. Do …show more content…
Complete and compare a similar analysis for Lowe’s. 10. How sensitive is return on capital to the forecast assumptions in case Exhibit 8? What independent changes in Carrie Galeotafiore’s estimates are required to drive the 2002 return-on-capital estimate below Home Depot’s cost-of-capital estimate of 12.3 percent? Look specifically at gross margin, cash operating expenses, receivable turnover, inventory turnover, and P&E turnover. What effect does sales growth have on return on capital? Explain your findings. 11. Do you agree with Galeotafiore’s forecast for Home Depot? How would you adjust it? 12. How would your forecast assumptions differ for Lowe’s? Complete and recommend a five-year Lowe’s forecast to Galeotafiore. 13. What do the financial ratios in case Exhibit 7 tell you about the operating performance of Home Depot? What additional information do the different ratios provide? Complete and compare a similar analysis for Lowe’s. 14. How sensitive is return on capital to the forecast assumptions in case Exhibit 8? What independent changes in Carrie Galeotafiore’s estimates are required to drive the 2002 return-on-capital estimate below Home Depot’s cost-of-capital estimate of 12.3 percent? Look specifically at gross margin, cash operating expenses, receivable turnover, inventory turnover, and P&E turnover. What effect does sales growth have on return on