Value Line Publishing Essay

900 Words May 31st, 2010 4 Pages
Value Line Publishing, October 2002 In Case Number 12, "Value Line Publishing, October 2002," Carrie Galeotafiore presents a five-year financial forecast that shows Home Depot in an positive light. It also prepares to do the same with an analysis of Lowe's. She supports the changes proposed by the new Home Depot CEO and that would play a role in improving Home Depot's financial health in the home center and building industry. Galeotafiore supports her by mentioning a number of sources that would help the growth of the two companies. She mentions the recent consolidation throughout the building industry with both Lowe's and Home Depot acquiring several smaller companies.

Lowe's and Home Depot have done well by going
…show more content…
This bodes well for the companies and demonstrates that both are able to liquidate quickly if necessary. Current Ratio for both are neither negative nor perfect. With 2.0 representing the ratio of a healthy company able to pay back debt, Home Depot's average current ratio of 1.73 and better than Lowe's' average current ratio of 1.51 over the past five years.
While not 100% healthy, they are in position to improve their financial healthy with some careful adjustments in their operations and expenditures. Quick Ratio test is more demonstrative as both Home Depot and Lowe's have Quick Ratios of .33, less than the 1.0 minimum a company should have so they can quickly convert assets to cash. If a company displays an inability to convert cash when needed, this becomes a liability they need to access large amounts of cash quickly. Return on capital for Home Depot varies from 15% to 17%, a favorable ratio, whereas Lowe's' return on capital varies from 10% to 11%. Lowe's' returns on capital are not that bad, but not great either. Home Depot's financial forecast shows that it should be continuing to enjoy high returns on capital in the future.
Return On Equity is between 16% and 19% for Home Depot, while it is between 13% and 16%. Returns on equity are within acceptable average ranges of returns on shareholder investment; this indicates a profitable investment. The average Return on Equity is in the 15% range
Open Document