Question

LOWE’S COMPANIES INC. Income Statement (In millions) For Fiscal Year Ended January 29, 2016
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $59,074 Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,504
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,570 Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . 14,115 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,484 Interest—net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,151
Pretax earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,419 Income tax provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,873
Net earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,546
Assets Current assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 405 $ 466 Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307 125 Merchandise inventory, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,458 8,911 Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 349 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,561 9,851 Property, less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,577 20,034 Long-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 354 Deferred income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 133 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 665 1,349 Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,266 $31,721
Liabilities and Shareholders’ Equity Current liabilities Current maturities of long-term debt and short-term borrowings . . . . . . . . . . . $ 1,104 $ 552 Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,633 5,124 Accrued compensation and employee benefits. . . . . . . . . . . . . . . . . . . . . . . . . 820 773 Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,078 979 Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,857 1,920 Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,492 9,348
Long-term debt, excluding current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . 11,545 10,806 Deferred revenue—extended protection plans . . . . . . . . . . . . . . . . . . . . . . . . . 729 730 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 846 869 Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,612 21,753 Shareholders’ equity Preferred stock—$5 par value, none issued . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Common stock—$0.50 par value; shares issued and outstanding, 910 at January 29, 2016 and 960 at January 30, 2015, respectively . . . . . . .
455
480 Capital in excess of par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,593 9,591 Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (394) (103) Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,654 9,968 Total liabilities and shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $31,266 $31,721

Compute:

Times interest earned

current ratio

quick ratio

liabilities-to-equity ratio

total debt-to-equity ratio

Answer 1

1) Times Interest earned = Income before interest and Taxes / Interest Expenses

Income before interest and Taxes = Pretax Earnings + interest Net

Income before interest and Taxes = $ 4,419 +$ 552

Income before interest and Taxes = $ 4,971

Times Interest earned = Income before interest and Taxes / Interest Expenses

Times Interest earned = $4,971 / $ 552

Times Interest earned = $ 9.005 Times (rounded to 3 decimal )

2) Current Ratio = Total Current Assets / Total Current Liabilities

For January 29, 2016 :

Current Ratio = Total Current Assets / Total Current Liabilities

Current Ratio = $ 10,561 / $ 10,492

Current ratio = $1.007 Times ( rounded to 3 decimal )

For January 30,2015 :

Current Ratio = Total Current Assets / Total Current Liabilities

Current Ratio = $ 9,851 / $ 9,348

Current ratio = $ 1.007 Times ( rounded to 3 decimal )

3) Quick ratio = Quick assets / Total current liabilities

Here Quick assets = Cash and cash equivalent + short term investment

For January 29, 2016 :

Quick ratio = Quick assets / Total current liabilities

Quick ratio = ($405+ $307) / $ 10,492

Quick ratio =$ 0.068 Times(Rounded to 3 decimal )

For January 30,2015 :

Quick ratio = Quick assets / Total current liabilities

Quick ratio = ($466+ $125) / $ 9,348

Quick ratio = $ 0.063 Times(Rounded to 3 decimal )

4) Liabilities to Equity Ratio = Total liabilities / Total shareholder's equity

For January 29, 2016 :

Liabilities to Equity Ratio = Total liabilities / Total shareholder's equity

Liabilities to Equity Ratio = $ 23,612 / $ 7,654

Liabilities to Equity Ratio = $3.085 (rounded to 3 decimal )

For January 30,2015 :

Liabilities to Equity Ratio = Total liabilities / Total shareholder's equity

Liabilities to Equity Ratio = $ 21,753 / $ 9,968

Liabilities to Equity Ratio = $2.182 (rounded to 3 decimal )

5) Total Debt to equity ratio = Total Debt / Total shareholder's equity

Here Total Debt = Current maturities of long term debt and short term borrowings+ Long term debt excluding current maturities

For January 29, 2016 :

Total Debt to equity ratio = Total Debt / Total shareholder's equity

Total Debt to equity ratio = ($1,104+$11,545) / $ 7,654

Total Debt to equity ratio = $ 1.653 (rounded to 3 decimal )

For January 30,2015 :

Total Debt to equity ratio = Total Debt / Total shareholder's equity

Total Debt to equity ratio = ($552+$10,806) / $ 9,968

Total Debt to equity ratio = $ 1.139 (rounded to 3 decimal )