Current Ratio

2.00
1.50

Home Depot
Lowe's

1.00
0.50
0.00
1997

1998

1999

2000

2001

Graph 1

A/R Turnover
150.00
Home Depot

100.00

Lowe's

50.00
0.00
1998

1999

2000

2001

From graph 1, we can tell that

current ratio is higher in Home Depot than Lowes, which means Home Depot can
convert assets to cash quicker to cover short-term creditors. However, both of them
reached around 1.60 in 2001, and from the tendency, Lowes would have a higher
CR in the future.

A/R collection period

8.00
Home Depot

6.00

Lowe's

4.00
2.00
0.00
1998

1999

2000

2001

A/R turnover of Lowes is higher than Home depot, and at the same time collection
period is shorter. Therefore the two graphs imply that Lowes has better efficient to
collect its account receivable. Lowes has an increasing trend on A/R turnover but
Home Depot started decline from 1999, so Lowes will have more competitive

advantage in the market. From this perspective, Lowes is more efficient than Home
Depot.

Operating profit margin

0.12
0.10

Home Depot

0.08

Lowe's

0.06
0.04
0.02
0.00
1997

1998

1999

2000

2001

From graph 4, we can tell that Home Depot is operating more efficiently than
Lowes. Over past 5 years Home Depot margin has increased from 7.8% to 9.2%
whereas for Lowes it has increased from 6.4% to 8.1% has been doing better than
Lowes. Clearly Lowes operating margin has improved over the years decreasing its
operating margins.

Debt to equity ratio

1.20
1.00
0.80
0.60
0.40
0.20
0.00
1997

Home Depot
Lowe's

1998

1999

2000

2001

Lowes has certainly more Debt/Equity ratio than Home Depot over 5 years. Lowes
is much more leveraged than Home Depot. Lowes has been aggressive over the
years in financing its growth with debt than Home Depot.

return on equity
0.25
0.20
Home Depot

0.15

Lowe's

0.10
0.05
0.00
1998

1999

2000

2001

From 1998 till 2001 Home depot is able to generate more profit than Lowes with

the money shareholders have invested. But from 2000 the returns of Lowes has
seen an upward trend where the returns on Home Depot from 1999 has seen a
downward trend. This is an be correlated with Lowes becoming more efficient on
operating margin thus increasing the net income resulting in better returns on
equity.