Acid Test Analysis: Home Depot And Lowes

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Register to read the introduction… The Home Improvement sector as a whole is one where the acid test ratio .43 leads, but in light of all markets, the Acid-Test reveals that this is an inventory rich location. Acid Test Ratio Identified as a: Weakness.

 Inventory Turnover: This ratio, especially within the context of the retail and inventory management side of our company is a key indicator into the health and strength of our purchasing mechanism. At 5.21, Company G finds its self below the median rate in the given data in regards to the Inventory rate. In comparison with Home Depot and Lowes (4.4 and 3.94 respectively) Company G seems to be competitive within its market sector in relation to Inventory turnover, but when we consider this equation means that Company G is only cycling through their inventory just over five times annually, within the retail sector as a whole they are behind the curve. Inventory Turnover
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The TIE Ratio is a: Strength  Rate of Return on Net Sales: This is an efficiency evaluation, and one that Company G should be proud of showing at 6.43. This is a ratio that sets the company within the median of its market segment when we compare it to Home Depot’s ratio at 8.62 and apply it to the given Quartile Industry data. Rate of Return on Net Sales is a: Satisfactory Condition  Rate of Return on Total Assets: Company G’s ratio was 14.5% for fiscal year 12. The nearest competitor of those evaluated was Home Depot at 11.11% followed by a tremendous variance in the rest of the companies we evaluated. In comparison to the Quartile data in the given statement, Company G is well position in the top of its business segment and, because this is a representation of how efficient management is at using the assets of the company to generate earnings, this is a key indicator as to the health of Company G and I believe that company G is in a very good position in regards to their Rate of return on total assets. Return on Assets is a : Strength  Rate of Return on Common Stockholder’s equity: Company G showed a Return on Equity ratio of 19.61 percent. In comparison to other businesses in the same industry It would appear that company G is once again performing excellently. Home Depot reported a 21.11percent return on Equity, but it was the only one the three competitors I evaluated that performed nearly

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