unit_09_key - percentages are stable over the two years,...

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E14–3. 1. 2. Accounting firm (high receivables; no gross profit) 3. Retail jewelry store (high inventory; high gross profit) 4. Grocery store (high inventory turnover) E14–6. (In Millions, Except Per Share Data) 1/31/2004 % 1/31/2004 % Net Sales $ 30,838 100.00 % $ 26,112 100.00 Cost of Sales 21,231 68.85 18,164 69.56 Gross Margin 9,607 31.15 7,948 30.44 Expenses: Selling, General and Administrative 5,543 17.97 4,676 17.91 Store Opening Costs 128 0.42 129 0.49 Depreciation 758 2.46 622 2.38 Interest 180 0.58 182 0.70 Total Expenses 6,609 21.43 5,609 21.48 Pre-Tax Earnings 2,998 9.72 2,339 8.96 Income Tax Provision 1,136 3.68 880 3.37 Earnings from Continuing Operations 1,862 6.04 1,459 5.59 Earnings from Discontinued Operations, Net of Tax 15 0.05 12 0.05 Net Earnings $1,877 6.09 % $ 1,471 5.63 % There is a small but meaningful improvement in the gross margin. This improvement added significantly to the overall profitability of Lowe’s. The other
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Unformatted text preview: percentages are stable over the two years, indicating a well-run company. E149. Turnover: Accounts receivable $15,422* [($3,038 + $4,062) 2] = 4.3 Inventory ($51,407 x .55) [($3,640 + $4,400) 2] = 7.0 *$51,407 x 30% = $15,422 Days: Accounts receivable (365 days 4.3) = 84.9 Inventory (365 days 7.0) = 52.1 E1410. Rate of return on equity $1,180 ($28,728 $16,506) = 9.7 % Rate of return on assets $1,180 + ($16,506 x .08 x .7)] $28,728 = 7.3 % Financial leverage percentage (positive) = 2.4 % E1411. Current Assets (1) Current Liabilities (2) Current Ratio (1 2) Start $100,000 ($100,000 1.5) $66,667 1.50 Transaction (1) Cash 6,000 Accts. pay. 6,000 Subtotal 94,000 60,667 1.55 Transaction (2) Cash 10,000 84,000 60,667 1.38 Transaction (3) No impact 84,000 60,667 1.38 Transaction (4) Cash 25,000 Dividends pay. 25,000 $ 59,000 $35,667 1.65...
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unit_09_key - percentages are stable over the two years,...

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