FIN501 SLP

FIN501 SLP

The home improvement industry is a booming enterprise, which is mainly controlled by two major retailers. Each retailer has its strong points as well as its weaknesses. Home Depot is a company that holds a great history; it was the forefront of the home improvement warehouse store. Lowe's quickly followed in the wake of Home Depot's successes. They decided to improve the industry by offering a cleaner environment, and an easier shopping experience. Which one is the stronger company in today's financial marketplace? Who really dominates the home improvement industry? In this thesis, we will attempt to discover the answers to these questions with an expansive study of both companies financial status. I would suggest a merger of home Depot and Lowe's because if both of the companies merged than they can play a dominant role in home improvement industry.

According to Home Depot (2007), the company ended the fiscal year with stockholders equity of $22 billon, $34 billion in assets (including $2.9 billon in cash), and a debt to equity ratio of 6.1%. Home Depot has $2.9 billon in cash, which indicates that it most likely will remain a strong competitor in its industry. The cash statement indicates that operating expenses increased 11.9% to $13.7 billon for the fiscal year 2006, from $12.3 billon for the previous year (Home Depot, 2007). This increase was due to the actuality that Home Depot experienced rising workers compensation insurance, inflated liability insurance costs, and rapidly increasing medical costs. They also note that the store modernization program attributed to operating expenses rising quickly.

According to Lowe's (2007), the net earnings for 2006 increased 28% to $1.9 billon or 6.1% of sales compared to $1.5 billion or 5.6% of sales for 2002. Diluted earnings per share were $2.34 for 2006 compared to $1.85 for 2002. ...