Comparison of Home Depot and Lowes

Comparison of Home Depot and Lowes

Increasing Fixed Assets

Home Depot

Home depot has approx one billion in cash available but has current liabilities amounting to nine billion. It cannot afford to bind its cash flow in long term investment. The fixed assets have not increased especially the plant and machinery. The total fixed asset reported is approximately the same and they should evaluate the possible return of investment if there is an opportunity of fixed asset investment (Hansen et al, 2011). The current return on Asset is 10.72 % which is good in comparison to 6.81 % of Lowes (Yahoo, 2012a, web). Increasing fixed assets will require the business to generate more revenue which will also be backed by investors concerns.

Lowes

Lowes with asset turnover at 6.81 % and cannot afford in the increase in fixed assets. The company has to review the increase in other assets and look into its contribution towards revenue.

Divestitures of Underperforming Business Areas

Home Depot

Home depot is the market leader in the segment of home improvement. It has to provide all the services related to home improvement and there will be some areas of services are not as lucrative or fast moving as other item of the business (Gole and Hilger, 2008). The company should review the troubled areas and try a possible turnaround if possible. If the area is not improvable, then it can spin off those areas of the business or sell them to a specialized company in that field and establish a joint venture with the company. In this way is will be able to maintain the product categories it requires without additional overheads.

Lowes

Lowes should look into its business operations as it is far behind in the profitability with Home depot despite being smaller company then Home depot. The ...