KEY FINANCIAL RELATIONSHIPS

Key Financial Relationships

Key Financial Relationships

Name of Company:

Home Depot

Lowes

Total Assets as of Dec 31, 2008:

1,814,282,000

2,343,666,000

Total Deposits (Dec 31, 2008):

1,180,262,000

1,898,969,000

Total Liabilities (Dec 31, 2008):

1,386,621,000

2,142,937,000

2008 Net Income:

22,208,000

61,170,000

Total Equity:

427,661,000

200,729,000

Peer group Number & Description: Peer Group # 2; Includes all insured retail stores having assets between $1 Billion and $3 Billion and banks having trust assets less than or equal to $100 million.

Financial Analysis

From the above figures, it is clear that the cash at hand in case of Home Depot is less as compared to that of the Lowes. The reason behind the difference in cash is that the cash the utilization of cash and other quick assets is far more reasonable in case of Home Depot as compared to the Lowes. The balance sheet has three important avenues to be analyzed; these are Assets, liabilities and Shareholder's equity. In the balance sheet account, slight changes have occurred during the years under review. Investment of The Lowes is up i.e. 557,412,000 as compared to the Home Depot whose investments are 305,106,000 only.

The same is the case with the loan position. The loans given by the Lowes Bank amounts to 1,474,549,000 while that of the Home Depot amounts to 1,139,478,000. This reason can be attributed to the low cash position of the Home Depot. Since the Home Depot has given credit more as compared to the Lowes, therefore, the cash at hand is less respectively. Thus we can say that the position of Home Depot is more productive as compared to that of the Lowes because as cash lying idle itself becomes a liability on the company. Therefore, in case of cash position the Lowes is leading but in case of return, the Home Depot is the leader.

Since the loans disbursed by the Lowes are more than that of the Home Depot, therefore the allowance for loan losses is 23,093,000 & 9,646,000 respectively. The Lowes has disbursed loans but it is not much successful in the refund of those loans. So, we can say that the ideal condition is that the bank should be bale to disburse as well as refund the loans. Otherwise the whole idea of loan disbursement will be a failure as there will be no profits on the loans.

The borrowings from other banks are also a major factor in determining the profitability position of the banks. These borrowings generally give a clear picture about the financial health of the bank. In case of Home Depot, the borrowings are 0 which means that this bank totally rely on its own sources. It does not depend upon any other source of finance. On the other hand, The Lowes has borrowed 13,931,000 from the other banks. There is a controversy here. The cash at hand is 108,045,000 and the bank has also borrowed the money. This can be answered as the strategy of the bank. The strategy of The Lowes is that to keep enough cash at hand so as to fulfill the short cash ...