Lowes incorporation financial ratios 2015
=145.8%
Lowes incorporation financial ratios 2016
*100=900%
The debt ratio is the return on total liabilities to the total assets. In the year 2015, Lowes incorporation had a ratio of 145.8%t which was an indication that the company had mores assets than the total liabilities (Kane and Marcus 2011). In the following year, the debt ratio had decreased to 132.4 which revealed that there was more increase in the total liabilities than the increase in the total asset.
In the industry standing ratio, the corporation was expected to have a debt ratio of 145.6% in the year 2015. The ratios were almost equal which indicated that the Lowes Company was competing favorably in the competitive market.
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Similarly, the time interest earned ratio is the a measuring tool for capacity of a company to be able to pay its debts (Horrigan, 2015). To determine the ratio, the “Earnings Before Interest and Tax (EBIT)” is proportioned by the interest expense. In 2015, the Lowes Company had a ratio of 728%. This was a sign that the company was able to honor its debt in that particular financial period. In the following year, the ratio increased to 900% and it revealed that the company ability to honor debts was increasing.
In the industry standing time interest earned ratio, the company was expected to have a ratio of 916.2% in the year 2015 and a ratio 892.4%% in the year2016. In the comparison of the industry standing ratio and the real ratios of the company during the two years had a slight difference. This would be inferred that the company was reaching the industry expectation and hence an increase in its competitive advantage in the competitive economy.
Work Cited
Horrigan, J. O. (1965). Some empirical bases of financial ratio analysis. The Accounting Review , 40 (3), 558-568.
Kane, A., Marcus, A. J., & McDonald, R. L. (1985). Debt policy and the rate of return premium to leverage. Journal of Financial and Quantitative Analysis , 20 (04), 479-499.
