Accounting Notes

Earnings = income

Earnings from operations = net income

A Non-recurring item is typically an expense that is not ongoing – i.e. lawsuit

Assets = Liabilities + Stockholders’ Equity

Financial statements listed with most liquid first to least liquid assets last

Net book value = Total assets - total liabilities

Home Depot and Lowes are the first and second (respectively) largest home improvement retailers. The net earnings for both companies grew due to the housing market recovery. Home Depot and Lowes are the leadings for this industry and are the main competitors. However, other stores such as Ace Hardware and True Value Hardware are also competitors. Ace and True Value are known as the neighborhood hardware stores. The two companies are similar in the types of products and services they offer. They are different in that Home Depot has shown greater earnings and revenues than Lowes.

There are a few non-recurring items for both companies. In 2011, Lowes closed 27 underperforming stores in the United States which carried over as assets due to excess properties. In 2012, Home Depot closed its 7 stores in China and recorded a $145 million charge. Home Depot also incurred greater long-term debt at the end of FY 2013 and 2012 from $14.691 million and $9.475 million. The earnings are high quality for both Home Depot and Lowes. Net earnings are strong for both companies due to the gross profits. The earnings are persistent since they are greater than extraordinary operations. A stronger housing market also impacts the greater performance and earnings for these two stores.