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Lowe’s incorporated is a well known and a big name where anyone can get quality hardware and home improvement materials at very suitable prices. Lowe’s have been fair in its workings and information since the time when it was established that is in 1921. It now has more than 1675 stores in the United States. During 2008, Lowe’s ranked number 47 on the Fortune 500 list. It offers a range of good quality hardware at the most reasonable prices. It has been able to combine its quality and prices so effectively by following and adhering to all the rules, regulations and laws and always portrayed an ethical responsibility towards its customer s and the society. It uses various tools and techniques to measure its performance and tend to offer fair and correct figures not only during the internal audits but also to the public who have the shares or stocks of the company. it uses EDGAR, a hardware giant through which it makes sure that all the figures given are appropriate so that the stock are not affected and the shareholders have complete and accurate information with them.
Lowe’s is a company who strongly believes in ethical values and tends to follow them very strictly. In internal audits it provides the auditors with no fake values and its debt ratio indicates that it avoid taking too much loans or borrow not too much so that later on it does not become difficult to repay it. Lowe’s is the best example where the ethics and excellent business techniques are combined together in order to give the best to its customers and stock holders. It strictly follows the code of ethics which is also present at its website for its customers, stock holders and employees. These codes include all the business and the financial ways in which a company should operate in order to avoid any cheating or fraudulent. This is related to every function of the business and it is ensured that this code of ethic is followed by everyone in the company whether an ordinary doorman or the CEO of the company. Lowe’s has tried to create such an atmosphere where everyone should be well aware of his/her ethical responsibility and must take all the efforts to stick to it. The employees are enforced to report any unethical matter or are given somewhat authority to solve them on their own.
Lowe’s make all the conscious efforts to follow all the rules, regulations and laws made by the government when it comes to the ethics of their finances. According to the code of ethics a whole section has been provided for the accuracy of all the records whether in books or in computer. All the rules and regulations must be followed and they believe in the fact that the correct information is essential to trade the stocks in the US securities markets and while conducting transactions here Lowe’s will adhere to all the rules and regulations of it. The code of ethics also prohibit strictly giving any sort of gift whether cash or in the form of presents to any government official as it will be considered as bribery and it will ruin all the efforts to ensure ethics in the company. All the rules in regard to insider trading are also followed very strictly.
These codes of ethics are not only listed by Lowe’s in its company or on its websites in fact all the efforts are made that they are followed with dedication and strictness. At the time of hiring each and every employee has to undergo this code of ethics and then to show his/her consent he has to sign it. Various employees have been hired in various departments who keep an eye and check for any unethical work. The employees, customers and stockholders are provided with a phone number so that any unethical behavior can be reported as soon as possible.
Lowe’s uses EDGAR (Electronic Data Gathering, Analysis, and Retrieval system) to ensure that all the data presented is accurate and no misunderstanding is created. According to (U.S. Securities and Exchange Commission, 2009, ¶ 1) EDGAR has to be used by every company whether local or foreign in order to file in any information in regard to periodic reports, file registration statements. Its function is to collect, validate, index, accept and forward the submissions with the U.S. Securities Exchange Commission.
According to Lowe’s (2005), An Audit Committee has been formed by Lowe’s which is an independent and objective committee of the Board. The audit committee report is been prepared by this committee in accordance with the rules of the SEC. the Company’s annual proxy statement includes this report. Annual statements are made in order to provide accurate financial information to everyone and for these purpose ratios like debt, current, ROE are calculated.
The current ratios are used to see the liquidity of the organization. Liquidity is basically the ability of any company to pay its bills and it also provides with the information regarding converting the assets as soon as possible into cash if there are any crises. The current ratio is received when current assets are divided by the current liabilities. Higher the liquidity ratio there is more opportunities that investors will be attracted. In 2008 as per Lowe’s annual report the total assets as of January 30, 2009 were 9,251 million and 8,686 million for the previous year. The total current liabilities were 8,022 million and 7,751 million respectively (Lowe’s, 2009). The resulting current ratio for 2008 is 1.15 times (9,251M/8,022M). This illustrates that Lowe’s has $1.15 in current assets for every $1 of current liability. The current ratio for the previous year of 2007 was very similar at 1.12 times (8,686M/7,751M), resulting in $1.12 in current assets for every $1 of current liability at that time.
Another ratio determined in the annual report is the debt ratio which provides the information that what percentage of the assets is financed through debts. According to Keown, Martin, Petty, & Scott, (2005) the debt ratio is calculated by dividing total debts with the total assets. Usually 40% of the finance is generated through debt financing and the rest 60% is earned through equity. Lowe’s reported a total debt of 14,631 million for 2008 and 14,771 million for 2007. The total assets reported were 32,686 Million in 2008 and 30,869 million in 2007. The resulting debt ratio for 2008 was .447 or 44.7%. The debt ratio for 2007 was .478 or 47.9%. Both of these ratios fall into the normal range because “…companies in general finance about 40 percent of their assets with debt and 60 percent with equity” (Keown et al., 2005, p. 81).
The next ratio is ROE through which the stockholders get the information regarding return on equity capital and level of profitability. In order to determine ROE the comparison is conducted between the relative income to the amount of invested assets as well as the amount of debt used to finance the invested assets. For 2007 and 2008, Lowe’s ROE ratios were .17 and .12 respectively. Because of retaining more earnings to re-invest as well as for the purpose of purchasing new property in 2008 Lowe’s ROE is decreased in 2008 and 2009 but this is not at all alarming. The company is effectively and efficiently managing their resources and this is proved by Lowe’s return on equity trend analysis. The company is no doubt very favorable for making an investment.
In order to ensure that the assets are utilized to their optimum level and in the best possible manner Lowe’s use asset management ratios. Ratios like receivable ratios are part of these ratios. In order to see that how well the accounts or payments are been collected by the company the Receivables Turnover Ratio is calculated. The Day’s receivables Ratio is calculated when the Receivable Turnover Ratio is found.
| Receivables Turnover Ratio SalesAccounts Receivables Figure 1 | Days’ Receivables Ratio 365Receivables Turnover Ratio Figure 2 |
Lowe’s does not have Accounts Receivables, the Receivable Turnover Ratio or the Days’ Receivables Ratio as the store does not sell on credit whereas the customers buy the products either through cash, check, or credit card.
Thus all this proves that Lowe’s is a company which strictly adheres to all the laws and regulations. Because of its fair business it has become a leader in regard to hardware supplies and home improvement materials. It has never adopted unfair means or any shortcuts infact has always followed all the rules and regulations. With the help of EDGAR it has provided its customers and stockholders with the accurate, updated and complete information. It has a code of ethics which is been followed by all the employees and the management official with full dedication and concern.
Keown, Arthur J., Martin, John D., Petty, J. William, & Scott, David F. (2005). Financial management: principles and applications (10th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
Lane, M. A. (2007). Business finance online: Asset management ratios. Retrieved October 22, 2009, from http://www.zenwealth.com/BusinessFinanceOnline/RA/AssetManagementRatios.html
Lowe’s (2005). Audit Committee Charter. Retrieved October 23, 2009 from http://investor. shareholder.com/lowes/documentdisplay.cfm?DocumentID=3653.
Lowes (2009). Balance 2008 Annual Report. Retrieved from http://www.lowes.com/lowes2/assets/2008%20Annual%20Report%20Bookmarked- %20FINAL.pdf
Lowe’s Investor Relations: Code of Business Conduct and Ethics, retrieved on October 24, 2009 from: http://investor.shareholder.com/lowes/documentDisplay.cfm?DocumentID=3627
U.S. Securities and Exchange Commission (2009). Filings & Forms. Retrieved October 23, 2009 from http://www.sec.gov/edgar.shtml
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