Companies’ financial statements.

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Select 2 companies in the same industry (for example, the home improvement industry or the candy industry).

Use the Internet to find the companies’ financial statements.
From the financial statements, list the different components from the Stockholder’s Equity section.
Read the footnotes to the financial statements to see what they disclose about their Stockholder’s Equity section.
Which parts do they have in common?
Is there anything about their Stockholder’s Equity that is distinctive to the business?
Share with the class what you have found.

Sample Solution

Company 1: Lowe’s Companies, Inc.

Company 2: The Home Depot, Inc.

Stockholders’ Equity

  • Common Stock: Represents the ownership interest of the company’s stockholders.
  • Retained Earnings: Represents the cumulative earnings of the company that have not been paid out to stockholders as dividends.
  • Treasury Stock: Represents shares of the company’s own stock that have been repurchased by the company.
  • Accumulated Other Comprehensive Income: Represents a variety of other items that affect stockholders’ equity, such as foreign currency translation gains and losses, unrealized gains and losses on investments, and changes in the value of equity securities.

Commonalities

Both Lowe’s and The Home Depot have the following components in their stockholders’ equity sections: common stock, retained earnings, treasury stock, and accumulated other comprehensive income.

Distinctive Features

There are a few distinctive features in the stockholders’ equity sections of Lowe’s and The Home Depot:

  • Lowe’s has a larger amount of retained earnings than The Home Depot. This is likely because Lowe’s has been in business for a longer period of time and has generated more earnings over the years.
  • The Home Depot has a larger amount of treasury stock than Lowe’s. This is likely because The Home Depot has repurchased more of its own stock than Lowe’s.
  • Lowe’s has a higher amount of accumulated other comprehensive income than The Home Depot. This is likely because Lowe’s has experienced more foreign currency translation gains and losses, unrealized gains and losses on investments, and changes in the value of equity securities than The Home Depot.

Conclusion

The stockholders’ equity sections of Lowe’s and The Home Depot are similar in many ways. However, there are also some distinctive features in each company’s stockholders’ equity section. These differences can be explained by factors such as the length of time each company has been in business, the amount of earnings each company has generated, and the investment strategies of each company.

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