1.Calculate the following ratios and filled in the worksheet for ratios.

LIQUIDITY RATIOS:

A. Net working capital for Walgreens

Net working capital for CVS

Analysis:What do the results of this calculation mean in the context of Walgreens?In the context of CVS?Compare the two - why are they different?Which is better or worse?

B.Current ratio for Walgreens

Current ratio for CVS

What does the results of this ratio mean in the context of Walgreens?How about CVS?Compare the two - why are they different

C.Quick ratio for Walgreens

Quick ratio for CVS

What do the results of this ratio mean in the context of Walgreens?How about CVS?Compare the two - why are they different

PROFITABILITY CALCULATIONS:

D.Gross profit$and gross profit%for Walgreens

Gross profit $ and gross profit % for CVS

What do the results of this calculation mean in the context of Walgreens?How about CVS?Compare the two - why are they different

SOLVENCY RATIOS

E.Debt ratio for Walgreens

Debt ratio for CVS

What do the results of this ratio mean in the context of Walgreens?How about CVS?Compare the two - why are they different

ASSET MANAGEMENT RATIOS

F.Accounts receivable turnover ratio for Walgreens

Accounts receivable turnover ratio for CVS

What do the results of this ratiomean in the context of Walgreens?How about CVS?Compare the two - why are they different

G.Inventory turnover ratio for Walgreens

Inventory turnover ratio for CVS

What do the results of this ratiomean in the context of Walgreens?How about CVS?Compare the two - why are they different

MARKET ANALYSIS RATIOS

H.Earnings per share for Walgreens

Earnings per share for CVS

What do the results of this ratiomean in the context of Walgreens?How about CVS?Compare the two - why are they different

I.Return on Equity for Walgreens

Return on Equity for CVS

What do the results of this ratiomean in the context of Walgreens?How about CVS?Compare the two - why are they different

J.Market Cap for Walgreens

Market Cap for CVS

What do the results of this ratiomean in the context of Walgreens?How about CVS?Compare the two - why are they different

I.Free Cash Flow for Walgreens

Free Cash Flow for CVS

What do the results of this ratiomean in the context of Walgreens?How about CVS?Compare the two - why are they different

Ratios:

Walgreens 8/31/20

CVS 12/31/19

EXPLAIN

A

Net Working Capital

B

Current ratio

C

Quick ratio

D

Gross Profit ($ and %)

E

Debt ratio

F

Accounts Receivable Turnover

G

Inventory Turnover

H

EPS

I

ROE

J

Market cap

K

Free Cash Flow

2. Using Walgreens financials, calculate a horizontal analysis ($ and %) on the income statement including gross profit (you will have to calculate).I recommend using EXCEL.

2a.Using Walgreens financials, then do the vertical analysis for the balance sheet for 2018 and 2017).I recommend using EXCEL.

2b. What do you notice about the change from year to year on income statement and the change in the balances compared to the prior year?Be as specific as possible.

3.Which company would you invest, Walgreens or CVS, based on the financial statement analysis?Give me at least two sentences on how much and why.

Consolidated Statements of Operations mm,mmm Revenues: Products Premiums Services Net investment income Total revenues Operating costs: Cost of products sold Benet costs Goodwill impairments Operating expenses Total operating costs Operating income Interest expense Loss on early extinguishment of debt Other expense (income) Income before income tax provision Income tax provision Income (loss) from continuing operations Loss from discontinued operations, net of tax Net income (loss) Net (income) loss attributable to noncontrolling interests Net income (loss) attributable to CVS Health Basic earnings (loss) per share: Income (loss) from continuing operations attributable to CVS Health Loss from discontinued operations attributable to CVS Health Net income (loss) attributable to CVS Health Weighted average basic shares outstanding Diluted earnings (loss) per share: Income (loss) from continuing operations attributable to CVS Health Loss from discontinued operations attributable to CVS Health Net income (loss) attributable to CVS Health Weighted average diluted shares outstanding Dividends declared per share See accompanying notes to consolidated financial statements. 91 256,776 244,789 E16 For the Years Ended December 31, 2019 185,236 $ 63,122 7,407 1,011 158,719 52,529 33,541 11,987 3,035 79 (124) 8,997 2,366 6,631 6,631 3 6,634 $ 5.10 $ 5.10 $ 1,301 5.08 $ 5.08 $ 1,305 2.00 $ 194,579 190,558 2018 183,910 $ 8,184 1,825 660 156,447 6,594 6,149 21,368 4,021 2,619 (4) 1,406 2,002 (596) (596) 2 (594) $ (0.57) $ (0.57) $ 1,044 (0.57) $ (0.57) $ 1,044 2.00 $ 2017 180,063 3,558 1,144 21 184,786 153,448 2,810 181 18,809 175,248 9,538 1,062 208 8,268 1,637 6,631 (3) 6,623 (1) 6,622 6.48 (0.01) 6.47 1,020 6.45 (0.01) 6.44 1,024 2.00 Index to Consolidated Financial Statements Consolidated Statements of Comprehensive Income (Loss) For the Years Ended December 31, In millions 2019 2018 2017 Net income (loss) 6,631 $ (596) $ 6,623 Other comprehensive income (loss), net of tax: Net unrealized investment gains 677 97 Foreign currency translation adjustments 162 (29) (2) Net cash flow hedges (33) 330 (10) Pension and other postretirement benefits 111 (124) 152 Other comprehensive income 917 274 140 Comprehensive income (loss) 7,548 (322 6,763 Comprehensive (income) loss attributable to noncontrolling interests 2 (1) Comprehensive income (loss) attributable to CVS Health 7,551 (320) ,762 See accompanying notes to consolidated financial statements. 92mm,mmmma Assets: Cash and cash equivalents Investments Accounts receivable, net Inventories Other current assets Total current assets Long-term investments Property and equipment, net Operating lease right-ofuse assets Goodwill Intangible assets, net Separate accounts assets Other assets Total assets Liabilities: Accounts payable Pharmacy claims and discounts payable Health care costs payable Policyholders' funds Accrued expenses Other insurance liabilities Current portion of operating lease liabilities Short-term debt Current portion of longterm debt Total current liabilities Long-term operating lease liabilities Long-term debt Deferred income taxes Separate accounts liabilities Other long-term insurance liabilities Other long-term liabilities Total liabilities Commitments and contingencies (Note 16) Shareholders' equity: Preferred stock, par value $0.01: 0.1 shares authorized; none issued or outstanding Common stock, par value $0.01: 3,200 shares authorized; 1,727 shares issued and 1,302 shares outstanding at December 31, 2019 and 1,720 shares issued and 1,295 shares outstanding at December 31, 2018 and capital surplus Consolidated Balance Sheets Treasury stock, at cost: 425 shares at both December 31, 2019 and 2018 Retained earnings At December 31, 2019 2018 5,683 4,059 2,373 2,522 19,617 17,631 17,516 16,450 5,113 4,581 50,302 45,243 17,314 15,732 12,044 1 1,349 20,860 79,749 78,678 33,121 36,524 4,459 3,884 4,600 5,046 222,449 196,456 10,492 8,925 13,601 1 1,365 6,879 6,147 2,991 2,939 12,133 10,711 1,830 1,937 1,596 720 3,781 1,265 53,303 44,009 18,926 64,699 71,444 7,294 7,677 4,459 3,884 7,436 8,119 2,162 2,780 158,279 137,913 45,972 45,440 (28,235) (28,228) 45,108 40,911 Accumulated other comprehensive income Total CVS Health shareholders' equity Noncontrolling interests Total shareholders' equity Total liabilities and shareholders' equity See accompanying notes to consolidated financial statements. 93 1,019 63,864 306 64,170 222,449 $ 102 58,225 318 58,543 196,456 Index to Consolidated Financial Statements Consolidated Statements of Cash Flows 1' '' Cash ows from operating activities: Cash receipts from customers Cash paid for inventory and prescriptions dispensed by retail network pharmacies Insurance benets paid Cash paid to other suppliers and employees Interest and investment income received Interest paid Income taxes paid Net cash provided by operating activities Cash ows from investing activities: Proceeds from sales and maturities of investments Purchases of investments Purchases of property and equipment Proceeds from saleleaseback transactions Acquisitions (net of cash acquired) Proceeds from sale of subsidiary and other assets Other Net cash used in investing activities Cash ows from financing activities: Net repayments of short-term debt Proceeds from issuance of long-term debt Repayments of long-term debt Derivative settlements Repurchase of common stock Dividends paid Proceeds from exercise of stock options Payments for taxes related to net share settlement of equity awards Other Net cash provided by (used in) nancing activities Effect of exchange rate changes on cash, cash equivalents and restricted cash Net increase (decrease) in cash, cash equivalents and restricted cash Cash, cash equivalents and restricted cash at the beginning of the period Cash, cash equivalents and restricted cash at the end of the period 94 $ For the Years Ended December 31, 2019 248393 (149,655) (52242) (28932) 955 (2954) (2317) 12348 'L049 (7534) (2457) 5 (444) 42 (3,339) (720) 3,736 e33a (25) (2,603) 210 (112) (7350) 1,659 4,295 5,954 $ $ 2018 18a519 (148,981) (6897) (17234) 644 (2,803) (2,383) 8,865 817 (692) (2,037) (42226) 832 21 (43,285) (556) 44343 (5522) 446 (2,038) 242 (97) 1 3a819 (4) 2,395 L900 4295 $ $ 2017 176,594 (146,469) (2,810) (15,348) 21 (1,072) (2,909) 8,007 61 (137) (1,918) 265 (1,181) 33 (2,877) (598) (4361) (2,049) 329 (71) (1) (6,751) 1 (1,620) 3,520 1,900 Index to Consolidated Financial Statements For the Years Ended December 31, In millions 2019 2018 2017 Reconciliation of net income (loss) to net cash provided by operating activities: Net income (loss) $ 6,631 $ (596) $ 6,623 Adjustments required to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 4,371 2,718 2,479 Goodwill impairments 6,149 181 Loss on settlement of defined benefit pension plans 187 Stock-based compensation 453 280 234 Loss on sale of subsidiary 205 86 Loss on early extinguishment of debt 79 Deferred income taxes (654) 87 (1,334) Other noncash items 264 253 53 Change in operating assets and liabilities, net of effects from acquisitions: Accounts receivable, net (2,158) (1,139) (941) Inventories (1,075) (1,153) (514) Other assets (614) (3) (338) Accounts payable and pharmacy claims and discounts payable 3,550 2,329 1,710 Health care costs payable and other insurance liabilities 320 (311) Other liabilities 1,476 165 333) Net cash provided by operating activities $ 12,848 $ 8,865 3,007 See accompanying notes to consolidated financial statements. 95Consolidated Statements of Shareholders' Equity Attributable to CVS Health Number of shares outstanding Common Stock and Accumulated Total Other Capital CVS Health Total In millions Common Treasury Shares Shares (i) Surplus (2) Treasury Retained Comprehensive Shareholders' Stock (1) Earning Income (Loss) Equity Noncontrolling Shareholders' Interests Equity Balance at December 31, 2016 1,705 31,635 $ (33,483) $ 38,983 (305) $ 36,830 36,834 Net income 6,622 6,622 6,623 Other comprehensive income (Note 13) 140 140 140 Stock option activity, stock awards and other 461 461 461 Purchase of treasury shares, net of ESPP issuances (54) (4,313) - (4,313) (4,313) Common stock dividends (2,049) - (2,049) (2,049) Other decreases in noncontrolling interests (1 ) (1) Balance at December 31, 2017 1,712 (698) 32,096 (37,796) 43,556 (165) 37,691 4 37,695 Adoption of new accounting standards (3) (6) (7) (13) (13) Net loss (594) (594) (2) (596) Other comprehensive income (Note 13) 274 274 - 274 Common shares issued to acquire Aetna 274 12,923 9,561 22,484 22,484 Stock option activity, stock awards and other 421 - 421 - 421 Purchase of treasury shares, net of ESPP issuances (1) 7 Common stock dividends - - (2,045) (2,045) (2,045) Acquisition of noncontrolling interests 329 329 Other decreases in noncontrolling interests (13) (13) Balance at December 31, 2018 1,720 (425) 45,440 (28,228) 40,911 102 58,225 318 58,543 Adoption of new accounting standards (Note 178 178 178 Net income (loss) 6,634 6,634 (3) 6,631 Other comprehensive income (Note 13) 917 917 917 Stock option activity, stock awards and other 2 532 532 532 Purchase of treasury shares, net of ESPP issuances (2) (7) - (7) - (7) Common stock dividends (2,615) (2,615) (2,615) Other decreases in noncontrolling interests (9) (9) Balance at December 31, 2019 1,727 (425) 45,972 $ (28,235) $ 45,108 $ 1,019 $ 63,864 $ 306 $ 64,170 (1) Treasury shares include 1 million shares held in trust for each of the years ended December 31, 2019, 2018 and 2017. Treasury stock includes $29 million related to shares held in trust for each of the years ended December 31, 2019 and 2018 and $31 million related to shares held in trust for the year ended December 31, 2017. See Note 1 "Significant Accounting Policies" for additional information. 2) Common stock and capital surplus includes the par value of common stock of $17 million as of December 31, 2019, 2018 and 2017. (3) Reflects the adoption of Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers, which resulted in a reduction to retained earnings of $13 million and the adoption of ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which resulted in a reduction to accumulated other comprehensive income of $7 million and an increase to retained earnings of $7 million, each during the year ended December 31, 2018. See accompanying notes to consolidated financial statements.2020 Assets Current assets: Cash and cash equivalents $ 516 Accounts receivable, net 7,132 Inventories 9,451 Other current assets 974 Total current assets 18,073 Non-current assets: Property, plant and equipment, net 13,342 Operating lease right-ofuse asset 21,724 Goodwill 15,268 Intangible assets, net 10,753 Equity method investments (see note 5) 7,338 Other non-current assets 677 Total non-current assets 69,101 Total assets 5 87,174 Liabilities and equity Current liabilities: Short-term debt $ 3,538 Trade accounts payable (see note 18) 14,458 Operating lease obligation 2,426 Accrued expenses and other liabilities 6,539 Income taxes 110 Total current liabilities 27,070 Non-current liabilities: Long-term debt 12,203 Operating lease obligation 21,973 Deferred income taxes 1,498 Other non-current liabilities 3,294 Total non-current liabilities 38,968 Commitments and contingencies (see note 10) Equity: Preferred stock $.01 par value; authorized 32 million shares, none issued Common stock $.01 par value; authorized 3.2 billion shares; issued 1,172,513,618 at August 31, 2020 and 2019 12 Paid-in capital 10,761 Retained earnings 34,210 Accumulated other comprehensive loss (3 ,771) Treasury stock, at cost; 306,910,099 shares at August 31, 2020 and 277,126,116 shares at August 31, 2019 (20,575) Total Walgreens Boots Alliance, Inc. shareholders' equity 20,637 Noncontrolling interests 498 Total equity 21,136 Total liabilities and equity 5 87,174 The accompanying notes to Consolidated Financial Statements are an integral part of these Statements. 3 2019 1,023 7,226 9,333 1,118 18,700 13,478 16,560 10,876 6,851 1,133 48,899 67,598 5,738 14,341 5,474 216 25,769 11,098 1,785 4,795 17,678 12 10,639 35,815 (3,897) (19,057) 23,512 641 24,152 67,598 Tablg pf! (intents August 31, 2017 Net earnings Other comprehensive income (loss), net of tax Dividends declared and distributions Treasury stock purchases Employee stock purchase and option plans Stock-based compensation Noncontrolling interests acquired and arising on business combinations August 31, 2013 Net earnings Other comprehensive income (loss), net of tax Dividends declared and distributions Treasury stock purchases Employee stock purchase and option plans Stock-based compensation Adoption of new accounting standards Noncontrolling interests contribution and other August 31, 2019 Net earnings Other comprehensive income (loss), net of tax Dividends declared and distributions Treasury stock purchases Employee stock purchase and option plans Stock-based compensation Adoption of new accounting standards Nonconh'olling interests contribution and other August 31, 2020 The accompanying notes to Consolidated Financial Statements are an integral part of these Statements. WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY For the years ended August 31, 2020, 2019 and 2018 Common Common stock stock shares amount 1,023,849,070 8 12 (76,069,557) 4,353,905 952,133,418 3 12 (61,723,456) 4,977,540 895,387,502 8 12 (32,055,576) 2,271,593 865,603,519 8 12 (in millions, except shares) Equity attributable to Walgreens Boots Alliance, Inc. Employee stock loan receivable Treasury stock amount $ (9,971) $ (5,228) 152 $ (15,047) 5 (4.160) 150 $ (19,057) 5 (1,589) '72 $ (20,575) 8 Paid-in capital 10,339 $ 22 130 2 10,493 $ 24 119 3 10,639 $ (17) 137 2 10,761 $ .63. Accumulated other comprehensive income (loss) 8 (3,051) $ 49 $ (3,002) $ (896) $ (3,897) $ 126 $ (3,771) $ 30,137 $ 5,024 (1,610) 33,551 $ 3,982 { 1,629) (33) (1) 35,815 $ 456 (1,618) (442) 34,210 $ Retained Noneontrolling earnings interests 808 $ 7 1 (138) 682 $ (20) ( 1 3) (3) (S) 641 $ (32) 22 (153) 498 $ Total equity 28,274 5,031 50 (1,748) (5,228) 174 130 6 26,1589 3,962 (909) (1,632) {4. l 60) 174 119 (33) (3) 24,152 424 148 (1,751) (1,589) 55 137 (442) 2 21,136 Table ofgantents WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS For the years ended August 31, 2020, 2019 and 2018 (in millions, except per share amounts) 2020 Sales $ 139,537 $ Cost of sales 111,520 Gross prot 28,017 Selling, general and administrative expenses 27,045 Equity earnings in AmerisourceBergen 341 Operating income 1,312 Other income 70 Earnings before interest and income tax provision 1,382 Interest expense, net 639 Earnings before income tax provision 743 Income tax provision 360 Post tax earnings from other equity method investments 41 Net earnings 424 Net (loss) earnings attributable to noncontrolling interests (32) Net earnings attributable to Walgreens Boots Alliance, Inc. 3 456 5 Net earnings per common share: Basic $ 0.52 $ Diluted $ 0.52 $ Weighted average common shares outstanding: Basic 879.4 Diluted 880.3 2019 136,866 $ 106,790 30,076 25,242 164 4,998 233 5,231 704 4,527 588 23 3,962 (20) 3,982 $ 4.32 $ 4.31 $ 921.5 923.5 The accompanying notes to Consolidated Financial Statements are an integral part of these Statements. .54. 2018 131,537 100,745 30,792 24,694 191 6,289 302 6,591 616 5,975 998 54 5,031 7 5,024 5.07 5.05 991.0 995.0 Tobie ofganfents WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the years ended August 31, 2020, 2019 and 2018 (in millions) 2020 2019 2018 Comprehensive income: Net earnings $ 424 $ 3,962 $ 5,031 Other comprehensive income (loss), net of tax: Pension/postretirement obligations (700) (149) 240 Unrealized gain on cash flow hedges (6) 5 3 Net investment hedges (see note 15) (90) 55 Share of other comprehensive income (loss) of equity method investments (14) (1) 5 Currency translation adjustments 958 (820) (198) Total other comprehensive income (1055) 148 (909) 50 Total comprehensive income 572 3,053 5,081 Comprehensive income (loss) attributable to noncontrolling interests (10) (33) 8 Comprehensive income attributable to Walgreens Boots Alliance, Inc. 5 582 5 3,036 $ 5,073 The accompanying notes to Consolidated Financial Statements are an integral part of these Statements. .55