CVS and Walgreens comparison (2017 data please)

1.

The main goals of this project is for you to learn how to perform financial statement analysis based on

the knowledge you have gained from your financial accounting course this semester and gain some

proficiency with Excel. In this project, you will compare the financial performance of Walgreens and CVS in

the same industry. Chapter 12 provides comprehensive information these ratios.

2.

Please make sure to show your work on calculated averages wherever the calculation of ratios is

required throughout this project.

4. You may download the annual report (also called the 10-K report) for Walgreens and CVS for the

financial year 2017 either from the website of the company or that of SEC.

WRITTEN DELIVERABLES (to be staple in the order below):

1.

Memo:

A memo (maximum two pages) recommending the company you would invest in based on the

companys information regarding their product, future prospects, past trend in revenues and profits,

movement of the stock price and any further information you deem appropriate. The internet is a very

good source to obtain all this information.

2.

Discussion Sheet:

A report providing all the information mentioned below (of no more than three

pages) on the financial health and performance of the company based on the ratios calculated.

3.

Excel Template

providing all the information mentioned in it (to be submitted electronically).

4.Discussion Sheet

: You discussion sheet should be inclusive of but not limited to the following

information:

1. Briefly summarize the purpose of each of the following kinds of financial ratios:

a. Liquidity ratios

b. Solvency ratios

c. Profitability ratios

2

2. Evaluate each firms liquidity for the year 2017 in the light of the liquidity ratios of the two

companies.

For each of the liquidity ratios computed, be sure to address the following questions:

Which firm enjoys a better (stronger) ratio? Which firm is better with the management of its

inventories? Which firm is better with the management of its receivables? Which firm enjoys a

better overall liquidity position? Give convincing arguments to support each of your answers.

3. Evaluate each firms profitability for the year 2017 in the light of the profitability ratios of the two

companies.

Hint:

Please use Consolidated Net Income, wherever net income is needed to calculate the ratios

(i.e., do not subtract the net income attributable to non-controlling interest).

For each of the profitability ratios computed, be sure to address the following questions:

Which firm earns more profit for every dollar of sales made? Which firm utilizes the assets more

efficiently to generate sales? Which firm has a better control over its operating expenses? Which

firm earns a higher return for its common stockholders? Comment on the overall profitability of

both the firms.

4. Evaluate each firms solvency for the year 2017 in the light of the solvency ratios of the two

companies.

Which firm enjoys a better solvency position? Why? Which firm appears to be more comfortable in

handling its long-term debts? If you were a bank and had to choose between the two firms to give a loan,

which firm would you choose? Why?

Information to be included on the Excel spreadsheet:

Questions to answer (on the first sheet, labeled questions):

Year ending date

CEO

Name of audit firm

Date audit completed

Who is the audit report addressed

Net cash flow from operating activity

Depreciation method

Inventory cash flow assumption

On the second sheet (labeled analysis):

Provide a vertical and horizontal analysis for the 2017 income statement

On the third sheet (labeled ratios):

Calculate ratios using the 2017 financial information

Column A name the ratio

3

Column B show the ratio formula

Column C thru E show numbers from the financial statements to be used to calculate the ratios

Column F the calculated ratio (this should be a formula, not a typed number)