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Summary of Findings
After reviewing the financial statements for both companies Walgreens and
CVS I believe that CVS is the better investment. I think that CVS is the better
investment because as I look at their ratio analysis and common sized income
statement and balance sheet I see them with the upper hand. In the Ratio analysis
there werent many differences between the two companies, besides the working
capital. Walgreens working capital is 2038 and CVS is at 6062 so CVS has 3 times
more cash on hand to cover its debt, which is good to see as an investor. Besides
that the two were very similar in numbers for their ratios. When making my
decision I also took into consideration the common sized income statement and
common sized balance sheet. Well looking at the common sized income statement
and balance sheet I noticed that CVS sales were much higher than that of Walgreens
also they had a lower percentage of selling, general, and admin expenses. The
income before interest and taxes is higher that Walgreens and I also saw that CVS
does have a slightly higher Net income percentage than that of Walgreens. Over all
through looking at the ratio analysis and common sized income statement and
balance sheet is how I came to the conclusion of CVS being the better choose of
investment.
Financial Ratios
Ratio
Debt/Assest
Debt/Equity
Return on Equity
Profit Margin
Return on Assets
Working Capital
Current Ratio
Walgreens
CVS
0.455
0.835
0.132
0.03
0.07
2038
1.23
The first ratio is Debt/Assets and the purpose of the ratio is to measure
how much of the companys assets are being financed by debt. The
Debt/Equity ratio is the proportion of equity and debt the company is
using to finance its assets. Return on equity is the measurement of the
corporations profitability by revealing how much profit a company
generates with the money shareholders have invested. Profit Margin
measures how much out of every dollar of sales a company actually
keeps in earnings. Return on Assets is an indicator of how profitable a
company is relative to its total assets. Working Capital is where the
company looks to see if it has enough cash on hand to cover its debt.
The current ratio is mainly used to give an idea of the company's ability
to pay back its short-term liabilities with its short-term assets.
0.428
0.748
0.102
0.031
0.059
6062
2.27
Summary
The common sized income statement gives you a look at each companys
Financial Statements
Walgreens
CVS