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Walgreens preferred performance measure. Explain.

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Ratios are used for many purposes, performance measurement is one such application. However, not all performance measures are expressed as a ratio. Do some research on the internet to learn about operating leverage, ROI, EVA, and pick another performance measure of your choice. You will note that there are variations in the computations of a particular measurement. Consistency in application is the key.

Use information from the latest financial statement for Walgreens company to compute the measurements you researched.

Reflect on the advantages and disadvantages of these performance measures. Choose your preferred measure and explain your rationale.

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Operating Leverage

Operating leverage is a measure of the degree of fixed costs. That is, in the total expenses, what proportion are fixed versus variable. This is important because high operating leverage magnifies the swings in profits when sales change. A small change in sales creates a large change in profits. So, growth is magnified but so are contractions.


We can't really compute this for Wallgreens because they are not required to report fixed versus variable costs. They report operating versus non-operating but not variable versus fixed. If you assume that COGS is all variable and SG&A is all fixed, you can see the computation on the attached spreadsheet.

Return on Investment

Return on investment is the amount over the initial investment that you earned divided by the initial investment. This is usually reported as a percent. The return on investment for Wallgreens is on the attached spreadsheet. ROI is usually more of a measure for a new project or particular decision. For the entire firm, the ROI is usually called the Return on Assets, using total assets as the ...

Solution Summary

Your tutorial is 697 words plus five references and suggests a new measure of performance and explains why. There is a spreadsheet attached with some assumptions and then the measures for Wallgreens for 2011 shown for you. A sample balanced scorecard is presented.

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I have chosen an issue from Walgreens and want to create a plan for a proposed change to resolve the issue. The one I have chosen is the way employee evaluations are done. Right now they are done once a year and I was thinking about making it four times a year and adding peer reviews. The way it is done right now is not fair to many employees. If you have a manager that is not considered to be fair they can ruin your chances of being promoted or even getting a yearly raise since they are now based on these reviews. The employee has very little involvement in these evaluations.

This is a three part response and I was wondering if you could help me on any of these parts. Part I of your plan focuses on assessment of the change issue and planning for the proposed change.

- Examine the need in the organization for your proposed change.
- Examine organizational and individual barriers to your proposed change.
- Identify factors that might influence your proposed change.
- Summarize factors influencing organizational readiness for your proposed change.
- Identify the theoretical model that relates to your proposed change.
- Identify internal and external resources available to support your change initiative.

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