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Financial ratios for Walgreens

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Using the most current financial statements for Walgreens, calculate and compare the financial ratios listed below. The financial statements can be located on the web.

Liquidity Measures- Working capital, Current ratio, Acid test ratio

Activity Measures- Total asset turnover, Inventory turnover

Profitability Measures- Gross profit rate, Profit margin rate, Return on investment, Return on equity, Earnings per share

Financial Leverage Measures- Debt ratio, Debt/equity ratio, Times interest earned ratio

Cite strengths and weaknesses of ratios.

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Solution Preview

Please see the attached Excel spreadsheet.

Liquidity Measures

Working Capital Ratio and Current Ratio are the same

Current Ratio:
Current Assets / Current Liabilities
Current Assets 10,183.50
Current Liabilities 7,502.30
Current Ratio 1.3574

Acid Test Ratio:
Current Assets - Inventory / Current Liabilities
Current Assets 10,183.50
Current Liabilities 7,502.30
Inventory 7,063.80
Acid Test Ratio: 0.3796

Activity Measures

Total Asset Turnover:
Sales / Assets
Sales $15,015.70
Assets $21,587.60
Total Asset Turnover: $0.70

Inventory Turnover
Cost of Goods Sold / ...

Solution Summary

The solution examines the financial ratios for Walgreens. The financial ratios are calculated and compared.

$2.19
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Practice Problems

1. Consider the following information for Walgreen's:

2008 2009
Cash and Marketable Securities $10 $80
Accounts Payables $60 $30
Long Term Bonds $754 $580
Deferred Income Taxes $140 $130
Notes Payable $110 $60
Net Plant and Equip $1000 $870
Preferred Stock(400,000 shares o/s) $40 $40
Depreciation $100 $90
Interest Paid $88 $60
Accumulated Depreciation $275 $330
Accounts Receivables $375 $315
Inventories $615 $415
Common Stock (50 mill shares o/s) $130 $130
Accumulated Retained Earnings $766 $710
Net Sales $3000 $2850
COGS $2616 $2497
Preferred Dividends $4 $4
Common Dividends $57.5 $53

The company's tax rate is 40%.
(a) Prepare an income statement in excel
(b) Prepare a balance sheet in excel
(c) Prepare a statement of cash flows in excel

2. Ratio analysis: provide the following ratios for Walgreen's for 2009. In excel spreadsheet
1. Inventory Turnover Ratio
2. Total Debt Ratio
3. Days Sales in Receivables
4. Times Interest Earned Ratio
5. Total Asset Turnover Ratio
6. Retention (Plowback) Ratio
7. Common Size Depreciation
8. Net Working Capital

3. Walgreen's major competitor, CVS Pharmacy has an inventory turnover ratio of 12.6 times, a TIE of 12 times, day's sales in receivables of 30 days, a total debt ratio of 25%, and a dividend payout ratio of 41%. How does Walgreen's compare with its competitor? Explain. What broad suggestions would you make to Walgreen's, given the current financial environment? Prepare in word document

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