Assignment- Examining Inventory Turnover and Days Inventory on Hand

Concepts

For CVS:

1. What inventory methods does CVS use to value its inventory: is it the same or different from what Walgreen's uses? If it is different how will that impact the financial statements?

2. How much is CVS' reserve for estimated inventory losses?

Analysis

For CVS:

1. Calculate inventory turnover and days inventory on hand for the past five (5) years in order to determine a trend.

2. Compare to Walgreens (for the last 5 years) and the industry average (for the current year).

3. What inventory method does CVS and Walgreens use?

4. Are there any major fluctuation or difference to comparators, give reasons for the fluctuations or differences using what you know regarding the industry, the economy, and linking what you have read in the management discussion and analysis as well as the Notes to the Consolidated Financial Statements related to inventory.

5. Has CVS or Walgreens improved its performance over the past 5 years?

6. Which company appears to make the most efficient use of inventory?

Reference:

Text: Financial Accounting: Tools for Business Decision Making
Author: Kimmel, Weygandt, Kieso
Publisher: Wiley
Ed/Year: 7th/2013
ISBN-13 (hard cover): 978-1118162286
ISBN (e-text): 978-1118562178.