CVS and Walgreens. Download the annual reports for each company and peruse them. Use the SEC EDGAR Website to locate the recent Form 10-K, or other annual report. Download a spreadsheet version of the financial statements.
Required:
1. Balance sheet analysis.
A. Prepare a common size balance sheet for each company. To make this easier, obtain the balance sheet in a spreadsheet such as Excel. Compare the two vertical analyses and look for major differences between the companies - some questions to consider include:
B. What are each company's largest assets? Largest liabilities?
C. What proportion of total assets is financed by owners? (Hint: compare with total equity.)
D. What proportion of total assets is financed by nonowners?
Income statement analysis.
A. Prepare common size income statement for each company. Express each item on the income statement as a percent of total sales or total revenue. To make this easier, obtain the income statement in a spreadsheet such as Excel. Compare the vertical analyses and look for major differences between the companies. Do any patterns March? Some questions to consider:
B. What are the companies' major expenses?
C. Are there any unusual or discontinued items? Are they large in magnitude?
D. Which company is more profitable?
E. Was each company more or less profitable when compared to the prior year?
3. Statement of cash flows analysis.
A. Determine the size and direction (cash source or use) of cash flows from operations, investing, and financing. One goal is to understand each company's pattern of cash flows and to form an opinion about the general strength of their cash flows. Some questions to consider:
B. What were the companies' cash flow from operations? Were they positive?
C. Were operating cash flows smaller or larger than net income?
D. What are the major differences between operating cash and net income?
E. Did the company purchase new property and equipment ("capital expenditures") during the year?
F. Did the company issued new debt during the year or was debt repaid? (Hint: we must sometimes add one or more line items on statement of cash flows to determine total net debt activity.)
G. Did the company issued new stock?
H. Did the company pay dividends?