Question

How would I compare two companies equity financing & debt financing using their balance sheets (what would I look at to compare and describe the differences between the two companies side by side)? Specifically looking at CVS and Walgreens.

Answer 1

Answer-

It is an American company that operates as the second-largest Pharmacy store chains the United States behind CVS HEALTH. It specializes in filling prescriptions, health and wellness products, health information, and photo services.

Equity

The equity portion of the debt-equity relationship is easiest to define. In a capital structure, equity consists of a company's common stock  and preferred stock plus retained earning .This is considered invested capital  and it appears in the shareholders' equity section of the balance sheet.

Debt

A discussion of debt is less straightforward. Investment literature often equates a company's debt with its liablities however, there is an important distinction between operational liabilities and debt liabilities. It's the latter that forms the debt component of capital structure

Observation

I think the best way to look and compare both the companies by observing ratio like Debt equity ratio which show how much equity company have to cover its Debt.

For long term company debt should be in control and Weighted average cost of capital of company should be minimised

Company is regular in paying interest on loans to bank financial institutions which shows company has enough fund to meet its interest obligations which makes going concern.

For both the Pharma company User should finalised that which company is leader in which bulkdrug (i.e Raw materials used in medicine) so that we can expect demand for that particular company in global market

In pharma company Research and development is the larhest expense which shows companies capacity to be effective in medicine.