Question

Gross profit $ and gross profit % for Walgreens

Gross profit for 2018 = Revenue – Cost of Goods Sold = 131,537 – 100,745 = $30,792

Gross profit % for 2018 = Gross profit / total sales * 100 = $30,792 / $131,537 *100 = 23.41%

Gross profit for 2017 = 118,214 – 89,052 = $29,162

Gross profit % for 2017 = $29,162 / $118,214 *100 = 24,67%

Gross profit for 2016 = 117,351 – 87,477 = $29,874

Gross profit % for 2016 = $29,874 / 117,351 *100 = 25,46%

Gross profit $ and gross profit % for CVS

Gross profit for 2018 = 194,579 – 156,447 = $33,132

Gross profit % for 2018 = $33,132 / $194,579 *100 = 17.03%

Gross profit for 2017 =184,786 – 153,448 = $31,338

Gross profit % for 2017 = $31,338 / $184,786 *100 = 16.96%

Gross profit for 2016 = 177,546 – 146,533 = $31,013

Gross profit % for 2016 = $31,013 / $177,546 *100 = 17,47%

What do the results of this calculation mean in the context of Walgreens? How about CVS? Compare the two - why are they different (be as specific as possible).

Answer 1

What do the results of this calculation mean in the context of Walgreens?

Solution:-In the context of walgreens we can see that the gross profit has declining year by year.In the Year 2016 the gross profit of the company was at 25.46% but in the next year it was decreased to 24.67% of Gross profit and the next year it was also decreased to 23.41%.That means the company have a decreasing trend in Gross profit Ratio.But at the same time it was found that the company making sales every year more than the previous year. Ie the company have increasing trend in sale or revenue.Then why the company making gross profit less than the previous year ? this is because the company's percentage of increase in the trading cost in every year is more than the percentage of increase of increase in the sale or revenue.

Percentage of Increase in sale or Revenue

In 2016 sales was $117546

In 2017 Sales Was $ 118214, Percentage of Increase =668/118214*100=.56%

In 2018 Sales Was $ 131537,Percentage of increase =13323/131537*100=10.13%

Percentage of increase in Cost of goods sold

In 2016 CGS was $87477

In 2017 CGS was $ 89052,Percentage Of Increase =1.76%

In 2018 CGS Was $ 100745,Percentage of Increase=11.60%

From the Above calculation we can easily understand the reason for the declining trend in the gross profit. From this we can conclude that the company walgreens required to reduce trading cost to increase the gross profit ratio.

How about CVS?

Solution:-

In the context of CSV the gross profit ratio is not in a consistent trend.That means gross profit percentage in 2016 was 17.47% but in the next year it was reduced to 16.96% but in the next year it was slightly increase to 17.03%.The company making sales in every year more than the sales in the previous year.And the Trading cost has also increasing every year.The main reason for the decline in the year 2017 was the percentage of increase in cost of sale were more than the percentage of increase in sale or Revenue.In the Next year company reduced its cost of sales by a small percentage so that the company had made more gross profit than the previous Year.

Compare the two - why are they different

Solution:-

By comparing two companies ,it was found that the company walgreen making sales less than CSV.But they have made gross profit % in every year above 24%.But at the same time they have a decreasing trend in gross profit percentage.But the company CSV making sales more than Walgreens but the percentage of Gross Profit is Less than 20% in 2016,2017,2018 .From the above two companies it was also found that walgreens have made profit of $ 30792 in the year 2018 with a sale of $ 1,31,537.But CSV made profit of $ 33,132 in the Year 2018 but they were sold out $1,94,579 during the year.The main reason for this percentage of sale of goods sold were very high in CSV than Walgreens.