Question

a. What is trend in the liquidity of CVS over the last three years, explain with ratios?
b. What is trend in the liquidity of Walgreens over the last three years, explain with ratios?

c. Which company has had better liquidity over the last 3 years? Explain with ratios.

Income Statement for CVS Balance Sheet All numbers in thousands Period Ending 8/31/2017 8/31/2016 8/31/2015 Current Assets Cash And Cash Equivalents 3,301,000 9,807,000 3,000,000 Short Term Investments - - - Net Receivables 6,528,000 6,260,000 6,849,000 Inventory 8,899,000 8,956,000 8,678,000 Other Current Assets 1,025,000 860,000 1,130,000 Total Current Assets 19,753,000 25,883,000 19,657,000 Long Term Investments 6,320,000 6,174,000 1,242,000 Property Plant and Equipment 13,642,000 14,335,000 15,068,000 Goodwill 15,632,000 15,527,000 16,372,000 Intangible Assets 10,156,000 10,302,000 12,351,000 Accumulated Amortization - - - Other Assets 506,000 467,000 4,092,000 Deferred Long Term Asset Charges - - - Total Assets 66,009,000 72,688,000 68,782,000 Current Liabilities Accounts Payable 18,296,000 16,690,000 15,489,000 Short/Current Long Term Debt 251,000 323,000 1,068,000 Other Current Liabilities - - - Total Current Liabilities 18,547,000 17,013,000 16,557,000 Long Term Debt 12,684,000 18,705,000 13,315,000 Other Liabilities 4,223,000 4,045,000 4,072,000 Deferred Long Term Liability Charges 2,281,000 2,644,000 3,538,000 Minority Interest 808,000 401,000 439,000 Negative Goodwill - - - Total Liabilities 37,735,000 42,407,000 37,482,000 Stockholders' Equity Misc. Stocks Options Warrants - - - Redeemable Preferred Stock - - - Preferred Stock - - - Common Stock 12,000 12,000 12,000 Retained Earnings 30,137,000 27,684,000 25,089,000 Treasury Stock -9,971,000 -4,934,000 -3,977,000 Capital Surplus 10,339,000 10,111,000 9,953,000 Other Stockholder Equity -3,051,000 -2,993,000 -216,000 Total Stockholder Equity 27,466,000 29,880,000 30,861,000 Net Tangible Assets 1,678,000 4,051,000 2,138,000

Income Statement for Walgreens

Balance Sheet

All numbers in thousands

Period Ending	8/31/2017	8/31/2016	8/31/2015
Current Assets
Cash And Cash Equivalents	3,301,000	9,807,000	3,000,000
Short Term Investments	-	-	-
Net Receivables	6,528,000	6,260,000	6,849,000
Inventory	8,899,000	8,956,000	8,678,000
Other Current Assets	1,025,000	860,000	1,130,000
Total Current Assets	19,753,000	25,883,000	19,657,000
Long Term Investments	6,320,000	6,174,000	1,242,000
Property Plant and Equipment	13,642,000	14,335,000	15,068,000
Goodwill	15,632,000	15,527,000	16,372,000
Intangible Assets	10,156,000	10,302,000	12,351,000
Accumulated Amortization	-	-	-
Other Assets	506,000	467,000	4,092,000
Deferred Long Term Asset Charges	-	-	-
Total Assets	66,009,000	72,688,000	68,782,000
Current Liabilities
Accounts Payable	18,296,000	16,690,000	15,489,000
Short/Current Long Term Debt	251,000	323,000	1,068,000
Other Current Liabilities	-	-	-
Total Current Liabilities	18,547,000	17,013,000	16,557,000
Long Term Debt	12,684,000	18,705,000	13,315,000
Other Liabilities	4,223,000	4,045,000	4,072,000
Deferred Long Term Liability Charges	2,281,000	2,644,000	3,538,000
Minority Interest	808,000	401,000	439,000
Negative Goodwill	-	-	-
Total Liabilities	37,735,000	42,407,000	37,482,000
Stockholders' Equity
Misc. Stocks Options Warrants	-	-	-
Redeemable Preferred Stock	-	-	-
Preferred Stock	-	-	-
Common Stock	12,000	12,000	12,000
Retained Earnings	30,137,000	27,684,000	25,089,000
Treasury Stock	-9,971,000	-4,934,000	-3,977,000
Capital Surplus	10,339,000	10,111,000	9,953,000
Other Stockholder Equity	-3,051,000	-2,993,000	-216,000
Total Stockholder Equity	27,466,000	29,880,000	30,861,000
Net Tangible Assets	1,678,000	4,051,000	2,138,000

Answer 1

Liquidity of CVS over the last three years

The current ratio is a very vital indicator of company’s liquidity position. As shown in the above table, a current ratio of the CVS is declining year by year in last three years. In 2015 it was 1.187, which reduced to 1.065 in 2017. This shows that company’s ability to pay off current liabilities is reducing year by year. The company has to consider necessary measures to have a satisfactory current ratio.

liquidity of Walgreens over the last three years

Walgreens Company has the same pattern of liquidity as CVS have in last three years. The company has exact same current ration in past three years as CVS had. And the declining pattern is also same here. So Walgreen Company also has to take necessary measures to maintain or increase its current ratio to improve its ability pay current liabilities.  

Which company has had better liquidity over the last 3 years

On the basis of given information, it’s clear that both the companies are on the same page at this time. Both the organizations need to improve its ratio or maintain a satisfactory current ratio. Both the organization still has an acceptable current ratio, but they have to avoid declining pattern, to achieve a sustainable growth.