Prepare common-sized income statements for cvs and walgreen

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Reference no: EM13899946

Walgreen Company and CVS Corporation operate national chains of drugstores that sell prescription drugs, over-the-counter drugs, and other general merchandise such as greeting cards, beauty and cosmetics, household items, food, and beverages. Walgreen operates 4,579 stores, while CVS Corporation operates 5,375 stores. The following operating data (in thousands) were adapted from the 2004 SEC 10-K filings of Walgreen and CVS.

	CVS	Walgreen
Net sales	$30,594,300	$37,508,200
Cost of sales	22,563,100	27,310,400
Gross profit	$ 8,031,200	$10,197,800
Selling, general, and administrative expenses	6,079,700	8,055,100
Operating income	$ 1,951,500	$ 2,142,700
Other income and (expense)	(555,100)	33,600
Income before taxes	$ 1,396,400	$ 2,176,300
Income taxes	477,600	816,100
Net income	$ 918,800	$ 1,360,200

1. Prepare common-sized income statements for CVS and Walgreen.

2. Compute the average sales per store for CVS and Walgreen. Round to the thousands.

3. Analyze and comment on your results in (1) and (2).

4. Broker recommendations are reported on Yahoo.com's financial Web site. The recommen- dations are ranked as follows:

Strong Buy 1
Buy 2
Hold 3
Sell 4
Strong Sell 5

Based upon your answers to (2) and (3), would you expect the average broker recommen- dation for CVS to be higher (less favorable), the same, or lower (more favorable) than for Walgreen? Compare your assessment with the average broker recommendation on Yahoo.com's financial Web site (https://finance.yahoo.com/). To find the broker recommendation, enter the stock symbols for CVS (CVS) and Walgreen (WAG) and click on "re- search."

Reference no: EM13899946

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