The following data are adapted from a recent annual report of Walgreens monly re
ID: 2578818 • Letter: T
Question
The following data are adapted from a recent annual report of Walgreens monly referred to as Walgreens (dollar amounts are stated in millions). Boots Alliance, com- 2015 2014 Balance sheet data: Quick assets $ 9,849 $ 5,864 19,657 12.242 8,895 31300 20,617 68,782 37,250 16.557 Stockholders' equity Income statement data: Net sales Gross profit . . $103,444 $76,392 26,924 21,569 4,668 4,194 2,031 Net earnings .. 4,279 Instructions Compute the foliowing for 2015 and 2014. (Round to one decimal place.) I. Working capital 2. Current ratio 3. Quick ratio Comment on the trends in the liquidity measures and state whether Walgreens appears to be able to satisty its liabilities at the end of 2015 Compute the percentage changes for 2015 in the amounts of net sales and net income. (Round to one-tenth of I percent.) a. b. c.Explanation / Answer
a.
1. Working capital = Current assets - Current liabilities
2015 = 19657 - 16557 = 3100
2014 = 12242 - 8895 = 3347
2. Current ratio = Current assets/ Current liabilities
2015 = 19657/ 16557 = 1.2
2014 = 12242/ 8895 = 1.4
3. Quick ratio = Quick assets/ Current liabilities
2015 = 9849/ 16557 = 0.60
2014 = 5864/ 8895 = 0.70
b. The trends as indicated by the the liquidity maeasures and ratios expressed above demonstrate that the liquidity state of the company has been falling since last year (2014) as in the current year (2015). The company needs to improve this position in order to be able to satisfy the liabilities without any risk of failure.
c. Percentage changes in amount of net sales = (Net sales for 2015 - Net sales for 2014)/ Net sales for 2014
= ($103444 - 76392)/ $76392 = 35.4%
Percentage changes in amount of net income = (Net income for 2015 - Net income for 2014)/ Net income for 2014
= ($4279 - 2031)/ $2031 = 110.7%
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