Search the internet and find the most recent 10-K reports for Walgreens and Grou
ID: 2772761 • Letter: S
Question
Search the internet and find the most recent 10-K reports for Walgreens and Groupon. You MUST use these financial statements: • Walgreens – fiscal year ended August 31, 2014 • Groupon – fiscal year ended December 31, 2014 Required: a) For BOTH companies, compute the following ratios, for 2014-2015: 1) Price-Earnings Ratio (for EPS, use Diluted EPS total) 2) Market-to-Book Ratio 3) Enterprise-Value-to-EBITDA (for debt, include long-term and short-term debt, for cash, include marketable securities) 4) Operating Margin (Use Operating Income after Depreciation) 5) Net Profit Margin 6) Return on Equity 7) Current Ratio 8) Book Debt-Equity Ratio 9) Market Debt-Equity Ratio 10) Interest Coverage Ratio b) Examining the ratios above, discuss the following: 1) Review the Market-to-Book ratios. Which, if any, of the two firms can be considered a growth firm and which would be a value firm, and why? 2) Compare the valuation ratios of the two firms (Part a, 1-3 above). Describe how you would interpret the difference between the two companies.
Explanation / Answer
1.Price earnings ratio = market price/ earnings per share
Price earnings ratio (walgreens) =76.2/2
=38.30
Price earnings ratio (groupon) =8.26/-0.11
=-75.09
2.Market to book ratio = Market price/ book value per share
Market to book value ratio (walgreens) = 76.20/21.52
= 3.54
Market to book value ratio (Groupon) = 8.26/1.13
= 7.31
3.Operating margin = Operating income / net sales
Operating margin (Walgreens) =4194/76,392
=5.49%
Operating margin (Groupon) =-14842/1627539
=-0.91%
4.Net profit margin =net income / net sales
Net profit margin (Walgreens) =2031/76,392
=2.66%
Net profit margin (Groupon) =-63919/1627539
=-3.93%
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