Cvs Ratio Analysis

Company Name: CVS Ratio Analysis

1. Table 1 CVS

Table 2 Walgreens (competitor)

1. Although generally speaking, a higher current ratio number implies that the company can easily cover its short-term debt; it should not be the sole determinant of liquidity. As shown in Table 1, Eli Lilly had a strong ability to pay short-term debts in 2010 with a 2:1 current ratio, very close to its competitor Pfizer’s1 ratio for the same year and known in many industries to be the ideal ratio according to the Trendshare. In 2011, the current ratio dropped down to 1.60 in comparison to its competitor Pfizer whose ratio for 2011 was 2.06. However, the company remains stable as long as this ratio is 1 or greater.

The inventory turnover ratio shows how easily a company can turn its inventory into cash. If inventory can't be sold, it is worthless to the company. Using the assumption that there are at least 12 credit cycles per year, the inventory turnover ratio going from 1.49 (13% liquidity) to 2.20 (18% liquidity) indicates an improvement. The same concept would apply to the accounts receivable ratio, from 2009 to 2011 as the company’s ratio for the collection of outstanding debts increased.