Cvs and Walgreen

When investing money on a company it is important to know how well or bad that certain company is doing. In business there is no way investors could take chances and invest on a company without knowing how they are doing. Living it to luck could potentially put an investor out of money because they decided to take a chance on a company they felt it was right. The risk on that would be high. That is why investors do not take chances and are careful in where they invest their money in. Investors do this by benchmarking specific-industries and measuring company's profitability.

I was asked by my supervisor to analyze NewCo, a company that my firm holds a small mount of stocks in, and compare it with competing companies in the same industry. Two well-known companies that are in the same industry as NewCo are CVS and Walgreen; they are two of the industries leading pharmaceutical companies in the market. The way investors analyze a company's profitability is by calculating different ratios from information of their balance sheets that they might see is important in looking at. This gives an investor an idea on how the company is doing financially.

When comparing it is important to know that all companies work differently and have different goals. For example, NewCo is focusing in making sales while CVS is working in expanding their business. Regardless of company's different goals that they are trying to accomplish profitability is the main key to choosing the right company to invest in. That is why we should look at a company's debt to equity, which indicates what proportion of equity and debt the company is using to finance its assets. Debt to equity ratio is calculated by dividing a company's total liabilities by its shareholders equity.

CVS Walgreen NewCo

Debt to equity ratio 29 16 23

The results show that Walgreens has the better debt to equity ratio at 16 from the other