Patrick Oliphant

ACCT 211
Dr. Rickling
Individual Report

1. Did its total assets increase or decrease over last year?

By what percentage?
Total assets increased from $66,2211 in 2012 to $71,526 in 2013. This
was an increase of $5,305 (8.01%).
2. Did net income increase or decrease over last year? By
what percentage?

1 All numbers are in millions except share amounts

Patrick Oliphant
ACCT 211
Dr. Rickling
Individual Report
Net income increased from $3,862 in 2012 to $4,592 in 2013. This was
an increase of $730 (18.90%).
3. For each of the following:
a. Calculate the ratio for the current year and the prior
year.
b. Indicate how the ratio changed.
c. In your opinion, discuss why you feel the change is a
sign of improvement or cause for concern.
Profit margin
I.
2012: 3.14%
2013: 3.62%
II.
The ratio increased by 0.48%
III.
This is a sign of improvement. The reason is because the
company is not only increasing their net revenues but their
net income at a greater rate. They are doing this by lower
their net interest expense as well as loss on early
extinguishment of debt. These decreases in expenses as
well as an increase in net revenue are signs that the
company is improving as indicated by the increase of their
profit margin.
Debt-to-equity
I.
2012: 0.39
2013: 0.41
II.
The debt-to-equity increased by 0.02
III.
This small increase is neither a sign of improvement nor a
sign of concern. This increase was due in part from an
increase of liabilities $5,020 and shareholders equity only
increasing by $285. For stockholders looking to hold onto
stock this could be an improvement as CVS has added 607
new stores and invested a lot of their debt into building
new stores. In the past year alone they added 644 new
stores. For the stockholder looking at dividends as a sign of
whether to buy a stock this is a sign of concern because
despite increasing profit margins and new stores the
dividends for shareholders increased only a small amount.
Return on equity
I.
2012: 14.02%
2013: 14.78%
II.
The return on equity ratio increased by 0.76%

III.

Patrick Oliphant
ACCT 211
Dr. Rickling
Individual Report
This is a sign of improvement because an increase in ROE
means more worth for stock purchases thus more profit
from less stockholders equity (investments in company).

Cash Ratio
I.
2012: 0.048
2013: 0.122
II.
The cash ratio increased by .073 (more than doubling
itself)
III.
This is a major sign of improvement. The company more
than doubled its cash ratio meaning it has significantly
more cash than liabilities decreasing the chance of
bankruptcy and shows that in the long-term this company
will be able to pay off its debts and liabilities.
Quick ratio
I.
2012: 0.57
2013: 0.84
II.
The quick ratio increased by 0.27
III.
The quick ratio increase is a sign of improvement but is still
a sign of concern because the company does not have a
dollar match (a quick ratio of 1) to cover its current
liabilities.
EPS
I.
2012: $3.02
2013: $3.74
II.
The EPS ratio increased by $0.72
III.
This increase is a sign of an improvement for the company.
What is even more of a sign of improvement is despite
increasing the number of outstanding shares from 2012 to
2013 the company increased the dividends on preferred
stock making it more valuable to own stock in the
company.
P/E Ratio
I.
2012: $16.01
2013: $19.24
II.
The P/E ratio increased by $3.23
III.
This is a sign of improvement for the company as an
increase in P/E suggests that investors are suspecting
higher earnings growth for the company.

Patrick Oliphant
ACCT 211
Dr. Rickling
Individual Report

4. Buy or not buy?

From the data I gathered I would recommend a buy for CVS. First and
foremost the obvious buy comes from a simple viewing of their stock
prices from the last two years as shown in figure 1.

Figure 1

CVSs stock not only has increased from 2012 to 2013 but also has
shown considerable growth into 2014. This is primarily driven by a
massive increase in cash between 2012 to 2013 (almost $3million)
allowing the company to pay off its debt and invest in new stores and
R&D. In addition the company has shown in every facet of the analysis
to improve its ratios from 2012 to 2013. This not only shows that the
company is poising itself for long-term growth but also with EPS
increasing and ROE increasing at a minor, yet still noticeable rate,
investors would be wise to purchase the stock.
With dividends increasing $0.20 between 2012 and 2013 as well as the
stock price increasing at the rate it is its clear that the stock is not

Patrick Oliphant
ACCT 211
Dr. Rickling
Individual Report
only for those investors looking to increase their wealth through
dividends but for those looking to hold onto the stock for its value to
increase. In addition the companys P/E ratio increased tremendously
showing that investors have a lot of confidence in the company a
belief that will clearly reflect higher stock prices in the future.
The company has also proven to be stable by having a solid increase in
its quick ratio which goes back to the main point that the company is
looking at securing a future and covering its debts.
In conclusion, the data points to a clear buy for CVS.