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Ratios Analysis Assignment

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Submitted By isabelgreen4
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Company Name: CVS

|RATIO |2011 |2010 |2009 |
|CURRENT RATIO |1.56 |1.60 |1.43 |
|CURRENT CASH DEBT COVERAGE RATIO |.51 |.41 |.31 |
|INVENTORY TURNOVER |8.34 |7.24 |8.04 |
|ACCOUNTS RECEIVABLE TURNOVER |19.52 |18.57 |18.21 |

Is the overall liquidity position improving, worsening, staying the same or cannot say, between 2009 and 2011? Why do you say so?

In general, the overall liquidity position for CVS was gradually improving through 2009-2011. While the current ratio was highest in 2010, the company experienced a slight decline the following year, where for every dollar of current liabilities the company had $1.56 of current assets. The current ratio is not the best indicator of company performance because it fails to take into account the composition of the current assets. The current cash debt coverage ratio provides a more clear illustration of company performance because net cash provided by operating activities encompasses the entire year versus a balance at a specific point. The current cash debt coverage ratio shows a gradual increase each year.

Based off of the inventory turnover ratio, CVS was most efficient in inventory management in 2011. Similarly, the accounts receivable turnover rate, which measures the efficiency of a business in collecting credit sales, was also at its peak in 2011. Their increased credit sales is a general indicator of improvement in the process of cash collection on sales.

Overall, CVS has shown improvement between 2009 and 2011. Although the

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