Case Study Discussion: Walgreen Co. Essay

Please argue the followingReview the commensurateness sheet of the latest Walgreen Co. 10k Filing. Select two of the following questions to review/discuss1. Which online assets are the most noteworthy?2. Which non-current assets are the most significant?3. Asset the level of debt and risk that Walgreen has by looking only at the balance sheet. 4. Evaluate the creditworthiness of Walgreen based on the balance sheet 5. Does Walgreen physical exercise off-balance sheet financing? Explain your answer. 6. Compute the current proportionality and debt ratio for the past two years.1. Which Walgreen current assets are the most significant?In 2011, Inventories were the most significant current asset ($8,044 million). The Inventories section of Note 1, Notes to unify Financial Statements, advises Walgreen Co. note valued 2011 inventories with the last-in, first-out (LIFO) cost method. Had Walgreen elected to use the first-in, first-out (FIFO) cost land for the 2011 inventories would h ave been greater by $1,587 million. GAAP permits companies to select which inventory chronicle method they will use to report inventories (LIFO or FIFO). Companies must invoke the method selected in the financial statement notes. Most companies calculate the value for both methods and select the method with the start tax liability. For the past peer of decades, costs have risen (inflation). LIFO has been a popular select as it produces the largest cost of goods sold expense, the greater the expense deduction the lower the taxable income.6.Compute the current ratio and debt ratio for the past two years. live Ratio = authoritative Assets up-to-date LiabilitiesDebt Ratio =Total Liabilities Total Assets20112010Current Assets$12,322.00$11,922.00Current Liabilities$8,083.00$7,433.00Current Ratio1.521.6020112010Total Liabilities$12,607.00$11,875.00Total Assets$27,454.00$26,275.00Debt Ratio45.9%45.2%Current Ratio measures a keep companys ability to recompense current liabilities as they come due. It is a measure of short-term liquidity, an indicator of how tardily a company can pay amounts due for the coterminous 12 months. A current ration greater than 1.0 is considered healthy as it indicates a company can meet all its upcoming expense for the next twelve months. With a debt ratio of 1.52, Walgreen appears very health. Of concern, is the decrease from a2010 debt ratio of 1.60. Further investigation is warranted. If this trend continues it could indicate mismanagement of company assets. A look at the notes gives a clue into the reason for the decline. Note 4, Notes to fused Financial Statements, state in 2011 Walgreen completed several acquisitions. Through the acquisitions, Walgreen anticipate additional debt. The increase in liabilities explains the decrease in current ratio. With this in mind, current ratio is within acceptable limits.Debt Ratio indicates the percentage of the company financed by debt. It measures solvency, an indicator of a companys a bility to pay back longsighted term debt when due. A low debt ratio indicates less(prenominal) financial risk and strong solvency. Debt ratios greater than 100% indicate a company has too much debt and will have trouble paid back principal with interest. Walgreens debt ratio for 2011 is 45.9%, up 0.7% from 2010. Considering the increase in assets and liabilities from the acquisitions Walgreen completed in 2011, a 0.7% increase in debt ratio is acceptable. A debt ratio of 45.9% indicates Walgreen is solvent and should have no issues paying back long term debt as payments come due.ReferencesSchoenebeck, K. P., & Holtzman, M. P. (2010). Chapter 1 Balance Sheet. In reading and analyzing financial statements A project-based appro2ach (pp. 38-39). Boston u.a. Prentice Hall.Ormiston, A., & Fraser, L. M. (2013). The Balance Sheet. In sympathy financial statements (10th ed., pp. 56-59). New York, NY Pearson Education.