Using the Income statement on page 47 http://investors.cvshealth.com/~/media/Fil

Question

Using the Income statement on page 47 http://investors.cvshealth.com/~/media/Files/C/CVS-IR-v3/reports/annual-report-2016.pdf

a.   Sales growth is indicated by calculating the percentage increase (decrease) of sales in comparison with the previous year.

Indicate the growth in sales during the current year (show your computations):

b. Did sales increase or decrease? An explanation of the change in sales is often contained in the Management Discussion and Analysis (MD&A). What reasons did management give for the change?

c.Trends in corporate profits are determined by calculating the percentage increase (decrease) of income from continuing operations over the previous year. Income from continuing operations is net income without the effects of any discontinued operations, extraordinary items, or cumulative effects of accounting changes.

Determine the growth in profits during the current year: _____

   (Show computations)

d. What can you infer from the analysis of growth in profit?

Explanation / Answer

1. As computed in the annual report the net Revenues of Pharmacy have increase 15.9% in 2017 as compared to 2016.

Front store sales has increased 0.3% in 2017 .

2. Sales has increased on an overall basis, only the Same store sales of Front sales has decreased by 1.5%

The decrease is due to softer customer traffic and sales promotional strategies rationalization.

The increase in sales is due to the efforts of the company and economic vibe in the market.

The decrease is also due to conversion of brand name drug to equivalent generic drug which have a low selling price.

3. Income from continuing operations in 2015 = 5230$ million and in 2016 is 5320$ million.

Increase % = 90/5230*100= 1.72%

4. Net Income or profit has decreased from 5239$ million to 5319$ million, despite of the growth in income from continuing operations.

The company is not growing much and due to losses from discontinued operations the results have dipped and the growth in profit is negative.

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