Question

The following operating data (in millions) were adapted from recent financial statements of CVS Caremark Corporation and Walgreen Co.


1. Using the preceding data, adjust the operating income for CVS and Walgreens to an adjusted cash basis. For Year 2, the operating income for CVS was $3,461 and for Walgreens it was $2,127 (in millions).
2. Compute the net difference between the operating income under the accrual and cash bases.
3. Express the net difference in (2) as a percentage of operating income under the accrual basis.
4. Which company’s operating income, CVS’s or Walgreens’s is closer to the cash basis? Round to one decimal place.
5. Do you think most analysts focus on operating income or net income in assessing the long-term profitability of a company?Explain.


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  • CreatedMarch 11, 2014
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