MEASUREMENT CONVENTIONS

Measurement Conventions

Measurement Conventions

Financial Analysis of a Retail Company (Walgreens)

Liquidity Ratios

We can assess the firm's liquidity location by appraising precise balance sheet items.

Liquidity ratios indicate the skills to get concurrently short-term obligations to creditors as they mature or draw close due.

The current ratio for 2003 and 2002 is calculated as follows:

Current Ratio

2009:

$6,358.1/$3,420.5 = 1.86 times

2008:

$5,166.5/$2,955.2 = 1.75 times

The balance sheet illustrates a huge boost in Walgreens's cash account in 2003, and both accounts receivables and inventory rose. At first glance, analysts may think Walgreens has slow-paying accounts or sales slowdowns (because of the inventory rise). But ...