Description

Concepts

1.      Define par value of stock. What is the significance of a stock’s par value from an accounting and analysis perspective?

2.      What are the basic differences between preferred stock and common stock? What are the typical features of preferred stock?

3.      What features make preferred stock similar to debt?

4.      Distinguish between authorized stock and issued stock. Why might the number of shares issued be more than the number of shares outstanding?

5.      Define stock split. What are the major reasons for a stock split?

6.      Define treasury stock. Why might a corporation acquire treasury stock? How is treasury stock reported in the balance sheet?

Analysis

1.      During 2014 did CVS initiate a stock repurchase plan, explain the nature and the purpose of the plan.

2.      Were dividends issued in 2014, if so how much and how does that compare to the dividends issued in 2013?

3.      What is the par value of CVS’ common stock in 2014?

4.      Explain what is the purpose of the shares held in trust.

5.      Explain what Stock-based compensation is.

For CVS:

1.      Calculate Return on Equity ratio ;

2.      Compare to Walgreens (for the last 5 years) and the industry average (for the current year);

3.      Comment on the increase or decrease in CVS’s ROE, give reasons for the any fluctuation (look at the components of the calculation for clues as to what caused the increase or decrease and examine the management discussion for events that impacted the ratios);

4.      How does CVS’s ROE compare to Walgreens and to the industry

5.      What conclusions can you draw about each company’s need to raise funds from debt and equity and its ability to grow.

In this assignment you will use Excel to create and compare your ratios. You may include your interpretation of the ratios in the Excel sheet.

Attachments include statements and reading material for the week.

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