Cvs Vs Walgreens
Concepts:
1.CVS and Walgreens have opposite inventory methods that are used in their day to day sales. CVS used the First-In-First-Out (FIFO) method for their inventory. In this method the earliest goods purchased are the ones that sell first. For inventory recording CVS would use the price of the most recent purchase of products to determine their inventory value. Following this the ending inventory is subtracted from this to get a cost of goods sold. For recording purposes this is one of the better choices for inventory. One drawback is that with inflation their prices will seem higher causing for greater recoded revenue and higher income tax. On the contrary Walgreens used the Last-In-Last-Out (LIFO) Method. This method unlike FIFO assumes
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2.CVS Inventory Loss reserves: 189 Million 2015 2014 2013 2012 2011
Cost of Goods Sold 126,762.00 114,000.00 102,978.00 100,627.00 86,539.00
Inventories 14,001.00 11,930.00 11,045.00 10,759.00 10,046.00
Inventory Turnover(Days): 9 9.5 9.3 9.3 8.6
Walgreen: 9 7.5 7.2 6.4 6.5
Industry: 9.52 9.55 9.62 8.9
Day in Inventory: 40 37.9 39.24 39.24 42
Walgreen: 40 48.6 50.7 57
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Reviewing the information, I able to determine that CVS Inventory has been pretty consistent staying near the 9-day mark. This number is usually either equal to or better than the industry average. I would account this to their use FIFO witch is share by most of the industry. In addition, CVS Increased the allowance of their vendors deferring some of the upfront cost. This allowed for them to move more inventory and reduces their Inventory turnover. Following these payments from vendors such as cardinal, Inventory cost will decrease (CVS Health, 2015). This is different Walgreen who uses a LIFO System. This system in not recommended or seen as valid. In is also influences Walgreen’s Days in inventory. The use of LIFO causes some inventory to stay in their system for many quarters causing the higher day in inventory
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