CVS Caremark ratio analysis Assignment Example | Topics and Well Written Essays - 1000 words

CVS Caremark ratio analysis - Assignment Example The company is therefore focused in the reinvention of pharmacy and the provision of highly innovated solutions that improve the well-being of the customers. The company also has a strategic plan to offer high quality health care service at an affordable cost, to cater for the needs of people with different financial background. The company has also implemented a health care program for the members of staff. The program involves free health care services to the employees. The program also constitutes the employee motivation strategy for the company. The company has more than 7,300 pharmacy stores spread across the United States. The accounting standards The International accounting standards and the general accounting principles have established rules and regulations governing the accounting practices in organizations. These rules and regulations are intended to guide the organization’s management team into practicing the generally accepted accounting methods. The company†™s financial statements reflect a commitment by the company to following the standards set by the international accounting standards. Such standards include the guide to revenue recognition, the concept of consistency, the concept of materiality and earnings management. The accounting standards state that revenue is â€Å"the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants.† According to IAS 18, revenue is supposed to be recognized exclusively under the following criteria: when a business unit has completed the transfer of ownership of goods; when a business has ceased exercising applicable managerial authorities and has given up any form of control over the goods; when the amount of the expected revenue can be determined with consistency; when it is certain that financial inflows resultin g from a certain business transaction will be directed to an entity; and when expenditures and costs related to a business transaction can be measured with consistency (Oppermann, 2009). On the other hand, revenues obtained through the provision of services should be recognized â€Å"where the outcome of a transaction involving the rendering of services can be estimated reliably, associated revenue should be recognized by reference to the stage of completion of the transaction at the end of the reporting period. The importance of distinguishing between the terms in financial reporting is to facilitate the provision of reliable material information to the users of financial statement. After a keen evaluation of the company’s financial statements, it has been proven that the accounting standards have been given first priority. The company has strictly followed the rules guiding the revenue recognition when preparing the income statement. The concept of consistency is an accoun ting term that states, similar items in a financial statement should receive similar treatment. For instance, item X in the current financial period should be treated the same as item X in the subsequent financial periods (Oppermann, 2009). CVS Company has considered this concept during the financial statement preparation. To illustrate further, for the two financial periods under consideration, the account receivables have been given a similar treatment. That is, they have been recognized as assets. The concept of materiality states that a financial state