Rite Aid vs Walgreens

Executive Summary
Rite Aid has had its share of tribulations starting with their former senior executives.   The former CEO, CFO, and Vice Chairman were charged with accounting fraud schemes in 2002.   From May of 1997 to May of 1999, they overstated Rite Aid’s income by massive amounts.   This poor and unethical management is a good reason why Rite Aid is hurting today and quite possibly facing bankruptcy.

Rite Aid has trouble concerning their debt issues.   The relationship between debt and equity is in complete disarray.   They will need to increase their equity and cut back on liabilities as much as possible.   The times interest earned ratio showed a trend where they will finally be able to cover interest charges and hopefully keep creditors away in order to avoid legal action against the company.

Rite Aid has been able to maintain its liquidity to pay off debts despite operating at a significant debt level over the years.   Their cash flow per share and the activity ratios of operating cycle and fixed asset turnover are far below the industry averages.   However, considering where they used to be, Rite Aid has improved considerably and they are headed in a positive direction.  

Rite Aid saw their first profitable year in 2004 after four years of losses.   They show very good trends and some signs of improvement in spite of their poor numbers relative to the industry.   The former executives left the company in shambles; however, the current management has made some progress based on the financial ratio reports.
Leverage of debt to total equity in 2003 was 420.08 as compared to the industry average of 0.22.   Over the past four years, debt to total equity has fluctuated dramatically from year to year with some ratios being negative and others positive.   In 2002, debt to total equity was -41.68.   The drastic fluctuation from 2002 to 2003 can be attributed to their change in extraordinary items and a gain in common equity of $97.50 million. Creditors...