Professor Elam

Wednesday August 20, 2014

Walgreen's CFO missed the 2016 gross revenue targe by $1.1 billion. The CFO and Pharmacy Chief are now resigning. 

Apparently the problem was the failure to factor in the higher cost of some generic drugs through the vagaries of Medicare Part D. 

WAG stock has fallen from 75 to 60. 

Accounting has five steps 

recognize a financial transaction

record the transaction – journals and ledgers

summarize the transaction – financial reports

interpret and report on the findings. 

It is the last of the five that usually trips executives up. This demonstrates the importance of not just understanding accounting, but the vital necessity of understandeing the entire business – how does WAG make money.  As we have accounting professionals come to campus and visit them, you will hear this again and again. To be an internal auditor for example, one must understand everything about the business, as well as the accounting.