Financial Analysis Of Costco Wholesale Corporation

Stakeholders invest money with the intent to gain return in the future. It is important for stakeholders to gain access to information and evaluate the firm’s performance before they put money in it. On the other hand, it is the firm’s management team job to make decisions that would maximize the long term value of the firm’s common stock. The intent of this paper is to analyze Costco Wholesale Corporation’s financial performance and to assess how efficient the business has been over a five year period as well as to provide recommendation for financial management strategy.

turnover, which is made possible by low prices and limited product selection. This business model is appealing for them and has many benefits. Firstly, by setting up the business approach to rapidly

investors, auditors, executives of the business, etc.) an overview of the financial results and condition of the company. The major financial statements that come out of the accounting cycle are income statements, balance sheets, Statement of cash flows and Statement of retained earnings. Income statements are considered the most important of all the financial statements since it presents the operating results of an entity , e.g. revenues, expenses, and profits/losses generated during the reporting period (Bragg, 2017). Balance sheets provide reports of assets, liabilities, and equity of the entity as of the reporting date and can be considered the second most important statement because it provides information/figures about the liquidity, as well as the capitalization of a company (Bragg, 2017). Statement of cash flows exhibits the cash inflows and outflows that occur during a reporting period, which provides a useful comparison to the income statement, particularly when the amount of profit or loss reported does not reflect cash flows encountered by the businesses (Bragg, 2017). Statement of retained earnings is the least used financial statement that provides information regarding changes in equity during the reporting period and can include information such as: sale or repurchase of stock, dividend payments, and changes caused by reported profits or losses. Statements of retained earnings are often

Costco Wholesale Corporation is the U.S. public corporation that I chose to do my Accounting 2 project on.

There are four major financial statements that investors, creditors, accountants, CEO’s, and the like study when looking at the financial

There are additional examples of managerial and financial accounting information that can apply to Costco. Examples of Costco’s financial accounting information are revenue, gross margin percentage, operating income, operating margin percentage, net income, earnings per share, dividends, shares, operating cash flow, cap spending, free cash flow, working capital, tax rate percentage, net margin percentage, average asset turnover, return on assets percentage, average financial leverage, return on equity percentage, return on invested capital percentage, and interest coverage (Morningstar, 2016). This information is very useful to external users such as creditors, government agencies, analysts, reporters, and investors (Edmonds, Olds, & Tsay,

It is a Sunday afternoon, and your parents announce to you and your siblings that they are going shopping at Costco. You waste no time sprinting to get your shoes on and getting in the car. When you arrive at Costco you hurry out of the car and bound into the store straight to the food aisle where you see samples upon samples upon samples. You love trying all of the different foods that they have to offer. Costco is one of the companies that I know something about. However before I picked it as my stock, I needed to use Peter Lynch’s blended approach to help me validate that Costco had the right financials for me to their purchase stock.

As a manager of an individual Costco store, I would need much different information than an outside investor who is considering lending money to the company or investing in stock. The investor would be looking for general data that would give him an idea of how Costco is faring within the industry (Edmonds, Olds, & Tsay, 2008). The investor would be desiring financial accounting data. As a manager of a Costco store, I would be desiring managerial accounting data. I would only be interested in the specific data that pertains to the store that I manage. The investor would be interested in data that concerns Costco as a company. Other stores could be performing at a higher level than my individual store and lessen the impact of my store to the

As the price of the products is comparatively low, that will increase the purchasing power of the customer and they will buy in larger quantity and thus the company gains the profit. (Soni, P. (2016))

According to Deloitte’s 2014 Global Powers of Retailing Report, it identifies the 250 largest retailers around the world based on publicly available data for fiscal 2012 encompassing companies’ fiscal years ended through to June 2013; however, here mainly focuses on the Top 10 retailers’ analysis.

The first case question asks to compare and contrast shopping experiences at retailers like Nordstrom, Costco, and Whole Foods with shopping experiences at other retailers Sears, Walmart, or Kroger. First of all, retailers like Costco, Nordstrom, and Whole Foods can be insanely expensive. But there is also the option of buying bulk items (Costco), brand names (Nordstrom), and better quality (Whole Foods). I just went grocery shopping for produce and decided to change it up (I usually go to Albertsons or Costco). I went to Walmart to get some spinach, apples, and blueberries. When I got to the produce section I was hesitant because of the quality. Most of the bags of spinach looked wet and slimy, while the apples were soft and slightly bruised.

The “financial statements are formal reports providing information on a company's financial position, cash inflows and outflows, and the results of operations” (Hermanson, p.22). There are four main components that make up a financial statement. The four parts are, balance sheet, income statements, cash flow and, statement of owner’s equity. The balance sheets role is to define the company’s assets liabilities and revenue of the business. The income statement shows the income within the company. Cash flow reviews the position of the company by cash payments and receipts. Lastly, the statement of owner’s equity shows the amount of earnings, stock and other capitals of people in the company. (Hermanson, p.34-35).

Information gathered from Costco’s balance sheet show that it has steadily grew a larger cash reserve. It has a higher rate of outstanding receivables and has sharply increased the rate of inventory kept in stock from 16% in 1997 to 27% in 2001. Another interesting fact to notice is the high increase in property, plants, and equipment increase in proportion to assets, from 31% in 1997 to 58% in 2001. Costco has a much higher ratio of accounts payable in 2001 compared to 1997, which can be explained by the many investments and purchases of property, land, and plans. The amount of short-term liabilities to assets has more than doubled, from 20% to 41%. This may be a troublesome trend if it continues since they

Costco Wholesale Corporation (Costco) is a retail membership warehouse chain which was founded by Jim Sinegal and Jeff Brotman in 1983. Headquartered out of Issaquah, Washington, Costco has grown in to one of the largest wholesale giants in the industry. The company’s business model was to generate high sales volumes and rapid inventory turnover by offering members low prices on a limited selection of nationally branded and selected private-label products in a wide range of merchandise categories (Gamble & Thompson Jr., 2009, p. 217). This

Each user of the financial statements interprets the information in a different manor. They use the information to determine their interactions with the organization. Management, investors, and employees use the same information from the financial statements but for different purposes. These four basic statements are the fundamentals of accounting which can be much more detail and complex. They do not need to be more complex for the users of the information; these basic statements have all the information needed to make