Instructions:                    

A case study with 5 sub-parts.  The work you submit must be entirely your work. Please do not plagiarise. Copying the works of others is considered cheating and will lead to zero mark and disciplinary action.

Total Marks: 100 marks

Case Study

Costco Wholesale Corporation Financial Statement Analysis

Costco Wholesale Corporation (Costco), together with its subsidiaries, engages in the operation of membership warehouses in the United States, Puerto Rico, Canada, Mexico, Japan, the United Kingdom, Korea, Australia, Taiwan, China, Spain, France, Iceland, New Zealand, and Sweden. The company offers branded and private-label products in a range of merchandise categories. It offers merchandise, such as sundries, dry groceries, candies, coolers, freezers, deli, liquor, and tobacco; appliances, electronics, health and beauty aids, hardware, garden and patio products, sporting goods, tires, toys and seasonal products, office supplies, automotive care products, postages, tickets, apparel, small appliances, furniture, domestics, housewares, special order kiosks, and jewellery; and meat, produce, service deli, and bakery products. The company also operates gasoline, pharmacies, optical, food courts, hearing-aid centres, and tire installation centres; and offers business delivery, travel, grocery, and various other services online. It also operates e-commerce websites. The company was formerly known as Costco Companies, Inc. and changed its name to Costco Wholesale Corporation in August 1999. Costco Wholesale Corporation was founded in 1976 and is based in Issaquah, Washington.

Refer to https://finance.yahoo.com/quote/COST/profile/ for further details.

Costco’s financial year for 2024 concluded on 1 September 2024. The 2024 Form 10-K, which includes the Consolidated Financial Statements (from pages 32 to 62), is attached.

Additional information:

• As of 1 September 2024, Costco had 443,914,000 ordinary shares in issue.
• As of 1 September 2024, the effective tax rate for Costco was 24.4%.
• As of 1 September 2024, the market value per share for Costco stood at 893 USD.

Required:

You are required to perform the following ratio analysis for Costco for the financial year ending 1 September 2024.

After performing each ratio analysis, provide a brief assessment of your understanding of what that ratio analysis tells you about Costco’s performance during the financial year ending 1 September 2024.

Please show all your workings. Please also provide appropriate reference sources, accurately cited using APA referencing or legal citation (footnotes).

Part 1: Activity Ratios

1. Receivable turnover and days of sales outstanding (4 marks).
2. Inventory turnover and days of inventory on hand (4 marks).
3. Payables turnover and number of days of payables (4 marks).
4. Asset turnover (4 marks).
5. Fixed asset turnover (4 marks).
6. Working capital turnover (4 marks).

[Total of 24 marks]

Part 2: Liquidity Ratios

1. Current ratio (4 marks).
2. Quick ratio (4 marks).
3. Cash ratio (4 marks).
4. Defensive interval (4 marks).
5. Cash conversion cycle (4 marks).

[Total of 20 marks]

Part 3: Solvency Ratios

1. Debt-to-equity ratio (4 marks).
2. Debt-to-capital ratio (4 marks).
3. Debt-to-assets ratio (4 marks).
4. Financial leverage (4 marks).
5. Interest coverage ratio (4 marks).

[Total of 20 marks]

Part 4: Profitability Ratios

1. Gross profit margin (4 marks).
2. Operating profit margin (4 marks).
3. Net profit margin (4 marks).
4. Return on assets – ROA (4 marks).
5. Return on equity – ROE (4 marks).

[Total of 20 marks]

Part 5: Valuation Ratios

1. P/E ratio (4 marks).
2. P/B ratio (4 marks).
3. P/S ratio (4 marks).
4. P/CF ratio (4 marks).

[Total of 16 marks]

Note: The work you submit must be entirely your work. Please do not plagiarise. Copying the works of others is considered cheating and will lead to zero mark and disciplinary action.