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2 pages/≈550 words
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Style:
MLA
Subject:
Accounting, Finance, SPSS
Type:
Case Study
Language:
English (U.S.)
Document:
MS Word
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Topic:

Costco Wholesale Corporation Financial Statement Analysis 1997-2001

Case Study Instructions:

Task:
Your task is to develop a detailed Financial Statement Analysis for Costco Wholesale in the year provided in the case FY2001. You should include the following components in your analysis:
1) Brief description of the company (Costco), its market, its competitors and its strategy.
2) Analyze Costco’s Income Statement and Balance Sheet. Discuss any trends that emerged from 1997 to 2001 (see Exhibits 5 and 9).
3) Analyze Costco’s financial ratios. Assess the company’s financial performance in regards to its profitability and financial risk (see Exhibits 10 and 11).
4) Briefly compare Costco’s financial statements with the main competitor’s financial statements (see Exhibits 6, 7, 8, and 11). What are Costco’s strengths and weaknesses compared to the competition?
5) Based on your analysis, provide a forecast for the company’s financial performance in the upcoming five years (in very broad terms). Focus on the company’s future profitability and potential future financial risks. Also discuss how Corporate Social Responsibility (CSR) initiatives may help Costco to achieve its financial goals.
Format of Paper:
- Font size 12.
- Single-spaced.
- Font type: Times New Roman.
- Please print two copies of your analysis; one to turn in as your homework assignment and one for class discussion.

Case Study Sample Content Preview:
Student Name
Professor
Course
Date
Costco Wholesale Corporation Financial Statement Analysis
Costco Whole Corporation (the company or Costco hereafter) started its operations in 1984 in the United States (US). The company operates subsidiaries in distinct jurisdictions, including Canada, Mexico, United Kingdom (UK), Australia, Japan, Puerto Rico, Iceland, China, Spain, Korea, and France. Its market specializes in diverse merchandise categories such as food and sundries, hardlines, fresh foods, soft lines, and ancillary. Costco operates in an increasingly competitive industry. Target, Amazon, Kroger, and Walmart constitute Costco’s significant retail market rivals. The company’s strategy is to offer customers a diversity of high-quality goods at consistently lower prices compared to their competitors (Costco Wholesale 3-6).
Analysis of Costco’s Balance Sheet and Income Statement concurrently reveals specific trends. Exhibit 5 shows that net sales and membership fees denote the company’s revenues. From exhibit 9, it can be derived that membership fees and other income sources increased from 1.82 percent in fiscal 1997 to 1.93% in fiscal 2001. This pattern can be attributed to Costco’s tendency to raise membership costs. Exhibit 5 shows that membership fees and other revenue sources increased from 390 in fiscal 1997 to 660 in fiscal 2001 (Tayan 15). In addition, the company’s common-size financial statement indicates that the interest income and expenses increased from 0.07 percent in fiscal 1997 to 0.15 percent in fiscal 2001. Also, the company efficiency improved over time, as evidenced by rising operating incomes. The company’s operating income, computed as a net sale percentage, increased from 2.7 percent in fiscal 1997 to 2.91 percent in fiscal 2001 (Tayan 23).
Costco’s current ratio of 0.94 is competitive since it is close to optimal where current assets equal current liabilities. Despite the fact that a current ratio of over 1 indicates that current assets are enough to meet current lia...
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