Interpreting Finanacial Results

Interpreting Financial Results
Name
Institution
Interpreting Financial Results – Costco Stores
Costco performance has experienced slow growth since 2011. Although the firm’s return on assets consistently increased from 2011 to 2013, where it recorded 5.76% up to 6.8% respectively, its return on asset deteriorated in 2014 to 6.32% lower than that recorded in 2013. The reduction in the return on asset could be attributed to increased operating expenses owing to the establishment of thirty new stores (Costco Wholesale, 2015). The management of the company is mindful of the continuous growth and development of the business both in the local market and foreign markets. The management’s focus on improving the company’s performance in terms of efficiency is exhibited through the firm’s unaltered inventory and receivables management tactics. The management is aware that altering such strategies in a competitive market may be dangerous, and it is practicing a conscious working capital management to enhance efficiency. Failure to efficiently manage inventory and receivables may inconvenient customers by preventing them to meet their expectations, which can scare them away, resulting into loss of their market share. The company’s focus on promoting review generation under a stable working capital management has contributed to the marginally improving efficiency ratios throughout the period from 2011 to 2014. Inventory turnover increase from 13.39 in 2011 to 13.97 in 2012, which later dropped slightly to 13.32 in 2013 and maintained the same level in 2014. Receivable turnover increased ...