BUS 401 UAGC Financial Statement Analysis Costco Wholesale Corp Paper

In order to determine if you can recommend buying or selling a stock, you first must understand how the company has performed recently. Would you want to invest in a company that has had negative earnings for the past 3 years? What about a company that has increased the amount of debt on its balance sheet? Or, would you prefer to invest in a company that has had consistent increases in revenues or net earnings over the past 3 years? As the equity analyst, your first task would be to determine the evidence of patterns in the recent financial performance. The financial analysis provides significant insight into the company’s strengths and weaknesses.

To fully understand a company’s financial performance, you cannot “evaluate performance using numbers alone. This level of analysis does not involve an understanding of the cause of performance…an analyst must look beyond the numbers” (Hickman et al.,  2013, Section 11.3, para. 7). In the real world, an analyst spends extensive time and effort researching the business strategy, operations, marketing, and other elements that have contributed to this financial performance. For this class, you will limit your investigation of the company to the historical financial analysis, ratio and competitive analysis, and the valuation of the stock. This Week 1 assignment will become Section 1 of the Week 5 final project.

The Section 1: Financial Statement Analysis

Write:

For this assignment, address the following seven parts in a Word document:

Part 1: Overview of the company (one paragraph)

State the name of the company.

Provide a brief overview of the company you selected, including a description of its business operations.

State the current market price per share.

Part 2: Income statements (one to two paragraphs)

Summarize key trends in revenues, operating income, and net income over the last 3 years.

Part 3: Common size income statements (one paragraph)

Evaluate the trends in gross margin, operating income margin, and net profit margin over the past 3 years.

Part 4: Balance sheets (one to two paragraphs)

Summarize key trends in total assets, total current assets, total current liabilities, long-term debt, and total shareholders’ equity over the past 3 years.

Part 5: Common size balance sheets (one paragraph)

Evaluate the trends in total current assets as a percent (%) of total assets, total current liabilities as a percent (%) of total assets, long-term debt as percent (%) of total assets, and total shareholders’ equity as a percent (%) of total assets over the past 3 years.

Part 6: Cash flow (one paragraph)

Calculate simple cash flow for the past 3 years.Show your calculations.

Summarize the trend in simple cash flow for the past 3 years.

Compare the simple cash flow to the net operating cash flow from the statement of cash flows for the past 3 years.

Part 7: Financial analysis conclusion: (one paragraph)

Determine the strengths and weaknesses of the company based primarily on the trends in items discussed from the income statements, balance sheets, common size income statements, and common size balance sheets, as well as the comments on cash flow.

Create a table that indicates whether each financial fact is a strength or a weakness.

Determine the overall financial strength of the company based on the financial facts included as strengths or weaknesses.Categorize the overall financial performance of the company as strong, neutral, or weak.Justify your conclusion based on the table you created  Powered by Clearbit
Costco Wholesale Corp (NMS: COST)
Company Financials
Income Statement
Exchange rate used is that of the Year End reported
date
As Reported Annual Income Statement
Report Date
08/28/2022
08/29/2021
08/30/2020
Currency
Audit Status
USD
Not Qualified
USD
Not Qualified
USD
Not Qualified
Consolidated
Scale
Yes
Thousands
Yes
Thousands
Yes
Thousands
Net sales
$ 222,730,000
Membership fees
$
4,224,000
Total revenue
$ 226,954,000
Merchandise costs
$ 199,382,000
Selling, general & administrative expenses
$ 19,779,000
Preopening expenses
Operating income
$
7,793,000
Interest expense
$
158,000
Interest income
$
61,000
Foreign-currency transactions gains (losses), net
$
106,000
Other interest income & other income, net
$
38,000
Interest income & other income, net
$
205,000
Income before income taxes – domestic
$
5,759,000
Income before income taxes – foreign
$
2,081,000
Income before income taxes
$
7,840,000
Current federal provison (benefit) for income taxes
$
798,000
Deferred federal provison (benefit) for income taxes
$
(35,000)
Total federal provison (benefit) for income taxes
$
763,000
Current state provison (benefit) for income taxes
$
333,000
Deferred state provison (benefit) for income taxes
$
(5,000)
Total state provison (benefit) for income taxes
$
328,000
Current foreign provison (benefit) for income taxes
$
851,000
Deferred foreign provison (benefit) for income taxes
$
(17,000)
Total foreign provison (benefit) for income taxes
$
834,000
Provision for income taxes
$
1,925,000
Net income (loss) including noncontrolling interests
$
5,915,000
Net loss (income) attributable to noncontrolling interests $
(71,000)
Net income attributable to Costco Wholesale Corp
$
5,844,000
Weighted average shares outstanding – basic
443,651
Weighted average shares outstanding – diluted
444,757
Year end shares outstanding
442,664
Net income (loss) per common share – basic
$
13.17
Net income (loss) per common share – diluted
$
13.14
Cash dividends declared per common share
$
3.38
Number of full time employees
Number of part time employees
Total number of employees
304000
Number of common stockholders
10279
Foreign currency translation adjustments
-721000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
192,052,000
3,877,000
195,929,000
170,684,000
18,461,000
76,000
6,708,000
171,000
41,000
56,000
46,000
143,000
4,931,000
1,749,000
6,680,000
718,000
84,000
802,000
265,000
11,000
276,000
557,000
(34,000)
523,000
1,601,000
5,079,000
(72,000)
5,007,000
443,089
444,346
441,825
11.30
11.27
12.98
288000
9958
181000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
163,220,000
3,541,000
166,761,000
144,939,000
16,332,000
55,000
5,435,000
160,000
89,000
7,000
(4,000)
92,000
4,204,000
1,163,000
5,367,000
616,000
77,000
693,000
230,000
8,000
238,000
372,000
5,000
377,000
1,308,000
4,059,000
(57,000)
4,002,000
442,297
443,901
441,255
9.05
9.02
2.70
156000
117000
273000
9690
162000
Balance Sheet
Exchange rate used is that of the Year End reported
date
As Reported Annual Balance Sheet
Report Date
08/28/2022
08/29/2021
08/30/2020
Currency
Audit Status
USD
Not Qualified
USD
Not Qualified
USD
Not Qualified
Consolidated
Scale
Yes
Thousands
Yes
Thousands
Yes
Thousands
Cash & cash equivalents
Short-term investments
Receivables, net
Merchandise inventories – U.S.
Merchandise inventories – Canada
Merchandise inventories – other international
Merchandise inventories
Other current assets
Total current assets
Land
Buildings & improvements
Equipment & fixtures
Construction in progress
Property & equipment, gross
Less accumulated depreciation & amortization
Property & equipment, net
Operating lease right-of-use assets
Other long-term assets
Total assets
Accounts payable
Current portion long-term debt
Accrued salaries & benefits
Accrued member rewards
Deferred membership fees
Other current liabilities
Total current liabilities
Senior notes
Other long-term debt
Total long-term debt
Less unamortized debt discounts & issuance costs
Less: current portion
Long-term debt, excluding current portion
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities
Common stock
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Total Costco Wholesale Corp stockholders’ equity
Noncontrolling interests
Total equity
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
10,203,000
846,000
2,241,000
13,160,000
1,966,000
2,781,000
17,907,000
1,499,000
32,696,000
7,955,000
20,120,000
10,275,000
1,582,000
39,932,000
15,286,000
24,646,000
2,774,000
4,050,000
64,166,000
17,848,000
73,000
4,381,000
1,911,000
2,174,000
5,611,000
31,998,000
6,000,000
590,000
6,590,000
(33,000)
73,000
6,484,000
2,482,000
2,555,000
43,519,000
2,000
6,884,000
(1,829,000)
15,585,000
20,642,000
5,000
20,647,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
11,258,000
917,000
1,803,000
10,248,000
1,456,000
2,511,000
14,215,000
1,312,000
29,505,000
7,507,000
19,139,000
9,505,000
1,507,000
37,658,000
14,166,000
23,492,000
2,890,000
3,381,000
59,268,000
16,278,000
799,000
4,090,000
1,671,000
2,042,000
4,561,000
29,441,000
6,800,000
731,000
7,531,000
(40,000)
799,000
6,692,000
2,642,000
2,415,000
41,190,000
4,000
7,031,000
(1,137,000)
11,666,000
17,564,000
514,000
18,078,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
12,277,000
1,028,000
1,550,000
8,871,000
1,310,000
2,061,000
12,242,000
1,023,000
28,120,000
6,696,000
17,982,000
8,749,000
1,276,000
34,703,000
12,896,000
21,807,000
2,788,000
2,841,000
55,556,000
14,172,000
95,000
3,605,000
1,393,000
1,851,000
3,728,000
24,844,000
6,800,000
857,000
7,657,000
(48,000)
95,000
7,514,000
2,558,000
1,935,000
36,851,000
4,000
6,698,000
(1,297,000)
12,879,000
18,284,000
421,000
18,705,000
Cash Flows
Exchange rate used is that of the Year End reported
date
As Reported Annual Cash Flow
Report Date
08/28/2022
08/29/2021
08/30/2020
Currency
Audit Status
USD
Not Qualified
USD
Not Qualified
USD
Not Qualified
Consolidated
Scale
Yes
Thousands
Yes
Thousands
Yes
Thousands
Net income (loss) including noncontrolling interests
$
5,915,000
Depreciation & amortization
$
1,900,000
Non-cash lease expense
$
377,000
Stock-based compensation
$
724,000
Other non-cash operating activities, net
$
76,000
Deferred income taxes
$
(37,000)
Merchandise inventories
$ (4,003,000)
Accounts payable
$
1,891,000
Other operating assets & liabilities, net
$
549,000
Net cash flows from operating activities
$
7,392,000
Purchases of short-term investments
$ (1,121,000)
Maturities & sales of short-term investments
$
1,145,000
Additions to property & equipment
$ (3,891,000)
Acquisitions
Other investing activities, net
$
(48,000)
Net cash flows from investing activities
$ (3,915,000)
Change in bank payments outstanding
Proceeds from short-term borrowings
Proceeds from issuance of long-term debt
Repayments of long-term debt
$
(800,000)
Minimum tax withholdings on stock-based awards
Tax withholdings on stock-based awards
$
(363,000)
Repurchases of common stock
$
(439,000)
Cash dividend payments
$ (1,498,000)
Dividend to noncontrolling interest
$
(208,000)
Acquisition of noncontrolling interest
$
(842,000)
Other financing activities, net
$
(133,000)
Net cash flows from financing activities
$ (4,283,000)
Effect of exchange rate changes on cash & cash equivalents
$
(249,000)
Net change in cash & cash equivalents
$ (1,055,000)
Cash & cash equivalents beginning of year
$ 11,258,000
Cash & cash equivalents end of year
$ 10,203,000
Cash paid during the year for interest
$
145,000
Cash paid during the year for income taxes, net
$
1,940,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
5,079,000
1,781,000
286,000
665,000
85,000
59,000
(1,892,000)
1,838,000
1,057,000
8,958,000
(1,331,000)
1,446,000
(3,588,000)
(62,000)
(3,535,000)
188,000
41,000
(94,000)
(312,000)
(496,000)
(5,748,000)
(67,000)
(6,488,000)
46,000
(1,019,000)
12,277,000
11,258,000
149,000
1,527,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
4,059,000
1,645,000
194,000
619,000
42,000
104,000
(791,000)
2,261,000
728,000
8,861,000
(1,626,000)
1,678,000
(2,810,000)
(1,163,000)
30,000
(3,891,000)
137,000
3,992,000
(3,200,000)
(330,000)
(196,000)
(1,479,000)
(71,000)
(1,147,000)
70,000
3,893,000
8,384,000
12,277,000
124,000
1,052,000
Powered by Clearbit
Costco Wholesale Corp (NMS: COST)
Company Financials
Income Statement
Exchange rate used is that of the Year End reported
date
As Reported Annual Income Statement
Report Date
08/28/2022
08/29/2021
08/30/2020
Currency
Audit Status
USD
Not Qualified
USD
Not Qualified
USD
Not Qualified
Consolidated
Scale
Yes
Thousands
Yes
Thousands
Yes
Thousands
100.00%
1.90%
101.90%
89.52%
8.88%
100.00%
2.02%
102.02%
88.87%
9.61%
0.04%
3.49%
0.09%
0.02%
0.03%
0.02%
0.07%
2.57%
0.91%
3.48%
0.37%
0.04%
0.42%
0.14%
0.01%
0.14%
0.29%
-0.02%
0.27%
0.83%
2.64%
-0.04%
2.61%
100.00%
2.17%
102.17%
88.80%
10.01%
0.03%
3.33%
0.10%
0.05%
0.00%
0.00%
0.06%
2.58%
0.71%
3.29%
0.38%
0.05%
0.42%
0.14%
0.00%
0.15%
0.23%
0.00%
0.23%
0.80%
2.49%
-0.03%
2.45%
Net sales
Membership fees
Total revenue
Merchandise costs
Selling, general & administrative expenses
Preopening expenses
NM
Operating income
Interest expense
Interest income
Foreign-currency transactions gains (losses), net
Other interest income & other income, net
Interest income & other income, net
Income before income taxes – domestic
Income before income taxes – foreign
Income before income taxes
Current federal provison (benefit) for income taxes
Deferred federal provison (benefit) for income taxes
Total federal provison (benefit) for income taxes
Current state provison (benefit) for income taxes
Deferred state provison (benefit) for income taxes
Total state provison (benefit) for income taxes
Current foreign provison (benefit) for income taxes
Deferred foreign provison (benefit) for income taxes
Total foreign provison (benefit) for income taxes
Provision for income taxes
Net income (loss) including noncontrolling interests
Net loss (income) attributable to noncontrolling interests
Net income attributable to Costco Wholesale Corp
Weighted average shares outstanding – basic
Weighted average shares outstanding – diluted
Year end shares outstanding
Net income (loss) per common share – basic
Net income (loss) per common share – diluted
Cash dividends declared per common share
Number of full time employees
Number of part time employees
Total number of employees
Number of common stockholders
Foreign currency translation adjustments
3.50%
0.07%
0.03%
0.05%
0.02%
0.09%
2.59%
0.93%
3.52%
0.36%
-0.02%
0.34%
0.15%
0.00%
0.15%
0.38%
-0.01%
0.37%
0.86%
2.66%
-0.03%
2.62%
Balance Sheet
Exchange rate used is that of the Year End reported
date
As Reported Annual Balance Sheet
Report Date
Currency
Audit Status
Consolidated
Scale
Cash & cash equivalents
Short-term investments
Receivables, net
Merchandise inventories – U.S.
Merchandise inventories – Canada
Merchandise inventories – other international
Merchandise inventories
Other current assets
Total current assets
Land
Buildings & improvements
Equipment & fixtures
Construction in progress
Property & equipment, gross
Less accumulated depreciation & amortization
Property & equipment, net
Operating lease right-of-use assets
Other long-term assets
Total assets
Accounts payable
Current portion long-term debt
Accrued salaries & benefits
Accrued member rewards
Deferred membership fees
Other current liabilities
Total current liabilities
Senior notes
Other long-term debt
Total long-term debt
Less unamortized debt discounts & issuance costs
Less: current portion
Long-term debt, excluding current portion
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities
Common stock
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Total Costco Wholesale Corp stockholders’ equity
Noncontrolling interests
Total equity
Cash Flows
08/28/2022
USD
Not Qualified
Yes
Thousands
15.90%
1.32%
3.49%
20.51%
3.06%
4.33%
27.91%
2.34%
50.96%
12.40%
31.36%
16.01%
2.47%
62.23%
23.82%
38.41%
4.32%
6.31%
100.00%
27.82%
0.11%
6.83%
2.98%
3.39%
8.74%
49.87%
9.35%
0.92%
10.27%
-0.05%
0.11%
10.11%
3.87%
3.98%
67.82%
0.00%
10.73%
-2.85%
24.29%
32.17%
0.01%
32.18%
08/29/2021
USD
Not Qualified
Yes
Thousands
19.00%
1.55%
3.04%
17.29%
2.46%
4.24%
23.98%
2.21%
49.78%
12.67%
32.29%
16.04%
2.54%
63.54%
23.90%
39.64%
4.88%
5.70%
100.00%
27.47%
1.35%
6.90%
2.82%
3.45%
7.70%
49.67%
11.47%
1.23%
12.71%
-0.07%
1.35%
11.29%
4.46%
4.07%
69.50%
0.01%
11.86%
-1.92%
19.68%
29.63%
0.87%
30.50%
08/30/2020
USD
Not Qualified
Yes
Thousands
22.10%
1.85%
2.79%
15.97%
2.36%
3.71%
22.04%
1.84%
50.62%
12.05%
32.37%
15.75%
2.30%
62.46%
23.21%
39.25%
5.02%
5.11%
100.00%
25.51%
0.17%
6.49%
2.51%
3.33%
6.71%
44.72%
12.24%
1.54%
13.78%
-0.09%
0.17%
13.53%
4.60%
3.48%
66.33%
0.01%
12.06%
-2.33%
23.18%
32.91%
0.76%
33.67%
Exchange rate used is that of the Year End reported
date
As Reported Annual Cash Flow
Report Date
Currency
Audit Status
Consolidated
Scale
08/28/2022
USD
Not Qualified
Yes
Thousands
Net income (loss) including noncontrolling interests
Depreciation & amortization
Non-cash lease expense
Stock-based compensation
Other non-cash operating activities, net
Deferred income taxes
Merchandise inventories
Accounts payable
Other operating assets & liabilities, net
Net cash flows from operating activities
Purchases of short-term investments
Maturities & sales of short-term investments
Additions to property & equipment
Acquisitions
Other investing activities, net
Net cash flows from investing activities
Change in bank payments outstanding
Proceeds from short-term borrowings
Proceeds from issuance of long-term debt
Repayments of long-term debt
Minimum tax withholdings on stock-based awards
Tax withholdings on stock-based awards
Repurchases of common stock
Cash dividend payments
Dividend to noncontrolling interest
Acquisition of noncontrolling interest
Other financing activities, net
Net cash flows from financing activities
Effect of exchange rate changes on cash & cash equivalents
Net change in cash & cash equivalents
Cash & cash equivalents beginning of year
Cash & cash equivalents end of year
Cash paid during the year for interest
Cash paid during the year for income taxes, net