Financial Ratio and Costco

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Acct Info for Decision Making
Project on Costco Wholesale Corp.

Costco Group
2012

History & Background
Founded by James (Jim) Sinegl and Jeffrey H. Brotman, Costco opened its first warehouse in Seattle, Washington, on September 15, 1983. Sinegal had started in wholesale distribution by working forSol Price at both FedMart and Price Club. Brotman, an attorney from an old Seattle retailing family, had also been involved in retail distribution from an early age. Wal-Mart founder Sam Walton had plans to merge Sam's Club with Price Club. In 1993, however, Costco merged with Price Club (called Club Price in the Canadian province of Quebec). Costco's business model and size were similar to those of Price Club, which was founded by Sol and Robert Price in 1976 in San Diego, California. Thus, the combined company, PriceCostco, was effectively double the size of each of its parents. Just after the merger, PriceCostco had 206 locations generating $16 billion in annual sales. PriceCostco was initially led by executives from both companies, but then Sol and his son Robert Price founded Price Enterprises and left Costco in December 1994. In 1993, when growing competition threatened both Price Club and Costco Wholesale, they entered into a partial merger just after Price’s earnings dropped to 40%. The new company, named PriceCostco, Inc., focused heavily on international expansion, opening stores in Mexico, South Korea, and England. Despite best efforts to recover losses, sales continued to drop. Disagreement between the two leaders, Robert Price and Jim Sinegal, regarding company direction and recovery policies soon left the merger in tatters. In 1994, the breakup was formally announced. Sinegal continued to manage PriceCostco while Price’s breakaway company was named as Price Enterprises. The first Price Club location was opened in 1976 in an old airplane hangar, previously owned by Howard Hughes, and is still in operation today (Warehouse No. 401, located on Morena Boulevard in San Diego). In 1997, the company changed its name to Costco Wholesale and all Price Club locations were rebranded Costco. As of December 2011, the Company operated a chain of 598 warehouses in 40 states and Puerto Rico (433 locations), nine Canadian provinces (82 locations), the United Kingdom (22 locations), Korea (seven locations), Taiwan (eight locations, through a 55%-owned subsidiary), Japan (eleven locations), Australia (three locations), and 32 warehouses in Mexico through a 50%-owned joint venture. Financial Highlights

Net Revenue
Year| 2012| 2011| 2010|
Costco Net Revenue| 12,314,000| 11,176,000| 9,951,000|
(Currency in USD)
The net revenue of COST increase every year, it was a good sign. Year| 2012| 2011| 2010|
Costco Net Income| 1,709,000 | 1,462,000| 1,303,000|
(Currency in USD)
COST did better in the following two years. And COST had most 40.6 thousand dollars increase from 2011 to 2012. Total Assets
Year| 2012| 2011| 2010|
Costco Total Assets| 27,140,000 | 26,761,000 | 23,815,000 | Costco Total Liabilities| 14,779,000  | 14,759,000| 12,986,000 | (Currency in USD)
The total assets and liability of COST shows that the company purchased a lot of assets on its credit during these three years. That might be not a good sign, because COST might not have enough cash. Earnings per Share

Year| 2012| 2011| 2010|
Costco EPS| 3.89| 3.3| 2.92|
It’s increasing in every years. It means COST are profiting during every years so that they can paying the EPS. Financial Ratios Analysis
Profitability Ratios
1. Return on Assets (ROA)
Year| 2011| 2010| 2009|
Costco| 5.78%| 5.69%| 5.09%|
Return on assets ratio is calculated by dividing net income by average total assets. Return on assets represents the cents in profits for every dollar of assets. This measures how efficiently and effectively the company uses its assets to generate profits. These numbers tell the ability of Costco to...
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