Costco Financial Analysis and Financial Ratios
Quality Business Consultant's financial analysis expert, Paul Borosky, MBA., doctoral candidate, and published author, has created proprietary financial models to help analyze Costco's financial performance using Costco's summarized income statements and balance sheets for the last five years, 2016 to 2020, found in their Annual Reports and Costco's 10ks.
Further, our financial model also calculates over 10 popular financial ratios, such as Costco's current ratio, return on equity, and debt ratio. This information is the basis of our financial report, "Coscto Inc. Financial Report," where we offer insights into understanding Costco's financial standing through insightful financial analysis.
A Beginner's Guide to Costco Financial Analysis - 2021
- Included Easy to download PDF File.
- Included Easy to use format.
- Included Summarized Income Statements and Balance Sheets for the last 5 years..
- Included Popular financial ratios for the last 5 years included... with calculations and formulas!
- Included Expert tips to help with financial statements analysis.
- Included Expert tips to help with financial ratios analysis.
- NOT Included-Identify and discuss financial trends for the company..
- NOT Included-Expert financial analysis done by Paul Borosky, MBA.
- NOT Included- Analyst "Letter Grades" for the company's ratios.
Costco Financial Report by Paul Borosky, MBA. - 2020
- Included Easy to download PDF File.
- Included Easy to use format.
- Included Summarized Income Statements and Balance Sheets for the last 5 years..
- Included Popular financial ratios for the last 5 years included... with calculations and formulas!
- Included Expert tips to help with financial statements analysis.
- Included Expert tips to help with financial ratios analysis.
- Included Identify and discuss financial trends for the company.
- Included Expert financial analysis done by Paul Borosky MBA.
- Included Analyst "Letter Grades" for the company's ratios.
Costco's Financial Report and Annual Report
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Costco 2021 Beginner's Guide
Table of Contents
- Disclaimer 3
- Forward 4
- Income Statement 6
- Costco’s Summarized Income Statements 6
- Revenues 7
- Cost of Goods Sold (COGS) 8
- Selling, General, and Administrative Expenses (SG&A 8
- Research and Development (R&D) 9
- Operating Expenses 10
- Earnings Before Interest and Taxes (EBIT 10
- Interest Expense 11
- Earnings Before Taxes (EBT) 12
- Taxes 12
- Net income 12
- Tax Rate 13
- Balance Sheet 15
- Costco’s Summarized Balance Sheets 15
- Cash 16
- Short-Term Investments 17
- Accounts Receivables 17
- Inventory 18
- Current Assets 19
- Property, Plant, and Equipment (PP&E) 20
- Total Assets 20
- Accounts Payable 21
- Accrued Expenses 22
- Short-Term Debt 23
- Total Current Liabilities 24
- Long Term Debt (LT Debt) 25
- Total Liabilities 26
- Common Stock and Additional Paid-in Capital 27
- Treasury 27
- Retained Earnings 28
- Total Equity 29
- Financial Ratios 30
- Costco’s Liquidity Ratios 31
- Current Ratio 31
- Quick Ratio 32
- Cash Ratio 33
- Costco’s Asset Ratios 35
- Total Asset Turnover 36
- Fixed Asset Turnover 37
- Days Sales Outstanding 37
- Inventory Turnover 38
- Accounts Receivable Turnover 39
- Accounts Payable Turnover 40
- Other Asset Ratio Calculations 41
- Working Capital Turnover 41
- Average Days in Inventory 41
- Average Days Payable 41
- Costco’s Profitability Ratios 43
- Return on Assets (ROA) 43
- Return on Equity (ROE) 44
- Net Profit Margin 45
- Gross Profit Margin 46
- Operating Profit Margin 46
- Costco’s Debt Ratios 48
- Debt Ratio 48
- Debt to Equity Ratio 49
- Times Interest Earned 50
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Costco 2020 Financial Report
Table of Contents
- Disclaimer 3
- Forward 4
- Company Summary 6
- Financial Statement Introduction 9
- Income Statement 10
- Costco’s Income Statement – Summary Analysis 11
- Income Statement Discussion 12
- Balance Sheet 20
- Balance Sheet – Summary Analysis 21
- Balance Sheet Discussion 22
- Financial Ratios 37
- Liquidity Ratios 38
- Liquidity Ratios - Summary Analysis 38
- Liquidity Ratios Discussion 39
- Current Ratio 39
- Quick Ratio 40
- Cash Ratio 40
- Other Liquidity Ratios 41
- Net Operating Working Capital 41
- Asset Ratios 43
- Asset Utilization Ratios - Summary Analysis 44
- Asset Utilization Ratios Discussion 45
- Total Asset Turnover 45
- Fixed Asset Turnover 45
- Days Sales Outstanding 46
- Inventory Turnover 47
- Accounts Receivable Turnover 48
- Accounts Payable Turnover 49
- Other Asset Ratio Calculations 49
- Working Capital Turnover 49
- Average Days in Inventory 50
- Average Days Payable 50
- Profitability Ratios 51
- Profitability Ratios - Summary Analysis 52
- Profitability Ratios Discussion 53
- Return on Assets (ROA) 53
- Return on Equity (ROE) 54
- Profit Margin 54
- Gross Profit Margin 55
- Operating Profit Margin 56
- Basic Earnings Power 57
- ROCE 57
- Capital Employed 57
- Debt Ratios 58
- Costco’s Debt Ratios - Summary Analysis 58
- Debt Ratios Discussion 59
- Long-Term Debt Ratio 59
- Debt to Equity Ratio 59
- Times Interest Earned 60
- WACC 62
- Book Value of WACC 62
- Free Cash Flow (FCF) 64
- Free Cash Flows – 2015 - 2019 64
- Free Cash Flows – 5 Year Projections 65
- Income Statement – Projections for 5 years 66
- Income Statement – 5 Year Projections 66
- Balance Sheet – Projections for 5 years 67
- Balance Sheet – 5 Year Projections 67
- Company Valuation and Intrinsic Stock Price 69
- Appendix 1: Summarized Income Statement 70
- Appendix 2: Income Statement – Percent of Sales 71
- Appendix 3: Income Statement – Year over Year Growth 72
- Appendix 4: Summarized Balance Sheet 73
- Appendix 5: Balance Sheet as Percent of Total Assets 75
- Appendix 6: Summarized Financial Ratios 76
Costco's Financial Report by Paul Borosky, MBA.
Hey All,
Thanks for considering my Costco Inc. Financial Report. In this report, you will be able to find preliminary information about Costco's current financial performance, as well as some historical track records and trends. Also, in this report, written by myself, Paul Borosky, MBA., Doctoral Candidate and published author, you will find:
- Summarized income statement for the last 5 years.
- Summarized balance sheet for the last 5 years.
- Summary analysis by myself of the important income statement, balance sheet, and financial ratio trends and other happenings.
- Five years’ worth of over ten common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
- Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
- Professional financial analysis tips are provided in each section to help YOU conduct your OWN financial analysis!
- Each section includes an “in other words” segment. This is where I use plain English to explain concepts.
Sincerely,
Paul, MBA.
Sample Report
Costco Inc. Income Statement Analysis Sample
In this section of the financial report, I walk you through a broad definition as to what an income statement is and why it is important. From this, I then discuss and define important income statement line items, such as revenues, gross profits, etc. in detail. Finally, I offer a summary analysis of the company's important income statement line item trends. For example,...
Costco's Cost of Goods Sold.
Costco’s cost of goods sold ended 2016 at $102 billion. In the next four years, Costco’s cost of goods would moderately increase, ending 2020 at $144 billion. As compared to revenues, Costco’s cost of goods sold would be 86.7%. In the next four years, Costco’s cost of goods sold as compared to revenues would maintain this percentage.
The ability for Costco to pass on raw material cost increases to consumers is a great business strategy. By doing this, the organization is able to maintain a simple pricing business strategy. Quite frankly, as raw material costs increase, so will the price charged to consumers. An issue with this strategy is that the company is open to a price war with other wholesalers competing for market share.
Costco 2021 Summary Income Statement |
|||||
Column1 |
2021 |
2020 | 2019 | 2018 |
2017 |
Revenues |
365,817 |
274,515 | 260,174 | 265,595 |
229,234 |
COGS |
212,981 |
169,559 | 161,782 | 163,756 |
141,048 |
Gross Profit |
152,836 |
104,956 | 98,392 | 101,839 |
88,186 |
SG&A |
21,973 |
19,916 | 18,245 | 16,705 |
15,261 |
Depreciation |
11,284 |
11,056 | 12,547 | 10,903 |
10,157 |
R & D |
21,914 |
18,273 | 16,217 | 14,236 |
11,581 |
Other | - | - | - | - | - |
Total Operating Expenses |
43,887 |
38,668 | 34,462 | 41,844 |
36,999 |
EBIT |
108,949 |
66,288 | 63,930 | 59,995 |
51,187 |
Other Income |
258 |
803 | 1,807 | 2,005 |
2,745 |
Interest Expense |
8,750 |
12,629 | 8,805 | 6,500 |
3,500 |
EBT |
109,207 |
67,091 | 65,737 | 55,500 |
50,432 |
Taxes |
14,527 |
9,680 | 10,481 | 13,372 |
15,738 |
Net Income |
94,680 |
57,411 | 55,256 | 59,531 |
48,351 |
Costco Inc. Balance Sheet Analysis Sample
In this section of the financial report, I walk you through a broad definition of what a balance sheet is and why it is crucial. From this, I then discuss and define important balance sheet line items, such as cash, inventory, etc., in detail. Finally, I offer a summary analysis of the company's important balance sheet line item trends. For example,...
Costco's Property, Plant, and Equipment
Costco’s property, plant, and equipment ended 2016 at $17 billion. In the next several years, the organization’s property, plant, and equipment would moderately increase, ending 2020 and $21.8 billion.
The continued growth in property, plant and equipment indicates that Costco’s executive team expects moderate to above-average growth in revenues for the foreseeable future. This also shows that the company is continuing to expand operations into new areas. Because the company has seemingly optimized its various business models in operations, inventory, and cash holdings, the expansion opportunity should be well received by investors.
Costco 2021 Summary Balance Sheet |
|||||
Column1 |
2021 |
2020 | 2019 | 2018 |
2017 |
Cash |
34,940 |
38,016 | 48,844 | 25,913 |
20,289 |
Short Term Investment |
27,699 |
52,927 | 51,713 | 40,388 |
53,892 |
Account Receivable |
26,278 |
16,120 | 22,926 | 23,186 |
17,874 |
Inventory |
6,580 |
4,061 | 4,106 | 3,956 |
4,855 |
Other | - | - | - | - | - |
Current Assets |
134,836 |
143,713 | 162,819 | 93,443 |
96,910 |
Net PPE |
39,440 |
36,766 | 37,378 | 41,304 |
33,783 |
Goodwill | - | - | - | - | - |
Other | - | ||||
Total Assets |
351,002 |
323,888 | 338,516 | 365,725 |
375,319 |
Accounts Payable |
54,763 |
42,296 | 46,236 | 55,888 |
44,242 |
Accrued Expense | - | - | - |
32,687 |
30,551 |
Accrued Taxes | - | - | - | - | - |
Notes Payable |
6,000 |
4,996 | 5,980 | 11,964 |
11,977 |
LT Debt - Current |
9,613 |
8,773 | 10,260 | 8,784 |
6,496 |
Other | - | - | - | ||
Total Current Liabilities |
125,481 |
105,392 | 105,718 | 116,866 |
100,814 |
LT Debt |
109,106 |
98,667 | 91,807 | 93,735 |
97,207 |
Other | |||||
Total Liabilities |
287,912 |
258,549 | 248,028 | 258,578 |
241,272 |
Common Stock |
57,365 |
50,779 | 45,174 | 40,201 |
35,867 |
Treasury | - | - | - | - | - |
Retained Earnings |
5,562 |
14,966 | 45,898 | 70,400 |
98,330 |
Other | |||||
Total Equity |
63,090 |
65,339 | 90,488 | 110,601 |
134,197 |
Total Equity & Liability |
351,002 |
323,888 | 338,516 | 365,725 |
375,319 |
Costco Inc. Financial Ratios Sample
In this section of the financial report, I walk you through definitions of various popular financial ratios, how to calculate the ratios, formulas used, etc. Also, for some popular financial ratios, I provide brief explanations of what the ratios mean as it is related to the company.
Costco's Fixed Asset Turnover Ratio
The organization’s fixed asset turnover ended 2016 at 6.9. In the next several years, the organization’s fixed asset turnover would gradually improve, ending 2020 at 7.6. The gradual improvements of the company’s fixed asset turnover show that the company is continually improving its usage of fixed assets. As a result, the company’s problems with total asset turnover may lie with its inability to fully exploit short-term current asset opportunities. Specifically, the organization needs to better handle its cash and short-term investment strategies.
Costco's Return on Equity
Costco’s return on equity ended 2016 at 19%. In the next year, the organization would substantially increase its return on equity to 24.2%. However, in the last three years, ending 2020, the organization’s return on equity would continually fall, ending 2020 at 21.4%. The moderate reduction in the organization’s return on equity shows that the firm may be relying more on equity as compared to debt for growth and expansion. If the organization wishes to increase its return on equity, then the firm needs to shift its capital structure from an equity-based reliance to a more debt burden structure. However, if the company does want to maintain a low-risk environment, then investors should anticipate a lower return on equity for the long term.
Costco 2021 Liquidity Ratios |
|||||
Ratios |
2021 |
2020 |
|||
Current Ratio | 1.00 | 1.13 | |||
Cash Ratio | 0.41 | 0.54 | |||
Quick Ratio | 0.52 | 0.64 | |||
Net Working Capital | 64 | 3,276 | |||
Costco 2021 Asset Utilization |
|||||
Ratios |
2021 |
2020 |
|||
Total Asset Turnover | 3.31 | 3.00 | |||
Fixed Asset Turnover | 8.34 | 7.65 | |||
Days Sales Outstanding | 3.12 | 3.38 | |||
Inventory Turnover (Using Sales) | 14.81 | 14.11 | |||
Inventory Turnover (Using COGS) | 12.90 | 12.26 | |||
Accounts Receivable Turnover | 116.87 | 108.11 | |||
Working Capital Turnover | 3,061.39 | 50.90 | |||
AP Turnover | 11.34 | 11.28 | |||
Average Days Inventory | 28.29 | 29.76 | |||
Average Days Payable | 32.19 | 32.36 | |||
Costco 2021Profitability Ratios | |||||
Ratios |
2021 |
2020 |
|||
Return on Assets |
8.45% |
7.20% |
|||
Return on Equity |
27.70% |
21.40% |
|||
Net Profit Margin |
2.56% |
2.40% |
|||
Gross Profit Margin |
12.88% |
13.09% |
|||
Operating Profit Margin |
3.42% |
3.26% |
|||
Basic Earning Power |
11.32% |
9.78% |
|||
ROCE |
22.49% |
17.70% |
|||
Capital Employed | 29,827 | 30,712 | |||
ROIC |
19.95% |
15.62% |
|||
Costco 2021 Debt Ratios |
|||||
Ratios |
2021 |
2020 |
|||
Debt Ratio |
12.64% |
13.70% |
|||
Debt/Equity |
41.44% |
40.68% |
|||
Times Interest Earned | (39.23) | (33.97) |