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.

Costco's Financial Report and Annual Report

Costco 2020 Financial Report by Paul Borosky, MBA.

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 important income statement, balance sheet, and financial ratio trends and other happenings.
  • Five year’s 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 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.

Learn More

Sample Report

Sample report 2
Financial Report Sample 1

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's Income Statement 2020

Column1 2020 2019 2018 2017 2016
Revenues                  166,761                  152,703                  141,576                  129,025                    118,719
COGS                  144,939                  132,886                  123,152                  111,882                    102,901
Gross Profit                    21,822                    19,817                    18,424                    17,143                      15,818
 
SG&A                    16,332                    14,994                    13,876                    12,950                      12,068
Depreciation                      1,645                      1,492                      1,437                      1,370                        1,255
R & D                            -                            -                            -                             -
Other
Operating Expenses                    17,977                    15,080                    13,944                    13,032                      12,146
EBIT                      5,435                      4,737                      4,480                      4,111                        3,872
Other Income                            -                            -                            -                            -                             -
Interest Expense                         160                         150                         159                         134                           133
EBT                      5,367                      4,765                      4,442                      4,039                        3,619
Taxes                      1,308                      1,061                      1,263                      1,325                        1,243
Net Income                     4,002                     3,659                     3,134                     2,679                      2,350
Tax Rate 24.4% 22.3% 28.4% 32.8% 34.3%

Costco Inc. Balance Sheet Analysis Sample

In this section of the financial report, I walk you through a broad definition as to what a balance sheet is and why it is important.  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's Summary Balance Sheet - 2020

Column1 2020 2019 2018 2017 2016
Cash                      12,277                    8,384                    6,055                    4,546                    3,379
Short Term Investment                        1,028                    1,060                    1,204                    1,233                    1,350
Account Receivable                        1,550                    1,535                    1,669                    1,432                    1,252
Inventory                      12,242                  11,395                  11,040                    9,834                    8,969
Other                              -                         -                         -                         -                         -
Current Assets                    28,120                23,485                20,289                17,317                15,218
Net PPE                      21,807                  20,890                  19,681                  18,161                  17,043
Goodwill                              -                         -                         -                         -                         -
Other                              -                         -                         -                         -                         -
Total Assets                    55,556                45,400                40,830                36,347                33,163
Accounts Payable                      14,172                  11,679                  11,237                    9,608                    7,612
Accrued Expense                        3,605                    3,176                    2,994                    2,703                    2,629
Accrued Taxes                              -                         -                         -                         -                         -
Notes Payable                              -                         -                         -                         -                         -
LT Debt - Current                             95                    1,699                         90                         86                    1,100
Other                         -                         -                         -                         -
Total Current Liabilities                      24,844                  23,237                  19,926                  17,495                  15,575
LT Debt                        7,514                    5,124                    6,487                    6,573                    4,061
Other                              -                         -                         -                         -                         -
Total Liabilities                    36,851                29,816                27,727                25,268                20,831
Common Stock                               4                           4                           4                           4                           2
Treasury                              -                         -                         -                         -                         -
Retained Earnings                      12,879                  10,258                    7,887                    5,988                    7,686
Other                              -                         -                         -                         -                         -
Total Equity                    18,705                15,584                13,103                11,079                12,332
Total Equity & Liability                    55,556                45,400                40,830                36,347                33,163

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 Liquidity Ratios

Ratios

2020

2019 2018 2017

2016

Current Ratio

                          1.13

                   1.01

Cash Ratio

                          0.49

                   0.36

Quick Ratio

                          0.64

                   0.52

Net Working Capital

                        8,292

                 6,459

Costco Asset Utilization - 2020

Ratios

2020

2019 2018 2017

2016

Total Asset Turnover

                          3.00

                   3.36

Fixed Asset Turnover

                          7.65

                   7.31

Days Sales Outstanding

                          3.39

                   3.67

Inventory Turnover

                        13.62

                 13.40

Accounts Receivable Turnover

                      107.59

                 99.48

Working Capital Turnover

                        20.11

                 23.64

AP Turnover

                        11.77

                 13.08

Average Days Inventory

                        30.83

                 31.30

Average Days Payable

                        35.69

                 32.08

Costco Profitability Ratios

Ratios

2020

2019 2018 2017

2016

Return on Assets

7.20%

8.06%

Return on Equity

21.40%

23.48%

Net Profit Margin

2.40%

2.40%

Gross Profit Margin

13.09%

12.98%

Operating Profit Margin

3.26%

3.10%

Basic Earning Power

9.78%

10.43%

ROCE

17.70%

21.37%

Capital Employed

                      30,712

               22,163

ROIC

13.66%

13.46%

Long-term Debt

Ratios

2020

2019 2018 2017

2016

Debt Ratio

13.53%

11.29%

Debt/Equity

40.17%

32.88%

Times Interest Earned

                        33.97

                 31.58