Financial Ratio and Costco

Acct Info for Decision Making Project on Costco sweeping Corp. Costco keep company 2012 History & Background Founded byJames (Jim) SineglandJeffrey H. Brotman,Costco opened its starting signal store inSeattle, Washington, on September 15, 1983. Sinegal had started in wholesale diffusion by running(a) forSol impairmentat bothFedMartand expenditure Club. Brotman, anattorneyfrom an senile Seattle retailing family, had also been involved in retail distri exception from an azoic age. Wal-MartfounderSam Waltonhad plans to mergeSams Clubwith Price Club.In 1993, however, Costco merged with Price Club (calledClub Pricein the Canadian province ofQuebec). Costcos business sector 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 severally of its p bents. Just after the uniting, PriceCostco had 206 locations generating $16billion in annual gross sales. PriceCostco was ab initio led by executives from both companies, but then Sol and his countersign Robert Price founded Price Enterprises and left(a) Costco in December 1994.In 1993, when growing ambition threatened both Price Club and Costco Wholesale, they entered into a partial merger unless after Prices earnings dropped to 40%. The saucily company, named PriceCostco, Inc. , focused heavily on external expansion, opening stores in Mexico, southwest Korea, and England. Despite spunky hat efforts to recover losses, sales continued to drop. Disagreement amidst the two leaders, Robert Price and Jim Sinegal, regarding company direction and reco actually policies soon left the merger in tatters.In 1994, the breakup was formally announced. Sinegal continued to manage PriceCostco turn Prices breakaway company was named as Price Enterprises. The first Price Club location was opened in 1976 in an aging airplane hangar,previously owned byHoward Hughes, and is chill out in routine today (W behouse 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 011, the Company operated a chain of 598 w behouses in 40 states and Puerto anti-racketeering law (433 locations), nine Canadian provinces (82 locations), the United Kingdom (22 locations), Korea (seven locations), chinaware (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 receipts form 2012 2011 2010 Costco Net Revenue 12,314,000 11,176,000 9,951,000 (Currency in USD) The net revenue of woo increase every year, it was a safe sign.Year 2012 2011 2010 Costco Net Income 1,709,000 1,462,000 1,303,000 (Currency in USD) COST did rectify in the chase two years. And COST had more or less 40. 6 thousand sawhorses increase fro m 2011 to 2012. supply 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 li great power of COST shows that the company purchased a lot of assets on its credit during these three years. That king be not a good sign, because COST readiness not bring forth enough cash.Earnings per Share Year 2012 2011 2010 Costco EPS 3. 89 3. 3 2. 92 Its increase in every years. It means COST are pull ining during every years so that they sess paying the EPS. Financial symmetrys compendium Profitability Ratios 1. transcend on Assets (ROA) Year 2011 2010 2009 Costco 5. 78% 5. 69% 5. 09% Return on assets symmetry is cipher by dividing net income by mean(a) 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 abili ty of Costco to put forward profit. Costco has a positive net income so that its ROA is increasing historical 3 years. 2. Return on Equity (ROE) Year 2011 2010 2009 Costco 12. 81% 12. 50% 11. 31% The Return of Equity is mensural by dividing net profit by total shareholders equity. Return on equity measures a corporations gainfulness by revealing how much profit a company generates with the bullion shareholders. The number above shows that Costco is with stable growth in past 3 years, however, ROE 15% that will attract more investors to invest.Effectiveness Ratios 3. Asset upset Year 2011 2010 2009 Costco 3. 52 3. 40 3. 35 Asset disorderis cipher as sales divided by average total assets. It measuresa firmlys efficiency on using its assets to generate sale. The spiriteder assets turnover is, tells the better the company does. Costcos assets turnover tells us that it did a better lineage in 2011 because the ratio increased 0. 12 compared with 2010 which only grew about 0. 05 . 4. muniment Turnover Year 2011 2010 2009 Costco 12. 67 12. 31 11. 94 Inventory turnover is calculated as COGS divided by average inventory.It measures how many measure per year the company sells its inventory. Firms with a low cost outline compliments a high inventory turnover, while firms with a differentiation strategy will experience a lower inventory turnover. The ratios for Costco are increasing during the three years, and Costco seems to have done a better job in selling their inventory because it sells its inventory faster and faster. Liquidity Ratios 5. Current Ratio Year Aug. , 2011 Aug. , 2010 Aug. , 2009 Costco 1. 14 1. 16 1. 11 The catamenia ratio is calculated by dividing stream assets by current liabilities.This ratio measure if a firm has enough in current assets to cover his current liabilities. The current ratios for Costco have gone up during 2009-2010, and reductiond during 2010-2011. However, the ratio is greater than 1 which means Costco has enough asset s to cover his current liabilities. 6. Quick Ratio Year Aug. , 2011 Aug. , 2010 Aug. , 2009 Costco 0. 55 0. 56 0. 49 The quick ration is calculated by dividing the sum of cash, account receivable and short-term investment by current liabilities. As with the current ration, an analyst would wishing to see a borderline of one for the quick ratio.However, the number above shows that Costcos quick ratio is under 1, which means that Costco is not doing well on its job. It might because Costco has a too big liability to its business or Costco has a slight current asset to cover its liabilities. Solvency ratios 7. Long-Term Debt to Assets Year Aug. , 2011 Aug. , 2010 Aug. , 2009 Costco 0. 05 0. 09 0. 10 The long-run debt to assets is calculated by dividing long-run debt by total assets. This tells us that if a firm can pay its long-term debt. If a firm does not a ability to pay off its long-term debt, shareholder might be left with nothing.The lower long-term debt is the better abilit y a firm has to pay its debt. Costco is doing well by keeping the long-term debt ratio (average) around 0. 08, which means its assets will be enough to pay the long-term debt. 8. Debt to Equity Year Aug. , 2011 Aug. , 2010 Aug. , 2009 Costco 0. 10 0. 20 0. 22 The debt to equity is calculated as dividing total liabilities by total shareholder equity. It tests the ability of the firm to cover its interest payment. The higher the ratio is, the lower the likelihood of default.Costcos debt to equity ratio is quite stable around 0. 10-0. 22 during 2009-2011. compendium According to Costcos 2011 annual report, the Costco Wholesale has a growing rate in making profits. It is one of the largest retailer stores in the global grocery store. Unlike most retail operations, it has built its model around providing only what people want to buy quickly or in volumes that make up for its discounting practices. As the economy has slowed, the warehouse discount strategy has come into focus as the go- to source for both consumers and small business supply needs.Costco and its subsidiary companies are mostly like engaged in the operation of membership warehouses in the United States, Canada, the United Kingdom, Japan, Australia, through majority owned subsidiaries in Taiwan and Korea, and a 50 percent-owned joint venture in Mexico. Costco operates membership warehouses ground on the concept that offering members low prices on a limited dealion of nationally branded and private-label products in a wide range of merchandise categories will produce high sales volumes and rapid inventory turnover, management tell in a new filing.Here are the belligerent advantages and disadvantages for Toyota behindd on our research data and abridgment Competitive Advantages * Know their node Costco goes after a certain vitrine of customer small business owners who are status conscious and who have money to spend on bargain-priced premium items like Dom Perpignan champagne, high life watches and tech gadgets. * Deliver bigger treasure, not just lower prices Costco doesnt just offer low prices, it offers exceptional bargains on elegant, Treat customer service as an investment, not a cost to be toss away Costco has been criticized by some Wall Street analysts for their high labor be and Costco does pay their employees quite well Costco Wholesale SWOT Analysis Strengths Costco Wholesale offers its customers and consumers lowest prices on a wide range of national and world-wide branded products and goods, in a wide arrange of merchandise categories. The products and serve of the Costco Wholesale are reliable as the company deals in best available flavor products at competitive prices.The company pays attention to flesh out and has various strengths that add to its success. These factors include rapid turnover of the inventory, running an efficient operating structure, reduced cost of handling of merchandise and generation of high sales volume at apiece of its store . Costco Wholesale gives preferences to it customers and provides them best value for the money. Weaknesses Costcos business conditions constantly change because external and internal forces make opposite business participants to alter their actions.The driving forces in this sector are the major underlying causes changing business and competitive conditions. Operating on a large scale means difficulty in saving changes to grass root levels Opportunities Costco Wholesale is one of the first companies to have a growing acceptance of internet shopping. Costco created a website in the United States as well as website in Canada to be more effective and competitive in the internet market. The company is constantly working to make its distribution channels stronger and enter new potential markets.By offering value and working more towards developing a strong loyal customer base the company can gain more market share. Threats Warehouse clubs not only compete in one sector or market but i t competes with a wide range of other types of retailers which include Wal-Mart dollar bill General, supermarkets, general merchandise chains, specialty chains, fuel stations and internet retailers. Their battle changes because the different types of products they deal in. Due to its tremors growth and growing market share, the company has caught the attention of many of the market leaders and its competitors.The industry of wholesale has a number of individual companies that are highly competitive and have very effective strategies. They have developed loyal customer bases and everyone is relentlessly scrap for the greatest market share. Costcos major competitors include Wal-Mart. Recommendation 1. let more types of the products. The Costco involved every kind of products in the store, but we can see there are just few types of each product, so the optional become less and less.Every customer wants to the lower price at Costco, but they still want to have more choices on each pr oduct. And every single product just has the biggest packet so that it may cause to the waste. So the member of the Costco doesnt have any choices to select the same product, such as the size, color and so on. 2. Improve the quality of the products. The strategy of Costco is the right products in the right place for the right price, but the right price should be with the good quality, but some customers said the quality of the clothes is not good.We cannot deny that most of the products have the good quality, but the company should check on every product, or just a little customers unsatisfaction will influence all the customers choice. 3. Increase the come in of the stores. The company has 600 locations wide world. In US, there are 433 locations. As an international global company, Costco should develop more location out of the United States so that it can open a new market in the world. For other countries, the customers are still inconvenient to purchase in the Costco. It will decrease the confidence of Costcos members.The Costcos strategy is the right products in the right place for the right price. If the members of other countries doubt the right place, the strategy will be broken. 4. subordinate the prices of some products. The company guarantees the low price and most of the products are, but we still can see a lot of products are more high-priced compare to other stores, especially Jewelry. For most customers can understand that the high quality with the high price, but the huge amount of numbers, such as 12,234. 99 will make the members confuse to the strategy of the company