Question

P3-50. Analysis and Interpretation of Profitability Balance sheets and income statements for Costco Wholesale Corporation follow Aug. 30. 2015 Aug. 31, 2014 $113.666 2.533 116.199 $110.212 2.428 112.540 COSTCO WHOLESALE CORPORATION Consolidated Statements of income Aug. 20 For Fiscal Years Ended (5 millions) 2016 Revenue Net sales. $116.073 Membership fees. Total revenue. 118,719 Operating expenses Merchandise costs... 102 901 Selling, general and administrative...... 12.058 Preopening expenses............ Operating income.. 3.672 Other Income (expense) Interest expense..... . (1339 Interest Income and other net.... .. Income before taxes .......... Provision for income taxes..... . Net income including noncontrolling Interests. Net Income attributable to noncontrolling interests 2350 Net Income attributable to Costco 101.055 11.445 9452 10.899 3.624 3.220 124 COSTCO WHOLESALE CORPORATION Consolidated Balance Sheets Aug. 28, 2016 Aug. 30, 2015 $ millions, except par value and share data Assets Current assets Cash and cash equivalents... Short-term investments ... Receivables, not .......... Merchandise inventories... . Other current assets.... Total current assets.... $ 3.379 1.350 1.2.52 8.959 268 $ 4,801 1.618 1.224 8.908 228 15,218 16.779 4.961 12.618 5,274 811 Property and equipment Land. Buildings and improvements.. Equipment and fixtures......... Construction in progress.... Gross property and equipment...... Less accumulated depreciation and amortization .... Net property and equipment... Other assets......... Total assets...... 5,395 13.994 6,077 701 26, 167 (9.124 17.013 902 $33,163 23,664 (8.263 15,401 837 $33,017 continued

Answer 1

a.) The NOPAT( Net operating profit after tax ) = EBIT * (1- T)

where EBIT = Earning before Interest and Tax = operating Income

and T= tax rate = 37%

So NOPAT= operating Income * (1-0.37)

NOPAT = $3672* 0.63 = $2313.26

b) NOA= All assets of the company - all liabilities - all financial assets ( cash and investments) + all financial liabilities (short and long term debt)

For 2015

NOA = $33017-$22174 - (4801+1618) + (4852+1283)

NOA = $10,559

For 2016

NOA = $33163 -$20,831 - (3379+1350 ) + (1100 + 4061)

NOA = $33163- $20831- 4729 +5161

NOA = $12764

c ) RNOA = NOPAT/ Average Net operating Assets

Average NOA = (12764+10559 )/ 2 = 11661.5

For 2016,

RNOA = 2313.6/11661.5

RNOA = 0.1983= 19.83%

Net operating profit margin = Net operating profit after tax / Revenue

Net operating Profit margin (NOPM)= 2313.6 /118719 = 0.01948= 1.948%

Net operating asset turnover(NOAT) = Revenue / NOA

NOAT= 118719/11661.5  = 10.180%

Now

NOAT* NOPM = 10.180 %* 1.948% = 19.831 % = RNOA

Hence Proved

d) Net non operating obligations is defined as excess of debt over investments in non operating assets . It can be either positive or negative

for 2015 =NNO = Debt - Investment = (1283+4852 )- (1618+4801 ) = - 284

for 2016 ,NNO=  Debt - Investment and cash  = (1100+4061) -(3379 +1350) = 432

Now for 2015, Total Equity+ NNO = 10843-284 = 10559 = NOA (net operating assets )

for 2016 , Total Equity + NNO = 12332 + 432 = 12764 = NOA ( net operating assets )
Hence Proved

P.S. As per HOMEWORKLIB RULES only 4 parts are allowed in one question , please post this as separate parts and i would be happy to help , Please Rate.