Question

Analysis and Interpretation of Profitability Balance sheets and income statements for Costco Wholesale Corporation follow. Costco Wholesale Corporation Consolidated Statements of Earnings For Fiscal Years Ended ($ millions) August 28, 2016 August 30, 2015 August 31, 2014 Revenue Net Sales $116,073 $113,666 $110,212 Membership fees 2,646 2,533 2,428 Total revenue 118,719 116,199 112,640 Operating expenses Merchandise costs 102,901 101,065 98,458 Selling, general and administrative 12,068 11,445 10,899 Preopening expenses 63 Operating Income 3,672 3,624 3,220 Other income (expense) Interest expense (133) (124) (113) Interest income and other, net 104 90 Income before income taxes 3,619 3,604 3,197 Provision for income taxes 1,243 1,195 1,109 Net income including noncontrolling interests 2,376 2,409 2,088 Net income attributable to noncontrolling interests (26) (32) (30) Net income attributable to Costco $2,350 $2,377 $2,058 78 65 80

Answer 1

Part - 1

NOPAT = EBIT *(1- Tax rate)

= 3,752 * (1-0.37)

= 3,752*(0.63)

= 2,364 ($ million ) rounded off

Part - 2

Net operating assets = Operating assets - operating liabilities

NOA (2015) = 46,330 - 20,831

= 25,499 ($ million)

NOA (2016) = 47,367 - 22,174

= 25,193 ($ million)

* Short term investment and Construction in progress will be excluded from operating assets.

Part- 3

RNOA = (NOPAT/ Average NOA )*100

= (2,274.35/25,346)*100

= 9%

Average assets = (25,499+25,193)/2

= 25,349

* Non controlling interest and interest will not be included.

NOPM = (Operating Profit/ sales) * 100

= (3,513/116,073)* 100

= 3%( Rounded off)

*Non controlling interest and interest will not be included.

NOAT = Revenue/ Average NOA

= 118,719/ 25,193

= 4.71

= 5 (Rounded off)