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 (5 millions) September 2, 2018 Total revenue $141,576 Operating expenses Merchandise costs 123,152 Selling general and administrative 13,876 Preopening expenses 68 Operating Income 4,480 Other Income (expense) Interest expense 159 Interest income and other, net (121) Income before income taxes Provision for income taxes 1,263 Net income including noncontrolling interests 3,179 Net income attributable to noncontrolling interests () (45) Net income attributable to Costco $3.134 Costco Wholesale Corporation Consolidated Balance Sheets (5 millions, except par value and share data) September 2, 2018 September 3, 2017 Current assets Cash and cash equivalents $6,055 $4,546 Short-term investments 1,204 1,233 Receivables, net 1,432 Merchandise inventories 11,040 9,834 Other current assets 321 272 Total current assets 20,289 17,317 Net property and equipment 19,681 18,161 Other assets 860 869 Total assets 540.830 $36,347 Current liabilities Accounts payable $11,237 $9,608 Accrued salaries and benefits 2,994 2,703 Accrued member rewards 1,057 961 Deferred membership fees 1,624 1,498 Other current liabilities 3,014 2,725 Total current liabilities 19,926 17,495 Long-term debe 6,487 6,573 Other liabilities 1,314 1,200 Total liabilities 27,727 25,268 Equity Preferred stock, $0.01 par value: 0 0 . Common stock, 30.01 par value: 4 Additional paid-in-capital 6,107 5,800 Accumulated other comprehensive loss (1.199) (1.014) Retained earnings 7,887 5,988 Total Costco stockholders' equity 10,778 Noncontrolling interests 304 301 Total equity 13,103 Total liabilities and equity $ $40,830 536,347 4 12,799 11.079 (a) Compute net operating profit after tax (NOPAT) for 2018. Assume that the combined federal and state statutory tax rate is 22%. (Round your answer to the nearest whole number.) 2018 NOPAT = 3,206 * ($ millions) (b) Compute net operating assets (NOA) for 2018 and 2017. 2018 NOA = 0 X ($ millions) 2017 NOA = 0 * ($ millions) (c) Compute Costco's RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2018. (Do not round until final answer. Round two decimal places. Do not use NOPMX NOAT calculate RNOA) 2018 RNOA = 26.52 2018 NOPM - 0 X % 2018 NOAT = 0 x X

Answer 1

a) NOPAT = Operating income- Tax(22%)

2018 NOPAT= $4480- 22%Of 4480

= $3494

b) Net operating Assets= Operating Assets - Operating liabilites

2018 NOA= ($40830-$6055-$1204) - ( $27727-$6487) = $12331

2017 NOA=($36347-$4566-$1233) - ($25268-$6573) = $11853

Operating Assets= Total Assets- Non Operating Assets( cash& cash equivlants, short term investments)

Operating liabilites= Tota liabilities- Non Operating liabilites( long term debt)

c) NOPM = Net operating profit after tax/ Sales*100

NOAT= Sales/ Net operating assets

2018 NOPM = $3494.4/$141576*100 = 2.46%

2018 NOAT= $141576/$12331 = 11.48 times