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) 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, ne (121) Income before income taxes 4,442 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

Answer 1

a) Net Operating Profit After Tax (NOPAT) = Earnings Before Interest and Tax (EBIT) * [1-tax rate]

where EBIT is the Operating Income = $4,480 millions

Tax Rate (t) = 22%

NOPAT = $4,480 * (1 - 0.22)

= $4,480 * 0.78

= $3,494.4 OR $3,494 millions

b) Net Operating Assets (NOA) = Total Assets - Total Liabilities - Financial Assets (cash and investyments) + Financial liabilities (Short and long term debt)

For 2017:

NOA = $36,347 - $25,268 - ($4,546 + $1,233) + $6,573

= $11,873 millions

For 2018:

NOA = $40,830 - $27,727 - ($6,055 + 1,204) + $6,487

= $12,331 millions

c) For 2018:

RNOA = NOPAT / Average Net Operating Assets

where Average net operating assets = ($11,873 + $12,331) / 2 = $12,102 millions

RNOA = $3,494.4 / $12,102

= 0.2887 = 28.87%

(NOTE:In the relation of NOPM * NOAT = RNOA , the RNOA will be slightly changed due to the rounding off decimal places)

NOPM (Net Operating Profit Margin) = NOPAT / Total Revenue

= $3,494.4 / $141,576

= 0.02468

= 2.47%

NOAT (Net Operating Assets Turnover) = Total Revenue / Average NOA

= $141,576 / $12,102

= 0.11698

= 11.70 %

d) Net Nonoperating Obligations (NNO) is the diferrence between the debt and investment and cash present in non operating assets of the company.

For 2017:

NNO = Debt - (Investment + Cash)

= $6,573 - ($1,233 + $4,546)

= $794 millions

For 2018:

NNO = Debt - (Investment + Cash)

= $6,487 - ($1,204 + $6,055)

= -$772 millions

Now,confirmimg the relation NOA = NNO + Total Equity

For 2017 :

$11,873 = $11,079 + $794 (Confirmed)

For 2018:

$12,331 = $13,103 + (-$772)

$12,331 = $13,103 - $772 (Confirmed)

[NOTE: As per Chegg guidelines first four parts are allowed in one question . Kindly post the remaining parts separately again I would love to help,Thank You :) ]