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Costco Wholesale Corporation Consolidated Statements of Earnings For Fiscal Years Ended ($ millions) August 28, 2016...

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 78 65 63
Operating Income 3,672 3,624 3,220
Other income (expense)
Interest expense (133) (124) (113)
Interest income and other, net 80 104 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 $2,058
Costco Wholesale Corporation
Consolidated Balance Sheets
($ millions, except par value and share data) August 28, 2016 August 30, 2015
Assets
Current assets
Cash and cash equivalents $3,379 $4,801
Short-term investments 1,350 1,618
Receivables, net 1,252 1,224
Merchandise inventories 8,969 8,908
Deferred income taxes and other current assets 268 228
Total current assets 15,218 16,779
Property and equipment
Land 5,395 4,961
Buildings and improvements 13,994 12,618
Equipment and fixtures 6,077 5,274
Construction in progress 701 811
Gross property and equipment 26,167 23,664
Less accumulated depreciation and amortization (9,124) (8,263)
Net property and equipment 17,043 15,401
Other assets 902 837
Total assets $33,163 $33,017
Liabilities and equity
Current liabilities
Accounts payable $7,612 $9,011
Current portion long-term debt $1,100 $1,283
Accrued salaries and benefits 2,629 2,468
Accrued member rewards 869 813
Deferred membership fees 1,362 1,269
Other current liabilities 2,003 1,695
Total current liabilities 15,575 16,539
Long-term debt, excluding current portion 4,061 4,852
Other liabilities 1,195 783
Total liabilities 20,831 22,174
Equity
Preferred stock, $0.005 par value:
100,000,000 shares authorized; no shares issued and outstanding 0 0
Common stock, $0.005 par value:
900,000,000 shares authorized;
437,524,000 and 437,952,000 shares issued and outstanding 2 2
Additional paid-in-capital 5,490 5,218
Accumulated other comprehensive loss (1,099) (1,121)
Retained earnings 7,686 6,518
Total Costco stockholders’ equity 12,079 10,617
Noncontrolling interests 253 226
Total equity 12,332 10,843
Total liabilities and equity $33,163 $33,017


HINT: For Sales use "Total revenues" for your computations, when applicable.

(a) Compute net operating profit after tax (NOPAT) for 2016. Assume that the combined federal and state statutory tax rate is 37%. (Round to the nearest whole number.)

2016 NOPAT = Answer ($ millions)


(b) Compute net operating assets (NOA) for 2016 and 2015.

2016 NOA = Answer ($ millions)

2015 NOA = Answer ($ millions)


(c) Compute Costco’s RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2016. (Do not round until final answer. Round two decimal places. Do not use NOPM x NOAT to calculate RNOA)

2016 RNOA = Answer %

2016 NOPM = Answer %

2016 NOAT = Answer

(d) Compute net nonoperating obligations (NNO) for 2016 and 2015.

2016 NNO = Answer ($ millions)

2015 NNO = Answer ($ millions)


(e) Compute return on equity (ROE) for 2016. (Do not round until final answer. Round answer two decimal places)

2016 ROE = Answer%


(f) Infer the nonoperating return component of ROE for 2016. (Use answers from above to calculate. Round two decimal places.)

Answer%

Solutions

Expert Solution

a) 2016 NOPAT =3672*(1-37%)= $ 2313.36 millions
b) Net Operating assets= Net assets-Financial assets(Cash &Short-term Investments)+Long term debt & other long-term liabilities
Net assets= Total stockholders' equity
2016 2015
Total stockholders' equity $      12,332 $      10,843
Less:
Cash & Equiv. $      (3,379) $      (4,801)
ST Inv. $      (1,350) $      (1,618)
Add:
LT Debt $         4,061 $         4,852
Other LT Liab. $         1,195 $            783
Net Operating Assets(NOA) $      12,859 $      10,059
c) 2016 RNOA=NOPAT/(Av. NOA)
2313.36/((10059+12859)/2)
20.19%
2016 NOPM= NOPAT/Total revenue
=2313.36/118719
=1.95%
2016 NOAT=Total revenues/Av. NOA
118719/((10059+12859)/2)
10.36
d) Net non-operating obligations 2016 2015
Cash & Equiv. $         3,379 $         4,801
ST Inv. $         1,350 $         1,618
Less:
LT Debt $      (4,061) $      (4,852)
Other LT Liab. $      (1,195) $          (783)
NNO $          (527) $            784
e) ROE= Net Income/Av. stockholders' equity
2350/((12332+10843)/2)=
20.28%
f) Non-operating return component of ROE for 2016
20.28%-20.19%=
0.09%

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