In: Accounting
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 |
(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.)
(b) Compute net operating assets (NOA) for 2016 and 2015.
(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)
(d) Compute net nonoperating obligations (NNO) for 2016 and 2015
(e) Compute return on equity (ROE) for 2016. (Do not round until final answer. Round answer two decimal places)
(f) Infer the nonoperating return component of ROE for 2016. (Use answers from above to calculate. Round two decimal places.)
Answer a
Net operating profit after tax
Operating Income |
3,672 |
|
Less: Income Tax as per income statement |
-1,243.00 |
|
Less: Tax on Interest Expenses (133*0.37) |
-49.21 |
|
Add: Tax on Interest Income (80*0.37) |
29.60 |
-1262.61 |
Net Operating Profit after tax |
2409.39 |
|
Net Operating Profit after tax Round off |
2409 |
Answer b
Net Operating Assets:
Operating Assets – Operating Liabilities
Operating Assets = Total Assets – Cash and Cash equivalents- Short term investment
Operating Liabilities =Total Liabilities – Short term debt –Long term debt
August 28,2016 |
August 30,2015 |
|
Operating Assets |
||
Total Assets |
33,163 |
33,017 |
Less: Cash and Cash equivalents |
-3,379 |
-4,801 |
Less: Short term investment |
-1,350 |
-1,618 |
Total Operating Assets |
28,434 |
26,598 |
Operating Liabilities |
||
Total Liabilities |
20,831 |
22,174 |
Less: Short term debt |
-1,100 |
-1,283 |
Less: Long term debt |
-4,061 |
-4,852 |
Total Operating Liabilities |
15,670 |
16,039 |
Net Operating Assets |
12,764 |
10,559 |
C. RNOA (Return on Net operating assets): Net operating Income/Average of Net operating assets
Average of Net operating assets: 12764+10559/2
: 11,661.50
RNOA: 2409/11661.50
: 0.2066 or 20.66%
NOPM (Net operating Profit Margin): Operating Profit/Revenue
: 2409/118719
: 0.0202 or 2.02%
Net Operating Assets Turnover (NOAT): Revenue/Average Net Assets
: 118719/11661.50
: 10.18
d) Non-operating obligations
August 28,2016 |
August 30,2015 |
|
Short Term Debt |
1,100 |
1,283 |
Long Term debt |
4,061 |
4,852 |
Less: Cash and Cash Equivalents |
-3,379 |
-4,801 |
Less: Short term investment |
-1,350 |
-1,618 |
Non-operating Obligations |
432 |
-284 |
e) Return on equity: Net Income/Average Equity
Average Equity: (12,332+10,843)/2
: 11,587.50
ROE = 2,350/11587.50
= 0.2028 or 20.28%
f) Non-operating return component in ROE 2016
= Financial Leverage * spread (RNOA –NNEP)
Financial Leverage: Total Debt/Total Equity
= (1100+4061)/12332
=0.4185
Non-Operating expenses (NNE) = NOPAT –Net Income
= 2409-2350
= 59
NNO = 432
NNEP = NNE/NNO
= 59/432
=13.66%
Spread = (20.66-13.66)
=7%
Non-Operating return = 0.4185*7%
=2.93%