Costco Accounting

A.

1. (dollars in millions for all)

A.

2010 Profit Margin = 1,303 / 76,255 = .017

Net Inc Net sales

2011 Profit Margin = 1,462 / 88,915 = .016

B. Total Asset Turnover = 3.32

2011 88,915 sales

26,761 total ending assets

2010 = 3.27

77,946 / 23,815

C. Leverage = 2.22

2011 26,761 total ending assets

12,002 total ending shareholder equity

2010 = 2.19

23,815 / 10,829

D. ROA = .0546

2011 1,462 net income

26,761 total ending assets

2010 = .0547

1,303 / 23,815

E. ROE = .1218

2011 1,462 net income

12,002 shareholder equity

2010 = .12

1,303 / 10,829

ROA tells us how efficient Costco is at earning returns per dollar of assets, whereas ROE tells us how well Costco uses the invested capital. The ROA is going to typically fluctuate a lot more than equity because total assets can change drastically while equity usually stays pretty consistent. It’s also worth noting that Costco has a very high assets turnover ratio, which means that they are selling their products very quickly. Looking at trends from 2010 to 2011, it appears as though Costco is moving in a positive direction because ROE, Turnover and Profit margin have all increased during this period of time.

A.

2.

A.

Same store sales are important to investors because they help determine what portion of new sales has come from sales growth and what portion can be attributed to the opening of new stores.

B.

Of the 10% increase they noted that the strengthening of foreign currency and gasoline prices positively affected that 10%, excluding these effects gives Costco only an 8% increase.

C.

In the introduction we are given the information that there are 598 total Costcos in 2011. In the question we are given the information that the Mexico store sales are excluded from the 14.2% figure and...