ACC 561 - Accounting
July 25, 2013
COSTCO Wholesale began operations as a big box warehouse retailer in 1983. Today, the company has grown to over 622 warehouses spread over 41 states, Puerto Rico, Canada, Mexico, United Kingdom, Japan, Korea, Taiwan, and Australia The company has grown rapidly through the years and generates $97 billion dollars annually (COSTCO Wholesale, 2012). Our team conducted a financial review of the company vertical analysis, horizontal analysis, profitability rations, solvency rations, market ratios, growth, and analysts projected growth. Costco is a healthy growing company with a bright future.
Two Year Vertical Analysis
A two year vertical analysis was conducted for the annual income statement. “Vertical analysis is a technique for evaluating financial statement data that expresses each item in a financial statement as a percentage of a base amount” (Kimmel, Weygandt, & Kieso, 2011, p. 696). This analysis shows that COSTCO has kept expenses level over the last two years. The results are shown on the preceding page.
Two Year Horizontal Analysis
A two year horizontal analysis was conducted for the annual income statement. Horizontal analysis evaluates financial data over time (Kimmel, Weygandt, & Kieso, 2011). This analysis shows that COSTCO grew its sales, membership, and income over the last two years.
The last three years of net income/sales was analyzed using the profitability ratio. A profitability ratio measures the success of the company or its profitability for a set period of time (Kimmel, Weygandt, & Kieso, 2011). The profitability ratio for COSTCO over the last two years was found to be 0.017239 for 2012 and 0.016443 for 2011. This ratio shows that COSTCO’s profitability has increased slightly from 2011 to 2012 meaning they were slightly more successful in 2012 than 2011.
A review of COSTCO’s solvency ratio...