Analysis and Interpretation of Profitability Balance sheets and income statement

Question

Analysis and Interpretation of Profitability Balance sheets and income statements for Costco Wholesale Corporation follow. P4-45. COSTCO WHOLESALE CORPORATION Consolidated Statements of Income Aug. 28, 2016 Aug. 30, 2015 Aug. 31, 2014 For Fiscal Years Ended ($ millions) Revenue $116,073 $113,666 $110,212 2,428 2,533 Operating expenses ....102,901 101,065 11,445 65 98,458 10,899 63 78 3,672 3,624 3,220 Other income (expense) (133) 80 (124) 104 (113) 90 Interest income and other, net . . . .. 3,604 1,195 2,409 3,197 1,109 2,088 3,619 Net income including noncontrolling interests . . . . .. Net income attributable to noncontrolling interests . . . 2,376 26 $ 2.350 $ 2.377 5 2,088

Explanation / Answer

a. NOPAT = operating Income X (1-Tax rate) = 3,672 x (1-0.37)

For Fiscal Year ended August 28, 2016 ($ Millions) = $ 2,313.36 Millions

b. Net Operating Assets = Operating assets - Operating Liabilities

where Operating assets = Total Assets - Cash & Investments

Operating Liabilities = Total Liabilities - Long Term Debt - Current Portion of Long term debt (CPLTD)

For the Fiscal Year Ended($ Millions) Aug. 28, 2016 Aug. 30, 2015

i.Total Assets 33,163 33,017

ii.Cash 3,379 4,801

iii.Investments 1,350 1,618

Operating Assets (i-ii-iii) 28,434 26,598

iv. Total Liabilities 20,831 22,174

v. Long Term Debt (LTD) 4,061 4,852

vi. Current Portion of Long Term Debt 1,100 1,283

Operating Liabilities 15,670 16,039

Net Operating Assets 12,764 10,559

c. Return on Net Operating Assets (RNOA) = Net Operating Profit Margin (NOPM) X Net Operating Asset Turnover (NOAT)

G. NOPAT 2,313

H. Total revenue 1,18,719

NOPM (G/H) 1.95%

J. Revenues 1,18,719

I. Average Net Operating Assets 11,661.50

NOAT (I/J) 10.18

((Net Operating Assets for Fiscal year 16 + Net Operating Assets for fiscal year 15)/2)

RNOA = NOPM X NOAT 19.84%

RNOA = NOPAT/Average Non Operating Assets 19.84%

e. Return on Equity = Net Income/Total Equity =2,376/12,332 = 19.27%

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