1. a. Using the information for Costco, complete the table below (use 4 decimals). Use Net Income including noncontrolling interests and Total equity. __2020_ 2019 % Change Net Profit Margin Total Asset Turnover Equity Multiplier Return on Stockholders' Equity Use your ratios, and their percentage changes, to explain the change in Costco's ROE over the two-year period. Discuss the impact that each ratio had on the change in the return on stockholders' equity. Which ratio impacted the ROE change the most? You don't need to explain why the ratios changed, only how their changes affected ROE. Did you like what caused the change in ROE? Explain. (8) b. The net profit margin shows the net result of what happens from the top to the bottom of the income statement. It can be written as the product of 3 ratios, with EBIT = Operating Income and EAT-Net Income including noncontrolling interests. EAT EBT EBIT NPM X X EBT EBIT Sales Use these ratios, and their percentage changes, to explain the change in Costco's net profit margin from 2019 to 2020. (5) C. Calculate Costco's Total Debt Ratio for the 2 years, and its percentage change. Show and use a ratio to explain why this debt ratio is not risky. COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (amounts in millions, except per share data) 52 Weeks Ended August 30, 2020 52 Weeks Ended September 1, 2019 52 Weeks Ended September 2, 2018 $ 163,220 3,541 166,761 149,351 3,352 152,703 138,434 3.142 141,576 144.939 16,332 55 5,435 132.886 14,994 86 4,737 123. 152 13,876 68 4,480 REVENUE Net sales Membership fees Total revenue OPERATING EXPENSES Merchandise costs Seling, general and administrative Preopening expenses Operating income OTHER INCOME (EXPENSE) Interest expense Interest income and other net INCOME BLFORE INCOME TAXES Provision for income taxes Net Income including noncontrolling interests Net Income attributable to noncontrolling interests NET INCOME ATTRIBUTABLE TO COSTCO NET INCOME PER COMMON SHARE ATTRIBUTABLE TO COSTCO: (160) 92 5,367 1,308 4,050 (150) 178 4,765 1,061 3,704 (159) 121 4442 1.263 3.179 (45) 3.134 4,002 3.059 0.05 9.02 5 $ 8.32 8.26 $ $ Diluted Shares de 7.09 442,297 443,901 439,755 439,515 COSTCO WHOLESALE CORPORATION CONSOLIDATED BALANCE SHEETS (amounts in millions, except par value and share data) August 30, 2020 September 1, 2019 12,277 1,028 1,550 12,242 1,023 28,120 8.384 1,050 1.535 11 395 1 111 23.485 20,890 21,807 2,788 2,841 55,556 1,025 45.400 $ ASSETS CURRENT ASSETS Cash and cash equivalents Short-term investments Receivables, net Merchandise Inventories Other current assets Total current assets OTHER ASSETS Property and equipment, net Operating teaserah-of-use assets Other long-term assets TOTAL ASSETS LIABILES AND EQUITY CURRENT LIABILITIES Accounts payable Accrued salaries and benefits Accrued member rewards Deferred membership fees Current portion of long-term debt Other current liabilities Total currenties OTHER LIABILITIES Long-term debt, excluding current portion Long-term operating lease abilities Other long-term abilities TOTAL LIABILITIES COMMITMENTS AND CONTINGENCIES EQUITY Preferred stock 0.01 par Value 100,000,000 shares authorized, no share issued and outstanding Common stock 50.01 par value: 900.000.000 shares authorized: 445.255.000 and 439.625.000 shares Issued and outstanding Additional palo-In CAPIUN Accumulated other comprehensive loss Retained earnings Total Costco stockholders' equity Noncontrolling interests Toalequity TOTAL LIABILITIES AND EQUITY 14,172 3,605 1,393 1.851 95 3.728 24,844 11.679 3176 1.180 1.711 1,699 3.792 23.237 5.124 7,514 2.558 1.935 36,851 1.455 29.816 6,698 (1.297) 12,879 19,284 421 18.705 55.556 6.417 (1436) 10.258 15.243 341 15.584 45.400
