1. Evaluate Costco's financial performance based on the given tarios and common size statement.

2. Any suggestions on how to improve the performance?

Exhibit 10 Margarita Torres: Sustainable Growth Model for Costco (1997-2001) 2001 Sustainable Growth Model (millions) 2000 1999 1998 1997 Net Income Owners Equity Return on Equity (ROE) 602 4,240 2,468 18.6% 2,966 NA 17.9% Dividend Net Income Dividend Payout Earnings Retention Ratio 602 100% 602 515 100% 515 460 100% 100% 100% Net Income 8,634 7,505 5,476 Return on Assets (ROA) 7,505 3,532 6,260 2,966 5,476 2,468 8,634 Owner's Equity Financial Leverage Net Income 602 34,797 1.73% 32,164 1.96% 27,456 1.88% 24,270 1.90% 21,874 1 .43% es Net Margin (Return on Sales) 27,456 34,797 8,634 32,164 7,505 4.29 24,270 5,476 21,874 NA es Asset Turnover 4.39 1,052 32,164 3.27% 859 27,456 3.13% 766 24,270 3.16% Pretax Income (continuing operations) 34,797 2.88% 520 21,874 2.38% es Pretax Return on Sales Pretax Income (continuing operations) Taxes Tax Rate Tax Effect (1 - Tax Rate) 766 306 399% 520 208 40.0% 60.0% 1,052 859 40.0% 60.0% 40.0% 60.0% 40.0% 60.0% 0 1999 net income figures used for calculation are before cumulative effect of account change