1. Using the financial ratios provided in Table 4.1 and the financial statement information presented below for Costco Wholesale Corporation, calculate the following ratios for Costco for both 2013 and 2014: a. Gross profit margin b. Operating profit margin c. Net profit margin d. Times-interest-earned (or coverage) ratio e. Return on stockholders' equity f. Return on assets g. Debt-to-equity ratio h. Days of inventory i. Inventory turnover ratio j. Average collection period Based on these ratios, did Costco's financial performance improve, weaken, or remain about the same from 2013 to 2014? 2014 2013 Net sales $110,212 $102,870 Membership fees 2,428 2,286 Total revenue 112,640 105,156 Merchandise costs 98,458 $ 91,948 Selling, general, and administrative 10,899 10,155 Operating income 3,220 3,053 Other income (expense) Interest expense (113) (99) Interest income and other, net 90 97 Income before income taxes 3,197 3,051 Provision for income taxes 1,109 990 Net income including noncontrolling interests 2,088 2,061 Net income attributable to noncontrolling interests (30) (22) Net income $ 2,058 $ 2,039 Basic earnings per share $ 4.69 $ 4.68 Diluted earnings per share $ 4 4.65 $ 4.63 August 31,2014 September 1, 2013 Assets Current Assets Cash and cash equivalents $ 5,738 $ 4,644 Short-term investments 1,577 1,480 Receivables, net 1,148 1,026 Merchandise inventories 8,456 7,894 Deferred income taxes and other current assets page 116 669 621 Total current assets 17,588 $ 15,840 Property and Equipment Land $ 4,716 $ 4,409 Buildings and improvements 12,522 11,556 Equipment and fixtures 4,845 4,472 Construction in progress 592 585 22,675 21,022 Less accumulated depreciation and amortization (7,845) (7,141) Net property and equipment 14,830 13,881 Other assets 606 562 Total assets $ 33,024 $ 30,283 Liabilities and Equity Current Liabilities Accounts payable $ 8,491 $ 7,872 Accrued salaries and benefits 2,231 2,037 Accrued member rewards 773 710 Accrued sales and other taxes 442 382 Deferred membership fees 1,254 1,167 Other current liabilities 1,221 1,089 Total current liabilities 14,412 13,257 Long-term debt, excluding current portion 5,093 4,998 Deferred income taxes and other liabilities 1,004 1,016 Total liabilities 20,509 $ 19,271 Commitments and Contingencies Equity Preferred stock $0.005 par value; 100,000,000 shares authorized; no shares issued and outstanding 0 0 Common stock $0.005 par value; 900,000,000 shares authorized; 436,839,000 and 432,350,000 shares issued and outstanding 2. 2 Additional paid-in capital $ 4,919 $ 4,670 Accumulated other comprehensive (loss) me (76) (122) Retained earnings 7,458 6,283 Total Costco stockholders' equity 12,303 10,833 Noncontrolling interests 212 179 Total equity 12,515 11,012 Total Liabilities and Equity $ 33,024 $ 30,283
