Analysis and Interpretation of Liquidity and Solvency Balance sheets and income statements for Costco Wholesale Corportation follow. Consolidated Statements of Earnings For Fiscal Years Ended ($ millions) September 1, 2013 September 2, 2012 August 28, 2011 Revenue Net Sales $102,870 $97,062 $87,048 Membership fees 2,286 2,075 1,867 Total revenue 105,156 99,137 88,915 Operating expenses Merchandise costs 91,948 86,823 77,739 Selling, general andadministrative 10,104 9,518 8,691 Preopening expenses Operating Income 3,053 2,759 2,439 Other income (expense) Interest expense (99) (95) (116) Interest income and other, net Income before income taxes 3,051 2,767 2,383 Provision for income taxes 990 1,000 Net income including noncontrolling interests 2,061 1,767 1,542 Net income attributable to noncontrolling interests (22) (58) (80) Net income attributable to Costco $ 2,039 $ 1,709 $ 1,462 51 37 46 97 103 60 841 September 1, 2013 September 2, 2012 Consolidated Balance Sheets ($ millions, except par value and share data) Assets Current assets Cash and cash equivalents Short-term investments Receivables, net Merchandise inventories Deferred income taxes and other current assets Total current assets Property and equipment Land Buildings and improvements Equipment and fixtures Construction in progress $4,644 1,480 1,201 7,894 $3,528 1,326 1,026 7,096 621 550 15,840 13,526 4,409 11,556 4,472 585 21,022 (7,141) 13,881 4,032 10,879 4,261 374 19,546 (6,585) 12,961 562 653 $ 30,283 $ 27,140 $ 7,872 2,037 710 $ 7,303 1,832 661 Less accumulated depreciation and amortization Net property and equipment Other assets Total assets Liabilities and equity Current liabilities Accounts payable ccrued salaries and benefits Accrued member rewards Accrued sales and other taxes Deferred membership fees Other current liabilities Total current liabilities Long-term debt, excluding current portion Deferred income taxes and other liabilities Total liabilities Equity Preferred stock, $0.005 par value: 382 1,167 1,089 13,257 4,998 1,016 19,271 397 1,101 966 12,260 1,381 981 14,622 0 0 2 Equity Preferred stock, $0.005 par value: 100,000,000 shares authorized; no shares issued and outstanding Common stock, $0.005 par value: 900,000,000 shares authorized; 436,839,000 and 432,350,000 shares issued and outstanding Additional paid-in-capital Accumulated other comprehensive (loss) income Retained earnings Total Costco stockholders' equity Noncontrolling interests Total equity Total liabilities and equity 4,670 (122) 6,283 10,833 179 2 4,369 156 7,834 12,361 157 11,012 12,518 $ 27,140 $ 30,283 (a) Compute Costco's current ratio and quick ratio for 2013 and 2012. (Round answers two decimal places.) 2013 current ratio = 1.19 2012 current ratio = 0 2013 quick ratio = 0 2012 quick ratio = 0 (b) Compute Costco's times interest earned and its liabilities-to-equity ratios for 2013 and 2012. (Round answers two decimal places.) 2013 times interest earned = 0 2012 times interest earned = 0 2013 liabilities-to-equity = 0 2012 liabilities-to-equity = 0 (c) Which of the following statements best describes Costco's liquidity or solvency? OCostco's liabilities-to-equity ratio increased during 2013 thus its solvency has improved. OCostco's times interest earned is exceptionally high thus there is concern for Costco's solvency. OCostco's quick and current ratios slightly increased therefore its liquidity has declined. Costco's times interest earned is exceptionally high thus solvency is not a concern
