Analysis and Interpretation of Liquidity and Solvency Balance sheets and income statements for Co...

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Analysis and Interpretation of Liquidity and Solvency Balance sheets and income statements for Costco Wholesale Corporation follow. Costco Wholesale Corporation Consolidated Statements of Earnings For Fiscal Years Ended ($ millions) September 2, 2018 Total revenue $141,576 Operating expenses Merchandise costs 123,152 Selling, general and administrative 13,876 Preopening expenses Operating Income 4,480 Other income (expense) Interest expense Interest income and other, net (121) Income before income taxes 4,442 Provision for income taxes 1,263 Net income including noncontrolling interests 3,179 Net income attributable to noncontrolling interests (45) Net income attributable to Costco $3,134 68 159 Costco Wholesale Corporation Consolidated Balance Sheets ($ millions, except par value and share data) September 2, 2018 September 3, 2017 Current assets Cash and cash equivalents $6,055 $4,546 Short-term investments 1,204 1,233 Receivables, net 1,669 1,432 Merchandise inventories 11,040 9,834 Other current assets 321 272 Total current assets 20,289 17,317 Net property and equipment 19,681 18,161 Other assets 860 869 Total assets $40,830 $36,347 Current liabilities Accounts payable $11,237 $9,608 Accrued salaries and benefits 2,994 2.703 Accrued member rewards 1,057 961 Deferred membership fees 1,624 1,498 Other current liabilities 3,014 2,725 Total current liabilities 19,926 17,495 Long-term debt 6,487 6,573 Other liabilities 1,314 1,200 Total liabilities 27,727 25,268 Equity Preferred stock. $0.01 par value: 0 0 Common stock, $0.01 par value: 4 Additional paid-in-capital 6,107 5,800 Accumulated other comprehensive loss (1,199) (1,014) Retained earnings 7,887 5,988 Total Costco stockholders' equity 12,799 10,778 Noncontrolling interests 304 301 Total equity 13,103 11,079 Total liabilities and equity $40,830 $36,347 4 (a) Compute Costco's current ratio and quick ratio for 2018 and 2017. (Round answers two decimal places.) 2018 current ratio = 0 2017 current ratio = 0 2018 quick ratio = 0 2017 quick ratio = 0 (b) Compute Costco's times interest earned and its liabilities-to-equity ratios for 2018 and 2017. In 2017, Costco reported earnings before interest and tax (EBIT) of $4,111 million and interest expense of $134 million. (Round answers two decimal places.) 2018 times interest earned = 0 2017 times interest earned = 0 2018 liabilities-to-equity = 0 2017 liabilities-to-equity = 0 (c) Summarize your findings about the company's liquidity and solvency. Do you have any concerns about Costco's ability to meet its debt obligations? Costco's liabilities-to-equity ratio decreased thus its solvency has declined. Costco's times interest earned is high thus there is concern for Costco's solvency. Costco's quick and current ratios slightly increased therefore its liquidity has declined. Costco's times interest earned ratio is high thus solvency is not a concern for Costco