Analysis and Interpretation of Profitability Balance sheets and income statements for Costco Wholesale Corporation follow.

Costco Wholesale Corporation
Consolidated Statements of Earnings
For Fiscal Years Ended ($ millions)	August 28, 2016	August 30, 2015	August 31, 2014
Revenue
Net Sales	$116,073	$113,666	$110,212
Membership fees	2,646	2,533	2,428
Total revenue	118,719	116,199	112,640
Operating expenses
Merchandise costs	102,901	101,065	98,458
Selling, general and administrative	12,068	11,445	10,899
Preopening expenses	78	65	63
Operating Income	3,672	3,624	3,220
Other income (expense)
Interest expense	(133)	(124)	(113)
Interest income and other, net	80	104	90
Income before income taxes	3,619	3,604	3,197
Provision for income taxes	1,243	1,195	1,109
Net income including noncontrolling interests	2,376	2,409	2,088
Net income attributable to noncontrolling interests	(26)	(32)	(30)
Net income attributable to Costco	$2,350	$2,377	$2,058

Costco Wholesale Corporation
Consolidated Balance Sheets
($ millions, except par value and share data)	August 28, 2016	August 30, 2015
Assets
Current assets
Cash and cash equivalents	$3,379	$4,801
Short-term investments	1,350	1,618
Receivables, net	1,252	1,224
Merchandise inventories	8,969	8,908
Deferred income taxes and other current assets	268	228
Total current assets	15,218	16,779
Property and equipment
Land	5,395	4,961
Buildings and improvements	13,994	12,618
Equipment and fixtures	6,077	5,274
Construction in progress	701	811
Gross property and equipment	26,167	23,664
Less accumulated depreciation and amortization	(9,124)	(8,263)
Net property and equipment	17,043	15,401
Other assets	902	837
Total assets	$33,163	$33,017
Liabilities and equity
Current liabilities
Accounts payable	$7,612	$9,011
Current portion long-term debt	$1,100	$1,283
Accrued salaries and benefits	2,629	2,468
Accrued member rewards	869	813
Deferred membership fees	1,362	1,269
Other current liabilities	2,003	1,695
Total current liabilities	15,575	16,539
Long-term debt, excluding current portion	4,061	4,852
Other liabilities	1,195	783
Total liabilities	20,831	22,174
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;
437,524,000 and 437,952,000 shares issued and outstanding	2	2
Additional paid-in-capital	5,490	5,218
Accumulated other comprehensive loss	(1,099)	(1,121)
Retained earnings	7,686	6,518
Total Costco stockholders equity	12,079	10,617
Noncontrolling interests	253	226
Total equity	12,332	10,843
Total liabilities and equity	$33,163	$33,017

HINT: For Sales use "Total revenues" for your computations, when applicable.

(a) Compute net operating profit after tax (NOPAT) for 2016. Assume that the combined federal and state statutory tax rate is 37%. (Round to the nearest whole number.)

2016 NOPAT = Answer

($ millions) (b) Compute net operating assets (NOA) for 2016 and 2015.

2016 NOA = Answer

($ millions) 2015 NOA = Answer ($ millions) (c) Compute Costcos RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2016. (Do not round until final answer. Round two decimal places. Do not use NOPM x NOAT to calculate RNOA)

2016 RNOA = Answer

% 2016 NOPM = Answer% 2016 NOAT = Answer (d) Compute net nonoperating obligations (NNO) for 2016 and 2015.

2016 NNO = Answer

($ millions) 2015 NNO = Answer ($ millions) (e) Compute return on equity (ROE) for 2016. (Do not round until final answer. Round answer two decimal places)

2016 ROE = Answer

% (f) Infer the nonoperating return component of ROE for 2016. (Use answers from above to calculate. Round two decimal places.)

Answer

%

(g) What does the relation between ROE and RNOA suggest about Costco's use of equity capital?

ROE > RNOA implies that Costco's equity has grown faster than its NOA.

ROE > RNOA implies that Costco has taken on too much financial leverage.

ROE > RNOA implies that Costco is able to borrow money to fund operating assets that yield a return greater than its cost of debt.

ROE > RNOA implies that Costco increased its financial leverage during the period.