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$)$ September $2,2018$

Total revenue $$142,668$

Operating expenses

Merchandise costs $124,244$

Selling, general and administrative $13,876$

Preopening expenses $1,160$

Operating Income $3,388$

Other $($income$)$ expense

Interest expense $159$

Interest income and other, net $(121)$

Income before income taxes $3,350$

Provision for income taxes $1,263$

Net income including noncontrolling interests $2,087$

Net income attributable to noncontrolling interests $(45)$

Net income attributable to Costco $$2,042$

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 $$6,055$ $$5,638$

Short$-$term investments $2,2961,233$

Receivables, net $1,6691,432$

Merchandise inventories $11,04010,926$

Other current assets $1,413272$

Total current assets $22,47319,501$

Net property and equipment $20,77318,161$

Other assets $860869$

Total assets $$44,106$ $$38,531$

Current liabilities

Accounts payable $$11,237$ $$9,608$

Accrued salaries and benefits $2,9943,795$

Accrued member rewards $1,0572,053$

Deferred membership fees $2,7161,498$

Other current liabilities $3,0142,725$

Total current liabilities $21,01819,679$

Long$-$term debt $7,5797,665$

Other liabilities $2,4061,200$

Total liabilities $31,00328,544$

Equity

Preferred stock, $$0\mathrm{.}01$ par value: $00$

Common stock, $$0\mathrm{.}01$ par value: $44$

Additional paid$-$in$-$capital $6,1074,708$

Accumulated other comprehensive loss $(1,199)(1,014)$

Retained earnings $7,8875,988$

Total Costco stockholders$$ equity $12,7999,686$

Noncontrolling interests $304301$

Total equity $13,1039,987$

Total liabilities and equity $$44,106$ $$38,531$

Combined federal and state statutory tax rate $22\%$

$($a$)$ Compute net operating profit after tax $($NOPAT$)$ for $2018.$ Assume that the combined federal and state statutory tax rate is $22\%.$

NOPAT

Answer $1????????$

$($b$)$ Compute net operating assets $($NOA$)$ for $2018$ and $2017.$

Year NOA

$2018$ Answer $2????????$

$2017$ Answer $3????????$

$($c$)$ Compute Costco$$s RNOA, net operating profit margin $($NOPM$)$ and net operating asset turnover $($NOAT$)$ for $2018.$

Numerator Denominator RNOA

Answer $4$

NOPAT???????

Answer $5$

Average net operating assets $($NOA$)???????$

Answer $6?????$

Answer $7??????$

Numerator Denominator NOPM

Answer $8$

NOPAT

Answer $9$

Total revenue

Answer $10??????$

Answer $11$

$142,668$

$??????$

Numerator Denominator NOAT

Answer $12$

Total revenue

Answer $13$

Average net operating assets $($NOA$)$

Answer $14$

$142,668$

Answer $15$

$($d$)$ Compute net nonoperating obligations $($NNO$)$ for $2018$ and $2017.$ Confirm the relation: NOA $=$ NNO $+$ Total equity.

Year NNO

$2018$ Answer $16$

$??????$

$2017$ Answer $17???????$

Year NNO Total equity NOA

$2018$ Answer $18$

$?????$

Answer $19$

$13,103$

$13,103$

$2017$ Answer $20$

$??????$

Answer $21$

$9,987$

$9,987$

$($e$)$ Compute return on equity $($ROE$)$ for $2018.$

Numerator Denominator ROE

Answer $22$

Net income???????????

Answer $23$

Average equity????????

Answer $24$

$2,042$

Answer $25$

$($f$)$ Infer the nonoperating return component of ROE for $2018.$

ROE RNOA Nonoperating component of ROE

Answer $26$

$17\mathrm{.}69$

Answer $27$

$17\mathrm{.}69$