Based on the information provided below, include a memo which will summarize the following items:
Calculate and comment (which company seems to be better) on the following:
1.Current ratio
2.Inventory turnover
3.Debt to assets ratio
4.Return on Assets (use average assets and earnings from continuing operations)
5.Gross margin %
6.Asset turnover (use average assets)
Which company would you invest in and why?
Which company has the highest financial risk and why?
Which company appears to be using its assets most efficiently?
COSTCO WHOLESALE CORPORATION CONSOLIDATED BALANCE SHEETS (amounts in millions, except par value and share data) September 1, September 2, 2019 2018 ASSETS CURRENT ASSETS Cash and cash equivalents 8,384 $ 6,055 Short-term investments 1.060 1,204 Receivables, net 1,535 1,669 Merchandise inventories 11,395 11,040 Other current assets 1,111 321 Total current assets 23,485 20,289 PROPERTY AND EQUIPMENT Land 6,417 6,193 Buildings and improvements 17,136 16,107 Equipment and fixtures 7.801 7,274 Construction in progress 1,272 1,140 32,626 30,714 Less accumulated depreciation and amortization (11,736) (11,033) Net property and equipment 20,890 19.681 OTHER ASSETS ,025 860 TOTAL ASSETS $ 45,400 40,830 LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable 11,679 $ 11,237 Accrued salaries and benefits 3,176 2,994 Accrued member rewards 1,180 1,057 Deferred membership fees 1,711 1,624 Current portion of long-term debt 1,699 90 Other current liabilities 3,792 2,924 Total current liabilities 23,237 19,926 LONG-TERM DEBT, excluding current portion 5,124 6,487 OTHER LIABILITIES 1.455 1,314 Total liabilities 29,816 27,727 COMMITMENTS AND CONTINGENCIES EQUITY Preferred stock $0.01 par value; 100,000,000 shares authorized; no shares issued and outstanding 0 0 Common stock $0.01 par value; 900,000,000 shares authorized; 439,625,000 and 438, 189,000 shares issued and outstanding 4 Additional paid-in capital 6.417 6,107 Accumulated other comprehensive loss (1,436) (1,199) Retained earnings 10,258 7,887 Total Costco stockholders' equity 15,243 12,799 Noncontrolling interests 341 304 Total equity 15,584 13,103 TOTAL LIABILITIES AND EQUITY $ 45,400 $ 40,830COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (amounts in millions, except per share data) 52 Weeks Ended 52 Weeks Ended 53 Weeks Ended September 1, September 2, September 3, 2019 2018 2017 REVENUE Net sales $ 149,351 $ 138,434 $ 126,172 Membership fees 3,352 3,142 2,853 Total revenue 152,703 141,576 129,025 OPERATING EXPENSES Merchandise costs 132,886 123, 152 111,882 Selling, general and administrative 14,994 13,876 12,950 Preopening expenses 86 68 82 Operating income 4,737 4,480 4,111 OTHER INCOME (EXPENSE) Interest expense (150) (159) (134) Interest income and other, net 178 121 62 INCOME BEFORE INCOME TAXES 4,765 4,442 4,039 Provision for income taxes 1,061 1,263 1,325 Net income including noncontrolling interests 3,704 3.179 2.714 Net income attributable to noncontrolling interests (45) (45) (35) NET INCOME ATTRIBUTABLE TO COSTCO $ 3,659 $ 3,134 $ 2,679 NET INCOME PER COMMON SHARE ATTRIBUTABLE TOFINANCIAL STATEMENTS Table of Contents Target Index to Financial Statements Consolidated Statements of Financial Position (millions, except footnotes) February 1, 2020 February 2 2019 Assets Cash and cash equivalents 2,577 $ 1,556 Inventory 8,992 9,497 Other current assets 1,333 1,466 Total current assets 12,902 12,519 Property and equipment Land 6,036 6,064 Buildings and improvements 30,603 29,240 Fixtures and equipment 6,083 5,912 Computer hardware and software 2,692 2,544 Construction-in-progress 533 460 Accumulated depreciation (19,664) (18,687) Property and equipment, net 26,283 25,533 Operating lease assets 2,236 1,965 Other noncurrent assets 1,358 1,273 Total assets S 42,779 $ 41,290 Liabilities and shareholders' investment Accounts payable S 9,920 $ 9,761 Accrued and other current liabilities 4,406 4,201 Current portion of long-term debt and other borrowings 161 1,052 Total current liabilities 14,487 15,014 Long-term debt and other borrowings 11,338 10,223 Noncurrent operating lease liabilities 2,275 2,004 Deferred income taxes 1,122 972 Other noncurrent liabilities 1,724 1,780 Total noncurrent liabilities 16,459 14,979 Shareholders' investment Common stock 42 43 Additional paid-in capital 6,226 6,042 Retained earnings 6,433 6,017 Accumulated other comprehensive loss 868) (805 Total shareholders' investment 11,833 11,297 Total liabilities and shareholders' investment S 42,779 $ 41,290 Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 504,198,962 shares issued and outstanding as of February 1, 2020; 517,761,600 shares issued and outstanding as of February 2, 2019. Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented.FINANCIAL STATEMENTS Table of Contents Index to Financial Statements Consolidated Statements of Operations (millions, except per share data) 2019 2018 2017 Sales $ 77, 130 $ 74,433 $ 71,786 Other revenue 982 923 928 Total revenue 78, 112 75,356 72,714 Cost of sales 54,864 53,299 51,125 Selling, general and administrative expenses 16,233 15,723 15,140 Depreciation and amortization (exclusive of depreciation included in cost of sales) 2,357 2,224 2,225 Operating income 4,658 4,110 4,224 Net interest expense 477 461 653 Net other (income) / expense (9) (27) (59) Earnings from continuing operations before income taxes 4,190 3,676 3,630 Provision for income taxes 921 746 722 Net earnings from continuing operations 3,269 2,930 2,908 Discontinued operations, net of tax 12 7 6 Net earnings $ 3,281 $ 2,937 $ 2,914
