Question
Costco Wholesale Corporation operates membership warehouses that sell a variety of branded and private label products. Headquartered in Issaquah, Washington, it also sells merchandise online
Costco Wholesale Corporation operates membership warehouses that sell a variety of branded and private label products. Headquartered in Issaquah, Washington, it also sells merchandise online in the United States (costco.com) and in Canada (costco.ca). For two recent years, Costco reported the following (in millions):
Sales) Year 2= 99,137 Year 1= 88,915
Accounts receivable at end of year) Year 2 = 1,576 Year 1=1,455
Assume that the accounts receivable (in thousands) were $1,321 at the beginning of year 1.
1. Compute the accounts receivable turnover for year 2 and year 1. Use 365 days and round to one decimal place.
2. Compute the days' sale in receivables at the end of year 2 and year 1. Use 365 days and round to one decimal place.
3. What conclusions can be drawn from (1) and (2) regarding Costco's efficiency in collecting receivables?
4. Given the nature of Costco's operations, do you believe Costoco's accounts receivable turnover ratio would be higher or lower than a typical manufacuturing company, such as H.J. Heinz Company? Explain?
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