Question
Direct Computation of Nonoperating Return with Noncontrolling Interest Balance sheets and income statements for Costco Wholesale Corporation follow. Costco Wholesale Corporation Consolidated Statements of Earnings
Direct Computation of Nonoperating Return with Noncontrolling Interest
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 | 68 |
Operating Income | 4,480 |
Other income (expense) | |
Interest expense | 159 |
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 | $3,134 |
Costco Wholesale Corporation | |||
---|---|---|---|
Consolidated Balance Sheets | |||
($ 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 | 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 |
In 2018, Costcos return on equity (ROE) is 26.59% and its return on net operating assets (RNOA) is 26.52%. Assume that the combined federal and state statutory tax rate is 22%.
a. Compute net nonoperating expense (NNE) and net operating profit after tax (NOPAT). Round to the nearest whole number, if applicable. 2018 NNE $Answer
million 2018 NOPAT $Answer
million
b. Compute net nonoperating obligations (NNO) for 2018 and 2017. 2018 NNO $Answer
million 2017 NNO $Answer
million
c. Compute financial leverage (FLEV). Round answer to four decimal places. 2018 FLEV Answer
d. Compute NNEP and Spread. Round answers to two decimal places (example: 0.12345 = 12.35%). 2018 NNEP Answer
% 2018 Spread Answer
%
e. Compute the noncontrolling interest ratio (NCI ratio). Round answer to four decimal places. 2018 NCI Ratio Answer
f. Confirm the relation: ROE = [RNOA + (FLEV Spread)] NCI ratio. 2018 ROE =Answer
% = [Answer
%+(Answer
X Answer
%)] X Answer
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