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Exhibit 1 Sales Revenue for Major Retailers, Logarithmic Scale ( 1 9 5 5 - 2 0 0 0 ) NB: Federated Department Store sales
Exhibit
Sales Revenue for Major Retailers, Logarithmic Scale
NB: Federated Department Store sales estimated. Company operated in bankruptcy during this
period.
BJs growth rate from to was
Costco merged with Price Club during this period, which greatly increased sales. In the year
before the merger, Costco had sales of $ billion. In the combined companies reported sales of
$ billion.The following questions may help you to guide and focus your analysis:
Costco Wholesale Corporation: Financial Statement Analysis
Analyze Costcos commonsize income statements See Exhibit by discussing its components and the trends over the five years. There is no threshold.
Analyze Costcos commonsize balance sheets See Exhibit by discussing its components and the trends over the five years. There is no threshold.
Using Costcos sustainable growth model ratios provided in the case, analyze the changes over the five years in ROE, Dividend payout, ROA, Financial leverage, Asset turnover, Net ProfitIncome margin also referred to as Net margin Pretax income & Net income See Exhibit
Benchmark and analyze the following ratios among the four competitors Costco Sears, WalMart, and BJs See Exhibit :
Gross profit margin or Gross margin
Operating profit margin or Operating margin
Net profit margin or Net margin
Current ratio Inventory turnover
Average receivables period Receivables collection period
Average payables period Days of payables outstanding
Based on the information given in the case and your above analysis, which of the four companies would give you a warning sign for potential earnings management? Explain your answer.Margarita Torres: Other Ratios for Costco and Competitors
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