Exhibit $1$

Sales Revenue for Major Retailers, Logarithmic Scale $(1955-2000)$

NB: Federated Department Store sales $1987-1989$ estimated. Company operated in bankruptcy during this

period.

${?}^{}$ BJ$\text{'}$s growth rate from $1994$ to $2000$ was $13\mathrm{.}6\%.$

${?}^{}$ Costco merged with Price Club during this period, which greatly increased sales. In $1992,$ the year

before the merger, Costco had sales of $$6\mathrm{.}6$ billion. In $1993,$ the combined companies reported sales of

$$15\mathrm{.}5$ billion.The following questions may help you to guide and focus your analysis:

Costco Wholesale Corporation: Financial Statement Analysis

$1-$ Analyze Costco$$s common$-$size income statements $($See Exhibit $9)$ by discussing its components and the trends over the five years. There is no threshold.

$2-$ Analyze Costco$$s common$-$size balance sheets $($See Exhibit $9)$ by discussing its components and the trends over the five years. There is no threshold.

$3-$ Using Costco$$s 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 Profit$/$Income margin $($also referred to as Net margin$),$ Pre$-$tax income & Net income $($See Exhibit $10).$

$4-$ Benchmark and analyze the following ratios among the four competitors $($Costco$,$ Sears, Wal$-$Mart, and BJ$$s$)$ See Exhibit $11$:

$$ 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$)$

$5-$ 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 $(2001)$