P3-50. Analysis and Interpretation of Profitability Balance sheets and income statements for Costco Wholesale Corporation follow Aug. 30. 2015 Aug. 31, 2014 $113.666 2.533 116.199 $110.212 2.428 112.540 COSTCO WHOLESALE CORPORATION Consolidated Statements of income Aug. 20 For Fiscal Years Ended (5 millions) 2016 Revenue Net sales. $116.073 Membership fees. Total revenue. 118,719 Operating expenses Merchandise costs... 102 901 Selling, general and administrative...... 12.058 Preopening expenses............ Operating income.. 3.672 Other Income (expense) Interest expense..... . (1339 Interest Income and other net.... .. Income before taxes .......... Provision for income taxes..... . Net income including noncontrolling Interests. Net Income attributable to noncontrolling interests 2350 Net Income attributable to Costco 101.055 11.445 9452 10.899 3.624 3.220 124 COSTCO WHOLESALE CORPORATION Consolidated Balance Sheets Aug. 28, 2016 Aug. 30, 2015 $ millions, except par value and share data Assets Current assets Cash and cash equivalents... Short-term investments ... Receivables, not .......... Merchandise inventories... . Other current assets.... Total current assets.... $ 3.379 1.350 1.2.52 8.959 268 $ 4,801 1.618 1.224 8.908 228 15,218 16.779 4.961 12.618 5,274 811 Property and equipment Land. Buildings and improvements.. Equipment and fixtures......... Construction in progress.... Gross property and equipment...... Less accumulated depreciation and amortization .... Net property and equipment... Other assets......... Total assets...... 5,395 13.994 6,077 701 26, 167 (9.124 17.013 902 $33,163 23,664 (8.263 15,401 837 $33,017 continued S millions, except par value and share data Aug. 28, 2016 Aug. 30, 2015 $ 7,612 1,100 2,629 869 1,362 2,003 15,575 4,061 1.195 20,831 $ 9,011 1,283 2.468 813 1.269 1.695 16,539 4.852 783 22,174 Liabilities and equity Current liabilities Accounts payable... Current portion long-term debt... Accrued salaries and benefits.. Accrued member rewards Deferred membership fees. Other current liabilities Total current liabilities. .. Long-term debt, excluding current portion. Other liabilities... Total liabilities... Equity Preferred stock, $0.005 par value: 100,000,000 shares authorized: no shares issued and outstanding... Common stock, $0.005 par value: 900.000.000 shares authorized: 437.524,000 and 437.962.000 shares issued and outstanding... Additional paid-in-capital..... Accumulated other comprehensive loss .... Retained earnings........... Total Costco stockholders' equity Noncontrolling interests ....... Total equity.. Total liabilities and equity.. 5,490 (1,099) 7.686 12.079 253 12,332 $33,163 5.218 (1,121) 6,518 10.617 226 10.843 $33,017 Required a. Compute net operating profit after tax (NOPAT) for 2016. Assume that the combined federal and state statutory tax rate is 37%. b. Compute net operating assets (NOA) for 2016 and 2015. C. Compute and disaggregate Costco's RNOA into net operating profit margin (NOPM) and net operat ing asset turnover (NOAT) for 2016; confirm that RNOA - NOPM X NOAT. d. Compute net nonoperating obligations (NNO) for 2016 and 2015. Confirm the relation: NOA - NNO + Total equity. e. Compute return on equity (ROE) for 2016. Iofer the nonoperating return component of ROE for 2016. Comment on the difference between ROE and RNOA. What does this relation suggest about Costco's use of equity capital
