Target vs. Costco Questions:

Calculate and comment (which company seems to be better) on the following:

1. Current ratio
2. Inventory turnover
3. Debt to assets ratio
4. Return on Assets (use average assets and earnings from continuing operations)
5. Gross margin %
6. Asset turnover (use average assets)
7. Which company would you invest in and why?
8. Which company has the highest financial risk and why?
9. Which company appears to be using its assets most efficiently?

Target

Costco

ATEMENTS Table of Contents Index to Financial Statements Consolidated Statements of Operations $ 2019 77,130 $ 982 78,112 54,864 16,233 2018 74,433 $ 923 75,356 53,299 15,723 2017 71,786 928 72,714 51,125 15,140 (millions, except per share data) Sales Other revenue Total revenue Cost of sales Selling, general and administrative expenses Depreciation and amortization (exclusive of depreciation included in cost of sales) Operating income Net interest expense Net other (income) / expense Earnings from continuing operations before income taxes Provision for income taxes Net earnings from continuing operations Discontinued operations, net of tax Net earnings 2,357 4,658 477 (9) 4,190 921 3,269 12 3,281 $ 2,224 4,110 461 (27) 3,676 746 2,930 7 2,937 $ 2,225 4,224 653 (59) 3,630 722 2,908 6 2,914 $ COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (amounts in millions, except per share data) 52 Weeks Ended September 1, 52 Weeks Ended September 2, 2018 53 Weeks Ended September 3, 2017 2019 $ 126,172 149,351 3,352 152,703 138,434 $ 3,142 141,576 2,853 129,025 REVENUE Net sales Membership fees Total revenue OPERATING EXPENSES Merchandise costs Selling, general and administrative Preopening expenses Operating income OTHER INCOME (EXPENSE) Interest expense Interest income and other, net INCOME BEFORE INCOME TAXES Provision for income taxes Net income including noncontrolling interests Net income attributable to noncontrolling interests NET INCOME ATTRIBUTABLE TO COSTCO NET INCOME PER COMMON SHARE ATTRIBUTABLE TO 132,886 14,994 86 4,737 123,152 13,876 68 4,480 111,882 12,950 82 4,111 (150) 178 4,765 1,061 3.704 (45) 3,659 (159) 121 4,442 1,263 3.179 (45) 3,134 (134) 62 4,039 1,325 2.714 (35) 2,679 $ COSTCO WHOLESALE CORPORATION CONSOLIDATED BALANCE SHEETS (amounts in millions, except par value and share data) September 1 2019 September 2, 2018 ASSETS $ $ CURRENT ASSETS Cash and cash equivalents Short-term investments Receivables, net Merchandise inventories Other current assets Total current assets PROPERTY AND EQUIPMENT Land Buildings and improvements Equipment and fixtures Construction in progress 8,384 1,060 1,535 11,395 1,111 23,485 6,055 1,204 1,669 11,040 321 20.289 6,417 17,136 7,801 1,272 32,626 (11,736) 20,890 1,025 45,400 6,193 16,107 7,274 1,140 30,714 (11,033) 19,681 860 40,830 $ $ $ $ Less accumulated depreciation and amortization Net property and equipment OTHER ASSETS TOTAL ASSETS LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable Accrued salaries and benefits Accrued member rewards Deferred membership fees Current portion of long-term debt Other current liabilities Total current liabilities LONG-TERM DEBT, excluding current portion OTHER LIABILITIES Total liabilities COMMITMENTS AND CONTINGENCIES EQUITY Preferred stock $0.01 par value; 100,000,000 shares authorized; no shares issued and outstanding Common stock $0.01 par value; 900,000,000 shares authorized; 439,625,000 and 438, 189,000 shares issued and outstanding Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total Costco stockholders' equity Noncontrolling interests Total equity 11,679 3,176 1,180 1,711 1,699 3,792 23,237 5,124 1,455 29,816 11,237 2,994 1,057 1,624 90 2,924 19,926 6,487 1,314 27,727 0 0 4 6,417 (1,436) 10,258 15,243 341 15,584 6,107 (1,199) 7,887 12,799 304 13,103 TOTAL LIABILITIES AND EQUITY $ 45,400 $ 40,830 FINANCIAL STATEMENTS Target Consolidated Statements of Financial Position Table of Contents Index to Financial Statements $ February 1, February 2, (millions, except footnotes) 2020 2019 Assets Cash and cash equivalents 2,577 $ 1,556 Inventory 8,992 9,497 Other current assets 1,333 1,466 Total current assets 12,902 12,519 Property and equipment Land 6,036 6,064 Buildings and improvements 30,603 29,240 Fixtures and equipment 6,083 5,912 Computer hardware and software 2,692 2,544 Construction-in-progress 533 460 Accumulated depreciation (19,664) (18,687) Property and equipment, net 26,283 25,533 Operating lease assets 2,236 1,965 Other noncurrent assets 1,358 1,273 Total assets $ 42,779 $ 41,290 Liabilities and shareholders' investment Accounts payable 9,920 $ 9,761 Accrued and other current liabilities 4,406 4,201 Current portion of long-term debt and other borrowings 161 1,052 Total current liabilities 14,487 15,014 Long-term debt and other borrowings 11,338 10,223 Noncurrent operating lease liabilities 2,275 2,004 Deferred income taxes 1,122 972 Other noncurrent liabilities 1,724 1,780 Total noncurrent liabilities 16,459 14,979 Shareholders' investment Common stock 42 43 Additional paid-in capital 6,226 6,042 Retained earnings 6,433 6,017 Accumulated other comprehensive loss (868) (805) Total shareholders' investment 11,833 11,297 Total liabilities and shareholders' investment $ 42,779 $ 41,290 Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 504,198,962 shares issued and outstanding as of February 1, 2020; 517,761,600 shares issued and outstanding as of February 2, 2019. $ Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented. ATEMENTS Table of Contents Index to Financial Statements Consolidated Statements of Operations $ 2019 77,130 $ 982 78,112 54,864 16,233 2018 74,433 $ 923 75,356 53,299 15,723 2017 71,786 928 72,714 51,125 15,140 (millions, except per share data) Sales Other revenue Total revenue Cost of sales Selling, general and administrative expenses Depreciation and amortization (exclusive of depreciation included in cost of sales) Operating income Net interest expense Net other (income) / expense Earnings from continuing operations before income taxes Provision for income taxes Net earnings from continuing operations Discontinued operations, net of tax Net earnings 2,357 4,658 477 (9) 4,190 921 3,269 12 3,281 $ 2,224 4,110 461 (27) 3,676 746 2,930 7 2,937 $ 2,225 4,224 653 (59) 3,630 722 2,908 6 2,914 $ COSTCO WHOLESALE CORPORATION CONSOLIDATED STATEMENTS OF INCOME (amounts in millions, except per share data) 52 Weeks Ended September 1, 52 Weeks Ended September 2, 2018 53 Weeks Ended September 3, 2017 2019 $ 126,172 149,351 3,352 152,703 138,434 $ 3,142 141,576 2,853 129,025 REVENUE Net sales Membership fees Total revenue OPERATING EXPENSES Merchandise costs Selling, general and administrative Preopening expenses Operating income OTHER INCOME (EXPENSE) Interest expense Interest income and other, net INCOME BEFORE INCOME TAXES Provision for income taxes Net income including noncontrolling interests Net income attributable to noncontrolling interests NET INCOME ATTRIBUTABLE TO COSTCO NET INCOME PER COMMON SHARE ATTRIBUTABLE TO 132,886 14,994 86 4,737 123,152 13,876 68 4,480 111,882 12,950 82 4,111 (150) 178 4,765 1,061 3.704 (45) 3,659 (159) 121 4,442 1,263 3.179 (45) 3,134 (134) 62 4,039 1,325 2.714 (35) 2,679 $ COSTCO WHOLESALE CORPORATION CONSOLIDATED BALANCE SHEETS (amounts in millions, except par value and share data) September 1 2019 September 2, 2018 ASSETS $ $ CURRENT ASSETS Cash and cash equivalents Short-term investments Receivables, net Merchandise inventories Other current assets Total current assets PROPERTY AND EQUIPMENT Land Buildings and improvements Equipment and fixtures Construction in progress 8,384 1,060 1,535 11,395 1,111 23,485 6,055 1,204 1,669 11,040 321 20.289 6,417 17,136 7,801 1,272 32,626 (11,736) 20,890 1,025 45,400 6,193 16,107 7,274 1,140 30,714 (11,033) 19,681 860 40,830 $ $ $ $ Less accumulated depreciation and amortization Net property and equipment OTHER ASSETS TOTAL ASSETS LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable Accrued salaries and benefits Accrued member rewards Deferred membership fees Current portion of long-term debt Other current liabilities Total current liabilities LONG-TERM DEBT, excluding current portion OTHER LIABILITIES Total liabilities COMMITMENTS AND CONTINGENCIES EQUITY Preferred stock $0.01 par value; 100,000,000 shares authorized; no shares issued and outstanding Common stock $0.01 par value; 900,000,000 shares authorized; 439,625,000 and 438, 189,000 shares issued and outstanding Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total Costco stockholders' equity Noncontrolling interests Total equity 11,679 3,176 1,180 1,711 1,699 3,792 23,237 5,124 1,455 29,816 11,237 2,994 1,057 1,624 90 2,924 19,926 6,487 1,314 27,727 0 0 4 6,417 (1,436) 10,258 15,243 341 15,584 6,107 (1,199) 7,887 12,799 304 13,103 TOTAL LIABILITIES AND EQUITY $ 45,400 $ 40,830 FINANCIAL STATEMENTS Target Consolidated Statements of Financial Position Table of Contents Index to Financial Statements $ February 1, February 2, (millions, except footnotes) 2020 2019 Assets Cash and cash equivalents 2,577 $ 1,556 Inventory 8,992 9,497 Other current assets 1,333 1,466 Total current assets 12,902 12,519 Property and equipment Land 6,036 6,064 Buildings and improvements 30,603 29,240 Fixtures and equipment 6,083 5,912 Computer hardware and software 2,692 2,544 Construction-in-progress 533 460 Accumulated depreciation (19,664) (18,687) Property and equipment, net 26,283 25,533 Operating lease assets 2,236 1,965 Other noncurrent assets 1,358 1,273 Total assets $ 42,779 $ 41,290 Liabilities and shareholders' investment Accounts payable 9,920 $ 9,761 Accrued and other current liabilities 4,406 4,201 Current portion of long-term debt and other borrowings 161 1,052 Total current liabilities 14,487 15,014 Long-term debt and other borrowings 11,338 10,223 Noncurrent operating lease liabilities 2,275 2,004 Deferred income taxes 1,122 972 Other noncurrent liabilities 1,724 1,780 Total noncurrent liabilities 16,459 14,979 Shareholders' investment Common stock 42 43 Additional paid-in capital 6,226 6,042 Retained earnings 6,433 6,017 Accumulated other comprehensive loss (868) (805) Total shareholders' investment 11,833 11,297 Total liabilities and shareholders' investment $ 42,779 $ 41,290 Common Stock Authorized 6,000,000,000 shares, $0.0833 par value; 504,198,962 shares issued and outstanding as of February 1, 2020; 517,761,600 shares issued and outstanding as of February 2, 2019. $ Preferred Stock Authorized 5,000,000 shares, $0.01 par value; no shares were issued or outstanding during any period presented