Costco Financial Statements and Financial Ratios Analyzed from 2016 to 2020

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Hey All,

Thanks for visiting my Costco Financial Report page. On this page, you will be able to find preliminary information about Costco's current financial performance as well as some historical track records and trends. 

For a more detailed examination of Costco's financial performance, please check out the "Financial Report".  In this report, written by myself, Paul Borosky, MBA., Doctoral Candidate, and published author, you will find:

  • Summarized income statement for the last 5 years.
  • Summarized balance sheet for the last 5 years.
  • Summary analysis by myself of the important income statement, balance sheet, and financial ratio trends and other happenings.
  • Five year’s worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
  • Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
  • Professional financial analysis tips are provided in each section to help YOU conduct your OWN financial analysis!
  • Each section includes an “in other words” segment.  This is where I use plain English to explain concepts.

Enjoy the preliminary information and for a more detailed analysis, buy the financial report!

Sincerely,

Paul MBA. (Updated 2021)

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Costco 2020 Financial Report by Paul Borosky, MBA.
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Sample Financial Report

Sample Financial Report by Paul Borosky, MBA.
Financial Report Sample 2

Costco: Brief Summary

Costco Incorporated is one of the most sought-after stocks in the world.  The company’s legendary founders, James Sinegal and Jeffrey Brotman, are world-renowned.  Costco Inc. continues to innovate and disrupt their industry under the current leadership of Craig Jelinek. 

These circumstances have resulted in the organization becoming an industry leader.  For some, these facts alone are reason enough to buy stock in the company.

Costco Financial Report Sources

 “Costco 2020 Company Analysis: Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA. and owner of Quality Business Plan.  In this report, the author selected Costco's 2018 10k, 2017 10k annual report, 2016 10k annual report, 2020 10k annual report, and Costco's 2019 10k annual report as the basis for information gathering. 

Section 1: Costco Income Statement Analyzed 2016 to 2020

In this section, I walk through a broad definition as to what an income statement is and why it is important.  From this, I then discuss and define income statement line items, such as revenues, gross profits, etc. in detail.  After each line item is defined and discussed, I finally offer a summary analysis of Costco's important income statement line item trends from 2016 to 2020, in most cases.

Revenue Growth:  Costco’s revenues in 2016 were $118 billion.  In the next several years, the organization will continually increase its revenues ending 2020 at $166.7 billion.  This moderate growth rate equates to approximately a 9% annual revenue growth.

The consistent and above-average annual growth rate shows that the company is currently in a business expansion cycle.  In a business expansion cycle, investors often forgo the expectation of dividend payouts in hopes of future revenue gains through increase retained earnings.  In Costco’s case, not only is the organization consistently increasing its revenues, but they are also increasing its dividend payouts as well.  Investors are being rewarded on two fronts!  What a great deal.

Costco's Income Statement 2020

Column1 2020 2019 2018 2017 2016
Revenues                  166,761                  152,703                  141,576                  129,025                    118,719
COGS                  144,939                  132,886                  123,152                  111,882                    102,901
Gross Profit                    21,822                    19,817                    18,424                    17,143                      15,818
 
SG&A                    16,332                    14,994                    13,876                    12,950                      12,068
Depreciation                      1,645                      1,492                      1,437                      1,370                        1,255
R & D                            -                            -                            -                             -
Other
Operating Expenses                    17,977                    15,080                    13,944                    13,032                      12,146
EBIT                      5,435                      4,737                      4,480                      4,111                        3,872
Other Income                            -                            -                            -                            -                             -
Interest Expense                         160                         150                         159                         134                           133
EBT                      5,367                      4,765                      4,442                      4,039                        3,619
Taxes                      1,308                      1,061                      1,263                      1,325                        1,243
Net Income                     4,002                     3,659                     3,134                     2,679                      2,350
Tax Rate 24.4% 22.3% 28.4% 32.8% 34.3%

Section 2: Costco Balance Sheet Analyzed from 2016 to 2020

For Costco's balance sheet, I again go through each important line item from the balance sheet.  In reviewing each line item, I will define Costco's balance sheet line items, such as cash, property, plant and equipment, and liabilities between 2016 to 2020.  Next, I then offer a summary analysis of Costco's important balance sheet line items.

Cash:  Costco’s cash position in 2016 was $3.3 billion.  In the next three years, the organization would moderately increase its cash position ending 2019 at $8.3 billion.  However, in 2020, the organization’s cash position would increase substantially, ending the year at $12.2 billion. 

The significant increase in cash may indicate that the organization needs more funds to maintain operations.  However, because the organization has shown impressive discipline with its continued revenue growth and moderate cost growth, increasing cash at such a substantial rate may indicate inefficiencies in using current assets by the organization.  A better strategy would be for the firm to maintain their disciplinary ways and grow their cash position moderately similar to their revenue growth as well as operating cost growth.

Costco's Summary Balance Sheet - 2020

Column1 2020 2019 2018 2017 2016
Cash                      12,277                    8,384                    6,055                    4,546                    3,379
Short Term Investment                        1,028                    1,060                    1,204                    1,233                    1,350
Account Receivable                        1,550                    1,535                    1,669                    1,432                    1,252
Inventory                      12,242                  11,395                  11,040                    9,834                    8,969
Other                              -                         -                         -                         -                         -
Current Assets                    28,120                23,485                20,289                17,317                15,218
Net PPE                      21,807                  20,890                  19,681                  18,161                  17,043
Goodwill                              -                         -                         -                         -                         -
Other                              -                         -                         -                         -                         -
Total Assets                    55,556                45,400                40,830                36,347                33,163
Accounts Payable                      14,172                  11,679                  11,237                    9,608                    7,612
Accrued Expense                        3,605                    3,176                    2,994                    2,703                    2,629
Accrued Taxes                              -                         -                         -                         -                         -
Notes Payable                              -                         -                         -                         -                         -
LT Debt - Current                             95                    1,699                         90                         86                    1,100
Other                         -                         -                         -                         -
Total Current Liabilities                      24,844                  23,237                  19,926                  17,495                  15,575
LT Debt                        7,514                    5,124                    6,487                    6,573                    4,061
Other                              -                         -                         -                         -                         -
Total Liabilities                    36,851                29,816                27,727                25,268                20,831
Common Stock                               4                           4                           4                           4                           2
Treasury                              -                         -                         -                         -                         -
Retained Earnings                      12,879                  10,258                    7,887                    5,988                    7,686
Other                              -                         -                         -                         -                         -
Total Equity                    18,705                15,584                13,103                11,079                12,332
Total Equity & Liability                    55,556                45,400                40,830                36,347                33,163

Section 3: Costco Financial Ratios Analyzed from 2016 to 2020

For this section, I have chosen several different financial ratios to review for Costco from 2016 to 2020.  In reviewing each of Costco's financial ratios, I first start with defining the financial ratio.  Next, I supply the financial formula for calculating the specific ratio.  Finally, I offer a brief analysis of Costco's Important Financial ratios. 

Costco's Total Asset Turnover

Costco’s total asset turnover ended in 2016 at 3.5.  In the next several years, the organization’s total asset turnover would continually fall, ending 2020 at 3.0.  This means that the organization is making less money on total assets managed.  To better utilize total assets, the organization needs to either sell off underutilized assets and equipment or moderate their fixed asset accumulation until their current assets under management are better optimized.  In other words, the company needs to stop buying stuff like buildings and heavy machinery before they fully optimize what they have now.

Costco's Return on Assets

Costco’s return on assets ended 2016 at 7%.  In the next three years, the organization’s return on assets would moderately grow to 8.06% in 2019.  However, in 2020, the organization’s return on assets would moderately fall to 7.2%.  The reduction in return on assets for the organization may be attributed to its inability to optimally exploit current asset opportunities.  In other words, the company is holding too much cash and possibly short-term investments.  A better strategy would be for the organization to better utilize its liquid assets by paying out increased dividends, invest in company expansion at a faster pace, or repurchase stocks from the open market.  Any one of these actions may help improve the organization’s management of assets.

Costco Liquidity Ratios

Ratios

2020

2019 2018 2017

2016

Current Ratio

                          1.13

                   1.01

Cash Ratio

                          0.49

                   0.36

Quick Ratio

                          0.64

                   0.52

Net Working Capital

                        8,292

                 6,459

Costco Asset Utilization - 2020

Ratios

2020

2019 2018 2017

2016

Total Asset Turnover

                          3.00

                   3.36

Fixed Asset Turnover

                          7.65

                   7.31

Days Sales Outstanding

                          3.39

                   3.67

Inventory Turnover

                        13.62

                 13.40

Accounts Receivable Turnover

                      107.59

                 99.48

Working Capital Turnover

                        20.11

                 23.64

AP Turnover

                        11.77

                 13.08

Average Days Inventory

                        30.83

                 31.30

Average Days Payable

                        35.69

                 32.08

Costco Profitability Ratios

Ratios

2020

2019 2018 2017

2016

Return on Assets

7.20%

8.06%

Return on Equity

21.40%

23.48%

Net Profit Margin

2.40%

2.40%

Gross Profit Margin

13.09%

12.98%

Operating Profit Margin

3.26%

3.10%

Basic Earning Power

9.78%

10.43%

ROCE

17.70%

21.37%

Capital Employed

                      30,712

               22,163

ROIC

13.66%

13.46%

Long-term Debt

Ratios

2020

2019 2018 2017

2016

Debt Ratio

13.53%

11.29%

Debt/Equity

40.17%

32.88%

Times Interest Earned

                        33.97

                 31.58