Financial Statement Analysis

Question:

Describe about fundamentals of financial management and key financial ratios of the company costco wholesale corporation.

Answer:

Introduction

The overall project is discussion about the financial statement analysis of the company Costco Wholesale Corporation which is a public private based retail business holding organization started in the country Issaquah. The ratio analysis and financial statement analysis are required to do analysis of the financial performance of the company in the different countries in the financial period 2013 and 2014. The balance sheet and the other financial statements of the company will provide the actual position of the company in compare to its competitors (Costco Wholesale Corporation,2015).

Company Profile

This project is all about discussion about the financial statement analysis of the company Costco Wholesale Corporation which is having operating their business activities in different countries like U.S., Canada, U.K, and the country Australia. The Costco wholesale corporation is having their own subsidiary brand in the country Korea and Taiwan. According to the overall analysis the company Costco Corporation is mainly performing well in the market. The company is mainly trading in the products and appliance and homely products and pharmacy goods. Financial valuation of the company is based on the financial performance, the profit margin of the company increasing in the current market scenarios (Gibson, 2013).

Fundamentals of Financial Management

According to the overall analysis the financial statement of the company Costco Wholesale Corporation which is having their own subsidiaries company in different countries and as per the overall analysis of the financial statement of the company which selected as Balance Sheet of the company is discussing the different financial performance of the company. The balance sheet of the company is included the overall account of the parent and the subsidiaries company of the Costco Wholesale Corporation. The minority interest of the company and its subsidiaries which is related to the company’s subsidiaries. The company is mainly presented that the performance of the company which is related to the shareholder’s equity of the company are separated from the minority interest generated by the company. The company is mainly spends 50% of their equity to do joint venture with the company Costco in situated in Mexico (Costco Wholesale Corporation, 2015).

Cash and Cash equivalents

The liquidity position of the company is mainly at the very good position which is having turnover period of less than 3 months. The company is having huge cash and cash equivalent in terms of the receivables are $1384 and $1254 at the financial year end 2013 and 2014.

Short Term investments

In terms of the short term investment the company is having good financial position in terms of the abilities of the company to hold the investment till the maturity period of time. the company is continuously invented the losses in the securities investment and also the performance of the interest income from its fair market values.

Property and equipments

The company is having fixed assets like buildings, and other equipments which are related to the depreciation and the repairing cost. The company is taking 3 to 20 year of time for the equipment and fixtures and using straight line method for calculation of the depreciation of the company. The overall fair value which is estimated by the company is mainly valuation techniques which are administrative expenses of the company which is mainly based on the financial statement of the year 2013 and 2014.

Investments

The investment activities of the company which is related to the unrealized gains and the losses which is arises due to the provided sales securities at the end of the financial year 2013 and the securities selling activities at the end of the financial year $116,$ 244 respectively in the financial year 2013 and 2014.

Shareholder’s equity

The company is providing the share repurchased activities in the year 2014 is 29, 15,000 with the average price of $144.45 and also in the 2013 the number of share purchase is 357 which is having $96.41 at the end of the financial year.

Key financial ratios of the company Costco Wholesale Corporation

Profitability Ratio

The profitability ratio of the company is mainly describe the earning abilities of the company which is mainly depends upon the company’s total sales which is deducted from the cost of the good sold of the company. Profitability ratio of the company is mainly related to the gross profit and net profit margin of the company which is shows the earning abilities of the company. The chart which is given below is showing that gross profit margin of the company is 0.0296 and 0.0292 at the end of the financial year 2013 and 2014 (Bragg, 2012).

Liquidity Ratio

The liquidity ratios of the company are mainly showing the overall liquidity position of the company. The overall analysis shows that the company is how much capable to settle out the short term obligations within a given period of time. The liquidity ratios are mainly current ratios and the quick ratios clearly explain the liquidity position of the company Costco Wholesale Corporation with the current ratio of 1.19 and 1.22 within a financial period of 2013 and 2014. The quick ratio of the company is mainly the liquidity position of the company which is mainly 0.599 and 0.633 in the financial period of 2013 and 2014 (Abrahamsen & Kolbjørnsen, 2012).

Conclusion

The overall project is all about the analysis of the financial statement of the company Costco Corporation which is showing that the company is growing in the market as per their financial performance analysis methodology which is showing that the company is increases their earning abilities between the financial year 2013 and 2014. The liquidity ratios of the company show that company is having liquidity in their hand for sort out the short term obligation of the company.

Reference

Abrahamsen, P., Hauge, R., & Kolbjørnsen, O. (2012). Geostatistics Oslo 2012. Dordrecht: Springer.

Bragg, S. (2012). Business ratios and formulas. Hoboken, N.J.: Wiley.

Costco Wholesale Corporation, 2. (2015). Costco Wholesale Corporation – Investor Relations – Investor Relations Overview. Phx.corporate-ir.net. Retrieved 11 June 2015, from http://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-irhome

Gibson, C. (2013). Financial statement analysis. Mason, Ohio: South-Western.

Penman, S. (2013). Financial statement analysis and security valuation. New York: McGraw-Hill Irwin.

Peterson Drake, P., & Fabozzi, F. (2012). Analysis of financial statements. Hoboken, N.J.: Wiley.

Robinson, T. (2012). International financial statement analysis. Hoboken, N.J.: John Wiley & Sons.

Schmidlin, N. (2014). Art of company valuation and financial statement analysis. Chichester, West Sussex: Wiley.

Zack, G. (2013). Financial statement fraud. Hoboken, New Jersey: John Wiley & Sons, Inc.