Financial Statements of Costco Wholesale Term Paper

  • Length: 8 pages
  • Sources: 4
  • Subject: Business
  • Type: Term Paper
  • Paper: #36364179

Excerpt from Term Paper :

The fourth financial statement, called a "statement of shareholders' equity," shows changes in the interests of the company's shareholders over time. ("Beginners' Guide...," 2007)

To be considered profitable, a company's assets must equal, or "balance" the sum of its liabilities and shareholders' equity. Assets = Liabilities + Shareholders' Equity the following formula summarizes what a company's balance sheet pictures, followed by figure 5, which depicts this particular formula. ("Beginners' Guide...," 2007)

Figure 5: Formula Summarizing Balance Sheet (adapted from "Beginners' Guide...," 2007)

The following figure (6) presents a picture of locations of Costco's 529 warehouses, as of December 2007:

Figure 6: Locations of Costco's 529 Warehouses (Hanacek. 2008)

Financial figures presented during the course of this study relate and reinforce Costco's continuing history of making a profit from its sales. In addition, numerous publications reveal Costco's continuing growth in its number of warehouses; employee; cardholders; etc.. In turn, this researcher purports that the financial factors relating to Costco reveal a positive, profitable picture of a company that through caring for its customers, as Hudson (2007) contends, presents a "model with a success that outstrips competitors, including its chief rival, Wal-Mart Stores Inc.'s Sam's Club."

Conclusion

No one financial statement tells the complete story."

Beginners' Guide...," 2007)

As this segment's introductory quote purports, no single financial statement reveals a company's entire story. A combination of financial statements, albeit, provide vital information for investors. In turn, information retrieved from financial statements proves to be investor's best tool when he/she makes investment decisions. ("Beginners' Guide...," 2007)

When combined, a number of financial statements, as Costco's financial statements for the five years presented in this study reflect, they, as this researcher initially proposed to do, reveal a picture of the company.

That picture, consequently tells a company's story, as the one in this study tells the story of Costco. Hoff noted earlier in this study that due to the dearth of better options as fewer buyers shop at malls and other retail stores, numerous clothing companies recently decided to lower their prices and sell at Costco.

Selling their products at lower prices adds up to be more profitable than not selling them. In turn, Costco passes on lower prices to its customers, giving them a good "deal."

Future Projections

Galanti contends that consumers are just now beginning to realize with Costco, as with other companies, that increasing commodity costs, as well as, rising general merchandise costs will continue to cost more than previously seen, other than with gasoline. (D' Innocenzio, 2008) Higher energy costs not only adversely impact Costco's gas operations, but also affect freight costs of distributing merchandise. In turn, profits for the fourth quarter ending August 31, 2008 are expected to be "well below" the estimate of analysts Thomson Financial polled - $1 per share for the fourth quarter. "Costco's shares fell almost 12%, or $8.57, to close at $63.43." Costco plans to report 2008 fourth-quarter and fiscal year results October 8, 2008. (D' Innocenzio, 2008) at this time, more figures will contribute to Costco's projected future profit potential.

Everything One Needs to Know About Costco?

From a "finance" perspective, in regard to a company's past, present and future, some financial experts purport, when one utilizes the combination of financial statements, he/she can know everything one needs to know about a company such as Costco.

This researcher, however, proposes, that even a combination of financial statements may not be enough to know and/or predict a company's future story.

As Galanti stressed earlier in this study, however, "Everybody still likes a deal." (Harris, 2008)

This researcher projects that as a result of Costco's concentrated care for consumers and its practice of continually offering them "deals" in clothing and other areas, barring unforeseen, unnatural "acts of God" and/or nature, Costco, despite temporary set-backs, will likely continue to show profit in its financial statements. Consequently, the picture future financial statements of this company will likely continue to reflect its story by, as it does even today, permitting the figures to speak for themselves.

References

Beginners' Guide to Financial Statements." U.S. Securities and Exchange Commission; Modified: 02/05/2007. Retrieved July 27, 2008, at http://www.sec.gov/investor/pubs/begfinstmtguide.htm.

The Costco formula continues to resonate." MMR, May 5, 2008. Retrieved July 27, 2008, at http://www.highbeam.com/doc/1G1-179241204.html.

D&apos, Anne; Innocenzio. "Costco sees 4Q below estimates," AP Online, July 23, 2008. Retrieved July 27, 2008, at http://www.highbeam.com/doc/1A1-D923QE800.html.

Financial Statements. (2008) Costco Wholesale Corporation (NASDAQ:COST). Retrieved July 27, 2008, at http://finance.google.com/finance?fstype=ii&q=NASDAQ:COST.

Hanacek, Andy. "On the mark: more than 20 years after the launch of its meat and deli department, Costco Wholesale continues to meet the needs of its customers above all else." The National Provisioner, April 1, 2008. Retrieved July 27, 2008, at http://www.highbeam.com/doc/1G1-177636125.html

Harris,…

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