Costco Wholesale Corporation Financial Analysis 12286b

COSTCO WHOLESALE CORPORATION FINANCIAL ANALYSIS

Retailing is a very competitive industry. Historically, success has been determined by pricing, productline selection, and customer service. This case includes a competitive set of companies such as Sears, Wal-Mart, BJ’s which represent three phases of retailing:   

general merchandising discount retailing, and wholesale clubs.

General merchandisers, who first dominated retailing, revolutionized the industry by emphasizing broad product lines and customer service. Discounters shifted the emphasis toward lower pricing on a broad product line. Wholesale clubs have continued the trend of price reduction; to achieve rock-bottom pricing, they have limited product lines. In brief, the economics of wholesale clubs can be described as:    

Low gross margins Minimum operating overhead (especially SG&A) High inventory turnover hip structure for customer retention

Common-size statements An analysis of the common-size income statement reflects the following about Costco’s operations: 

The company does indeed operate on very low mark-ups, with cost of goods sold between 89.5 percent and 89.9 percent of merchandise sales.



As a result of their pricing strategy, they must maintain extremely low overhead. Their SG&A has been consistently below 10 percent of merchandise sales, as it must be in order for them to maintain profitability. This SG&A figure is a reflection of their successful low cost operations from cross-docking, warehouse facilities, no advertising, and low-labor stocking process.



hip fees are a substantial part (over 50 percent) of profits. They are between 1.7 percent and 1.9 percent of merchandise sales, whereas pre-tax profits are between 2.5 percent and 3.3 percent. Assuming that costs associated with managing the hip process are minimal, the majority of hip fees flow right to the bottom line.

The following trends can be observed from the common-size income statement regarding Costco’s operational efficiency: 

The company has not sustained operational losses, despite the company’s low gross-margin. This is a reflection of tight cost controls.



The three years 1998 - 2000 were a time of strong operational improvement over 1997. Excluding 1

the effect of the ing change, the company had a stable net margin between 1.9 percent and 2.0 percent. 2001, however, shows a slight worsening of results, with net margin dipping to 1.76 percent. An increase in SG&A seems to for the change. 

It is important to note the impact that the ing policy for hip fee revenue recognition has on profits. The change in policy from cash basis to deferred basis shaved off a substantial portion of profits in 1999. The deferred basis is a more appropriate ing policy because it matches revenues to the period in which the company provides services, but operationally it’s important to that Costco has the use of the cash up front.

An analysis of the common-size balance sheet reflects the following about Costco’s operations: 

Their assets consist primarily of cash, inventory, and PP&E representing warehouse facilities.



Their current assets are a large percentage of total assets. This could be a result of high inventory stocking levels, low cost of warehouse facilities, or a combination.



The company has very low levels of debt, particularly for a company that is expanding. However, we need to beware of off-balance sheet leases distorting the picture. According to the footnotes, 20 percent of warehouses are reported as operating leases. If we were to capitalize these leases at 8 times the 2001 lease expense of $70.4 million, debt would increase from 8.5 percent of assets to 13.4 percent. Although this increase is material, the debt level for a growing company remains very low.

The following trends can be observed from the common-size balance sheet regarding Costco’s operational efficiency and growth: 

Current assets fall below current liabilities in 2001. One interpretation is that Costco is increasing efficiency by reducing working capital. Another interpretation is that they do not have the funds available in short-term assets to cover short-term payments. We will need to look at turnover and other ratios to help us determine which interpretation is more accurate.



Inventories closely track payables as a percentage of assets. We would expect that inventories in a typical retailer would be substantially greater than payables. This suggests that they are either turning over inventory faster than other retailers (which is consistent with their business strategy) or they are stretching their payables, or some combination.



Current assets decline as a percent of total assets, which is a reflection of PP&E being added to the balance sheet as the company builds new warehouses.



Debt decreases as a percent of total capitalization. Also, paid-in capital decreases as a percent of total assets. Together, these indicate that the company is not using debt or equity financing to grow but internally generated funds (i.e. retained earnings).

2

Sustainable growth model A review of the sustainable growth model ratios indicates that Costco should be able to grow earnings at around 14 percent - 18 percent, if their operations do not materially deteriorate. The main question and cause for concern is the decrease in ROE in 2001. The analysis decomposes this number to help determine its cause: Return on Equity: Adjusted for the cumulative effect of ing change, ROE in the three year period 1998 to 2000 was over 17 percent per year. The ROE in 2001 fell to 14.2 percent, a significant decrease. (Note: ROE is calculated here using beginning equity. In a fast growing company, using beginning-of-the-year balance sheet figures inflates reported returns. Alternative methods would be using ending equity or an average equity amount. This would change the magnitude of ROE but would not change the trends. The same note applies to other balance sheet derived ratios, below).

Dividend Payout: Paying out a dividend would cause earnings growth to decrease unless the company increased its use of debt or equity financing. This is because less cash would be available to reinvest in the business, and growth in new store openings would necessarily have to be scaled back. First, note that the company in its financial footnotes states that it has not paid a dividend and does not plan to pay one. Second, the company has only bought back stock once under a $500 million share repurchase program that expired in 2001. Third, the company’s shares outstanding are slowly growing as a result of the stock option program . These three factors together indicate that the company is focused on growth through capital gains and not on returning excess cash to shareholders. Return on Assets: ROA shows the same trend as ROE, with a significant fall-off in 2001. This implies that the company is generating less profit per dollar in assets as its asset base is growing, a factor leading toward lower 2001 ROE. Financial Leverage: Although leverage slightly increased in 2001 over 2000, it has been steadily decreasing over the five-year period. All else being equal, decreasing leverage should lead to lower ROE as the company relies less on external capital to fund growth. This is consistent with what we saw on the common-size balance sheet. To some extent, then, the decrease in leverage s for the reduction in ROE from 18.6 percent in 1998 to 14.2 percent in 2001. It does not, however, explain the one-year change in ROE from 2000 to 2001.

3

Asset Turnover: Asset turnover has gradually fallen over the four-year period. This implies that the company is generating less revenue in sales (including hip fees) as it expands its asset base. Given the strategic importance of asset turnover for Costco, this is an unfavorable trend. Net Income and Pre-Tax Income: Both net income and pre-tax income follow the same trend as ROE: healthy margins over 1998 to 2000, with a reduction in 2001. Going back to commonsize income statement, we can see that the decrease in 2001 pretax margin arises from the increase in SG&A. In fact, the 9.17 percent SG&A is a 10-year high with no other year’s SG&A ing for more than 9 percent of sales. Tax Effect: The tax rate is constant throughout the period, implying that taxes did not effect ROE.

The reduction in net margin along with the slowdown in asset turnover might lead an investor to think that the company is becoming operationally less efficient. However, it is important to note that there were 41 new store openings in 2001 versus an average of 22 per year over the previous four years. New stores have lower sales and thus lower profitability. Therefore, an investor could also conclude that the decreased ROE in 2001 was a result of increased rate of expansion and not operational inefficiency. This cannot be inferred from ratio analysis; one has to consider and incorporate qualitative factors into the analysis. Benchmark ratios It is through benchmark ratios that we can see how Costco’s performance compares to that of others in the retail industry, and specifically how the unique business model of the wholesale club is reflected in their financial statements. As impressive as Costco’s ratios are, they are in fact quite similar to BJ’s, indicating that Costco’s success comes as much from their business model as their execution. Although we characterize Wal-Mart as a stereotypical discounter, note that their results are skewed in that they consolidate SAM’S club results (12 percent of total Wal- Mart sales). Gross margin: Sears has a slightly higher gross margin than Wal-Mart; however, Costco’s and BJ’s gross margins are significantly lower than either. We would expect this ordering, based on what we know of the pricing strategy of these three different types of retailers. What is surprising is how much lower the gross margin is for the wholesale clubs (less than half of WalMart’s). Sometimes differences in ratios or financial indicators compiled from financial statements are affected from ing methods. For instance, in this particular case (this information was not provided in the 4

case text) a direct comparison between Costco’s and BJ’s gross margings is not appropriate because of their differences in ing policies. BJ’s cost of goods sold figure includes procurement costs, thereby decreasing gross margin. Unless we know BJ’s annual procurement expenses, we cannot directly compare the gross margins. Operating margin: This figure reflects profitability, taking into both pricing strategy (gross margin) and operating efficiency. For Costco and BJ’s we include hip fees in this figure because we are interested in total return from all revenue from operations. Wal-Mart has the overall highest operating margin, indicating that it has achieved the most successful combination of pricing and efficiency. Qualitatively, we can attribute this to their discount pricing strategy, low overhead and high sales volume. What is surprising is BJ’s higher operating margin in comparison to Costco’s. We know that Costco’s 2001 pretax margin was hurt by expansion, but this might not be enough to explain the 150 basis point differential between the companies. More information would be needed to provide an explanation.

Net margin: This figure reflects profitability from sales, after including all operating, restructuring and extraordinary charges. Again, Wal-Mart has the overall best results, with a net margin almost 150 basis points greater than Sears’. It’s also interesting to note that even though Costco and BJ’s have gross margins significantly lower than Sears’, their net margins are quite similar. In addition, Costco’s net margin is relatively better than BJ’s even though BJ’s operating margin is better. The swing is a result of a material charge (“loss on contingent lease obligation”) that BJ’s incurred in 2001.

Current ratio: We see that Costco’s current ratio (0.94) and BJ’s (1.20) are significantly lower than Sears’ (2.32) and Wal-Mart’s (2.70). The interpretation is that wholesale clubs have much less funds tied up in working capital than other retailers. This is consistent with their strategy of maintaining relatively small SKU counts and focusing on inventory turnover. A glitch in operations, however, could have worse repercussions for wholesale clubs because they would be short of funds in paying current liabilities. In their financial footnotes, Costco assures us that this is not a problem because they have a $556 million, largely unused commercial line of credit.

Inventory turnover: Consistent with their strategy, Costco has incredible inventory turnover, not only compared to Sears and Wal-Mart but also compared to BJ’s. Costco is by far the most operationally efficient when it comes to inventory management. To some extent, it is a reflection of Costco operating with 3,500 - 4,000 Stock Kepping Units (SKUs) versus 6,000 SKUs at BJ’s. Turnover of 11.7 times per year means that inventory is in a Costco warehouse for 31 days on average (= 365 days / 11.7 turns per year). This 5

compares to 41 days at BJ’s, 50 days at Wal-Mart and 73 days at Sears. Given that Costco warehouses are 148,000 square feet, this represents an incredible volume of sales per month. Average Receivables Period: Wal-Mart, BJ’s, and Costco have practically no s receivable due to the fact that they do not offer credit s to general customers. Most of their sales are cash, check or credit card. Sears’ receivables period, however, is unusually long, even for a general retailer, reflecting the poor credit of their customers. Nevertheless, Sears does profit from slow average receivables because a high portion of their income comes from their credit division. Customers who stretch payments pay Sears significant finance charges.

Average Payables Period: Sears is again the outlier. One explanation is that Sears stretches its s payables to compensate for slower inventory turnover and longer AR collection. This combination spells troubles for the general retailer. However, Sears includes “other liabilities” in their year-end s payable figure, making it difficult to determine their exact payables period. Wal-Mart, Costco, and BJ’s have similar payables periods and ratios more in line with industry averages. The competitive advantage of Costco, however, becomes clear when we take into both the payables period and inventory turnover. Costco’s inventory is in stores on average 31 days and their payables period is 33 days. This implies that Costco can order, stock, sell goods and collect cash from customers, all before having to pay suppliers. This is a huge competitive advantage allowing them to use proceeds from operations to fund growth. Thinking again of Costco’s reduced ROE in 2001, the important figure to watch going forward will be inventory turns. This figure is key to their strategy, reflecting their success at the customer level. One reason that Costco has been adding ancillary services is to increase the frequency of customer visits, which encourages them to buy and keeps inventory turning over. Conclusion: In sum, this case shows how the operational performance of a business can be elucidated and better understood through financial statements and ratio analysis. This type of analysis allows an investor to evaluate a business both over time and in relation to competitors. However, it is important to keep in mind that ratios cannot be considered in isolation from the company’s business strategy and other qualitative information contained in annual reports and the financial press.

6

Financial Statements for Costco Wholesale Corp. (1997 - 2001) Warehouses in Operation Beginning of year (including Mexico) Openings Closings

2001

2000

1999

1998

1997

331

308

292

274

265

41

27

23

19

17

(7)

(4)

(7)

(1)

(8)

365

331

308

292

274

4,358

4,170

3,887

3,676

3,537

12,737

10,521

9,555

8,654

7,845

2001

2000

1999

1998

1997

34,137

31,621

26,976

23,830

21,484

660

543

480

440

390

34,797

32,164

27,456

24,270

21,874

30,598

28,322

24,170

21,380

19,314

3,129

2,756

2,338

2,070

1,877

Preopening expenses

60

42

31

27

27

Provision for impaired assets / closings

18

7

57

6

75

33,805

31,127

26,596

23,483

21,293

992

1,037

860

787

581

(32)

(39)

(45)

(48)

(76)

43

54

44

27

15

0

0

0

0

0

End of year at Year End (thousands) Business (primary cardholders) Gold Star Income Statement (millions) Revenue Net sales hip fees and other Total revenues Operating expenses Merchandise costs SG&A

Total operating expenses Operating income Other income (expenses) Interest expense Interest income and other Provision for merger and restructuring Income continuing ops before taxes

1,003

1,052

859

766

520

Provision for income taxes

401

421

344

306

208

Income before cumulative effect of accting

602

631

515

460

312

0

0

(118)

0

0

602

631

397

460

312

Income (loss), net of tax

0

0

0

0

0

Loss on disposal

0

0

0

0

0

602

631

397

460

312

Basic, before ing change

1.34

1.41

1.17

1.07

0.76

Cumulative effect of ing changes

0.00

0.00

(0.27)

0.00

0.00

Basic

1.34

1.41

0.90

1.07

0.76

Diluted

1.29

1.35

0.86

1.01

0.73

Basic

449,631

446,255

439,253

431,012

414,758

Diluted

475,827

475,737

471,120

463,371

449,336

Cumulative effect of accting, net of tax Income from continuing operations Discontinued operations

Net Income (loss) Net income per common share:

Number of common shares for calculation

7

Common size Income Statement Income Statement

2001

2000

1999

1998

1997

100.00%

100.00%

100.00%

100.00%

100.00%

1.93%

1.72%

1.78%

1.85%

1.82%

101.93%

101.72%

101.78%

101.85%

101.82%

89.63%

89.57%

89.60%

89.72%

89.90%

SG&A

9.17%

8.72%

8.67%

8.69%

8.74%

Preopening expenses

0.18%

0.13%

0.11%

0.11%

0.13%

Revenue Net sales hip fees and other Total revenues Operating expenses Merchandise costs

Provision for impaired assets / closings Total operating expenses Operating income

0.05%

0.02%

0.21%

0.03%

0.35%

99.03%

98.44%

98.59%

98.54%

99.11%

2.91%

3.28%

3.19%

3.30%

2.70%

Other income (expenses) Interest expense

-0.09%

-0.12%

-0.17%

-0.20%

-0.35%

Interest income and other

0.13%

0.17%

0.16%

0.11%

0.07%

Provision for merger and restructuring

0.00%

0.00%

0.00%

0.00%

0.00%

Income continuing ops before taxes

2.94%

3.33%

3.18%

3.21%

2.42%

Provision for income taxes

1.17%

1.33%

1.28%

1.28%

0.97%

Income before cumulative effect of accting

1.76%

2.00%

1.91%

1.93%

1.45%

Cumulative effect of accting, net of tax

0.00%

0.00%

-0.44%

0.00%

0.00%

Income from continuing operations

1.76%

2.00%

1.47%

1.93%

1.45%

Discontinued operations

0.00%

0.00%

0.00%

0.00%

0.00%

Income (loss), net of tax

0.00%

0.00%

0.00%

0.00%

0.00%

Loss on disposal

0.00%

0.00%

0.00%

0.00%

0.00%

Net Income (loss)

1.76%

2.00%

1.47%

1.93%

1.45%

8

Balance Sheet (thousands)

2001

2000

1999

1998

1997

602,585

524,505

440,586

361,974

175,508

4,999

48,026

256,688

75,549

0

Current assets Cash and equivalents Short-term investments Receivables, net

324,768

174,375

168,648

171,613

147,133

2,738,504

2,490,088

2,210,475

1,910,751

1,686,525

Other current assets

211,601

233,124

239,516

108,343

100,784

Total current assets

3,882,457

3,470,118

3,315,913

2,628,230

2,109,950

1,877,158

1,621,798

1,264,125

1,119,663

1,094,607

improvements

3,834,714

3,007,752

2,444,640

2,170,896

1,933,740

Equipment and fixtures

1,529,307

1,311,110

1,138,568

948,515

840,578

Merchandise inventories, net

Property and equipment Land and rights Building, leaseholds and land

Construction in process Subtotal Less accumulated depreciation Net property plant and equipment

133,995

200,729

176,824

91,901

81,417

7,375,174

6,141,389

5,024,157

4,330,975

3,950,342

(1,548,589)

(1,307,273)

(1,117,269)

(935,603)

(795,708)

5,826,585

4,834,116

3,906,888

3,395,372

3,154,634

Other assets

380,744

329,706

282,200

236,218

211,730

Total assets

10,089,786

8,633,940

7,505,001

6,259,820

5,476,314

2001

2000

1999

1998

1997

194,552

9,500

0

0

25,460

Current liabilities Short-term borrowing s payable

2,727,639

2,197,139

1,912,632

1,605,533

1,394,309

Accrued salaries and benefits

483,473

422,264

414,276

352,903

302,681

Accrued sales and other tax

152,864

159,717

122,932

102,367

90,774

Deferred hip income

322,583

262,249

225,903

0

0

Other current liabilities

231,078

353,490

190,490

136,139

150,823

Total current liabilities

4,112,189

3,404,359

2,866,233

2,196,942

1,964,047

Long-term debt

859,393

790,053

918,888

930,035

917,001

Deferred income taxes and other liabilities

119,434

90,391

66,990

61,483

38,967

5,091,016

4,284,803

3,852,111

3,188,460

2,920,015

115,830

108,857

120,780

105,474

88,183

Preferred

0

0

0

0

0

Common

2,259

2,236

2,214

2,176

2,136

Additional paid in

1,125,543

1,028,414

952,758

817,628

706,324

Other accumulated

(173,610)

(117,029)

(118,084)

(151,842)

(78,426)

Retained earnings

3,928,748

3,326,659

2,695,222

2,297,924

1,838,082

Total stockholder’s equity

4,882,940

4,240,280

3,532,110

2,965,886

2,468,116

10,089,786

8,633,940

7,505,001

6,259,820

5,476,314

Total liabilities Minority interest Stockholder’s Equity

Total liabilities and shareholder’s equity

9

Balance Sheet

2001

2000

1999

1998

1997

Cash and equivalents

5.97%

6.07%

5.87%

5.78%

3.20%

Short-term investments

0.05%

0.56%

3.42%

1.21%

0.00%

Current assets

Receivables, net

3.22%

2.02%

2.25%

2.74%

2.69%

27.14%

28.84%

29.45%

30.52%

30.80%

Other current assets

2.10%

2.70%

3.19%

1.73%

1.84%

Total current assets

38.48%

40.19%

44.18%

41.99%

38.53%

Land and rights

18.60%

18.78%

16.84%

17.89%

19.99%

Building, leaseholds and land improvements

38.01%

34.84%

32.57%

34.68%

35.31%

Equipment and fixtures

15.16%

15.19%

15.17%

15.15%

15.35%

Construction in process

1.33%

2.32%

2.36%

1.47%

1.49%

Merchandise inventories, net

Property and equipment

Subtotal

73.10%

71.13%

66.94%

69.19%

72.14%

-15.35%

-15.14%

-14.89%

-14.95%

-14.53%

57.75%

55.99%

52.06%

54.24%

57.61%

Other assets

3.77%

3.82%

3.76%

3.77%

3.87%

Total assets

100%

100%

100%

100%

100%

1.93%

0.11%

0.00%

0.00%

0.46%

27.03%

25.45%

25.48%

25.65%

25.46%

Accrued salaries and benefits

4.79%

4.89%

5.52%

5.64%

5.53%

Accrued sales and other tax

1.52%

1.85%

1.64%

1.64%

1.66%

Deferred hip income

3.20%

3.04%

3.01%

0.00%

0.00%

Other current liabilities

2.29%

4.09%

2.54%

2.17%

2.75%

Total current liabilities

Less accumulated depreciation Net property plant and equipment

Current liabilities Short-term borrowing s payable

40.76%

39.43%

38.19%

35.10%

35.86%

Long-term debt

8.52%

9.15%

12.24%

14.86%

16.74%

Deferred income taxes and other liabilities

1.18%

1.05%

0.89%

0.98%

0.71%

Total liabilities

50.46%

49.63%

51.33%

50.94%

53.32%

Minority interest

1.15%

1.26%

1.61%

1.68%

1.61%

Preferred

0.00%

0.00%

0.00%

0.00%

0.00%

Common

0.02%

0.03%

0.03%

0.03%

0.04%

Additional paid in

11.16%

11.91%

12.69%

13.06%

12.90%

Other accumulated

-1.72%

-1.36%

-1.57%

-2.43%

-1.43%

Retained earnings

38.94%

38.53%

35.91%

36.71%

33.56%

Total stockholder’s equity

48.39%

49.11%

47.06%

47.38%

45.07%

100.00%

100.00%

100.00%

100.00%

100.00%

Stockholder’s Equity

Total liabilities and shareholder’s equity

10

Managerial Balance Sheet: 2001

2000

1999

1998

1997

Cash

607,584

572,531

697,274

437,523

175,508

WCR

-642,764

-497,272

-247,594

-6,235

-4,145

LTA

5,972,065

4,964,574

4,001,318

3,464,633

3,239,214

Capital Invested

5,936,885

5,039,833

4,450,998

3,895,921

3,410,577

STD

194,552

9,500

0

0

25,460

LTD

859,393

790,053

918,888

930,035

917,001

Equity

4,882,940

4,240,280

3,532,110

2,965,886

2,468,116

Capital Employed

5,936,885

5,039,833

4,450,998

3,895,921

3,410,577

90

1800

80

1600

70

1400

60

1200

50

1000

40

800

30

600

20

400

10

200

8/1/2011

1/1/2011

6/1/2010

4/1/2009

11/1/2009

9/1/2008

2/1/2008

7/1/2007

12/1/2006

5/1/2006

10/1/2005

3/1/2005

8/1/2004

1/1/2004

6/1/2003

4/1/2002

0

11/1/2002

0

9/1/2001

Price

Costco Share Price vs S&P500

11

Sustainable Growth Model (millions) Net Income Owner’s Equity Return on Equity (ROE) Dividend

2001

2000

1999

1998

1997

602

631

515

460

312

4,240

3,532

2,966

2,468

NA

14.20%

17.90%

17.40%

18.60%

NA

0

0

0

0

0

Net Income

602

631

515

460

312

Dividend Payout

0.0

0.0

0.0

0.0

0.0

100%

100%

100%

100%

100%

Earnings Retention Ratio Net Income

602

631

515

460

312

8,634

7,505

6,260

5,476

NA

0.1

8.40%

8.20%

8.40%

NA

Assets

8,634

7,505

6,260

5,476

NA

Owner’s Equity

Assets Return on Assets (ROA)

4,240

3,532

2,966

2,468

NA

Financial Leverage

2.04

2.12

2.11

2.22

NA

Net Income

602

631

515

460

312

34,797

32,164

27,456

24,270

21,874

Sales Net Margin (Return on Sales)

1.73%

1.96%

1.88%

0.02

1.43%

Sales

34,797

32,164

27,456

24,270

21,874

Assets

8,634

7,505

6,260

5,476

NA

4.03

4.29

4.39

4.43

NA

1,003

1,052

859

766

520

Sales

34,797

32,164

27,456

24,270

21,874

Pretax Return on Sales Pretax Income (continuing operations)

2.88%

3.27%

3.13%

3.16%

2.38%

Asset Turnover Pretax Income (continuing operations)

1,003

1,052

859

766

520

Taxes

401

421

344

306

208

Tax Rate

0.4

0.4

0.4

39.90%

0.4

Tax Effect (1 - Tax Rate)

0.6

0.6

0.6

60.10%

0.6

12

Calculated Ratios Profitability Ratios

2001

2000

1999

1998

1997

Net Profit Margin

1.73%

1.96%

1.45%

1.90%

1.43%

10.17%

10.26%

10.22%

10.09%

9.92%

Operating Margin

2.85%

3.22%

3.13%

3.24%

2.66%

Change in Sales

7.96%

17.22%

13.20%

10.92%

Change in COGS

8.04%

17.18%

13.05%

10.70%

Change in OpExp

14.33%

15.62%

15.36%

6.27%

1.73%

1.96%

1.45%

1.90%

1.43%

Asset Turnover

3.45

3.73

3.66

3.88

3.99

Financial Leverage

2.07

2.04

2.12

2.11

2.22

12.33%

14.88%

11.24%

15.51%

12.64%

324,768

174,375

168,648

171,613

147,133

93,526

86,633

73,907

65,288

58,860

3.47

2.01

2.28

2.63

2.50

Gross Profit Margin

EBIAT/Invested Capital

?

EBIAT Invested Capital ROIC

ROE Profit Margin

ROE

Activity Ratios Asset Turnover Receivables Management s Receivables Daily Credit Sales Average Collection Period

Inventory Management COGS

30,598,000

28,322,000

24,170,000

21,380,000

19,314,000

2,738,504

2,490,088

2,210,475

1,910,751

1,686,525

Inventory Turnover

11.17

11.37

10.93

11.19

11.45

Days in Inventory

32.67

32.09

33.38

32.62

31.87

Inventory

Fixed Asset Turnover Sales 34,797,000

32,164,000

27,456,000

24,270,000

21,874,000

Fixed Asset 5,826,585

4,834,116

3,906,888

3,395,372

3,154,634

5.97

6.65

7.03

7.15

6.93

FAT

13

Leverage Ratios 5,091,016

4,284,803

3,852,111

3,188,460

2,920,015

10,089,786

8,633,940

7,505,001

6,259,820

5,476,314

50.46%

49.63%

51.33%

50.94%

53.32%

1.02

0.99

1.05

1.04

1.14

Market Value of Equity

?

?

?

?

?

Total Liabilities/TL+MVE

?

?

?

?

?

992

1037

860

787

581

Total Liabilitis Total Assets TL/TA Debt/Equity

Interest Coverage Ratio EBIT Interest Expense ICR

32

39

45

48

76

31.00

26.59

19.11

16.40

7.64

Number of Days in Payables 2,727,639

2,197,139

1,912,632

1,605,533

1,394,309

(COGS/365)

83830

77595

66219

58575

52915

A/P /(COGS/365)

32.54

28.32

28.88

27.41

26.35

Current Ratio=CA/CL

0.94

1.02

1.16

1.20

1.07

Quick Ratio

0.28

0.29

0.39

0.33

0.22

A/P

Liquidity Ratios

14