Financial analysis is a process to manage and identify the performance of an organization in terms of financial transactions. Financial analysis is a process which evaluates the current position of the company as well as it explains about the future performance of the company. There are various techniques through which the financial performance of the company could be evaluated and the financial projection of the company could be done. In the report, financial performance of Costco Wholesale Corporation has been evaluated on the basis of horizontal analysis and the vertical analysis and significantly, the prediction about the future performance of the company has been done on the basis of current trend and the position of the company in terms of finance.
Costco Wholesale Corporation is an American company which is operating its business at international level. The main operations of the company are operated through chain of membership at warehouse club. The company has been awarded as world’s largest retailing company in terms of organic food, chicken, wine, choice and prime beef etc. Headquarter of the company is at Issaquah in Washington (History, 2018). Currently, company has ownership over 741 warehouses. Main brand of the company is Kirkland Signature. 2,31,000 people are employed by the company. The current annual report of the company states that the turnover and the total net profit of the company is US $ 129 billion and US $ 2.679 billion. It explains that the financial position of the company is quite viable.
Gamble & Thompson, (2014) has explained into his study that financial analysis is one of the best processes to analyze the projection of a company. Further, it has been added by Baker (2016) into his study that financial analysis makes it easy for the management and the investors of the company to make better conclusion about the position of the company. Bloomberg (2018) explains that the financial position and performance of an organization could be evaluated on the basis of various techniques. FT (2018) explains about the financial position and performance of Costco Wholesale Corporation. In his study, he briefed that the position of the company is quite strong in terms of finance. The margin level and the market level of the company have been better in context with the last 10 years. Further, it has been explained by Yahoo Finance (2018) that the market position of the company has been bit lower due to various changes into the economy position and well as the changes into the industry. It has also been found that the main competitors of the company are Sam’s club and BJ’s wholesale. BJ’s wholesale has the highest market ratio among the main three competitors. On the basis of it, NASDAQ (2018) explains that the organization should invest into the BJ’s wholesale rather than Costco Wholesale Corp. Though, Borysov, Roudi & Balatsky, (2015) has briefed into his paper that the market share is not the only measurement to evaluate the financial performance and position of the company. It only measures the market base of the company and it is not a predictable and reliable data to project the future performance of any organization.
Further, the study of Morningstar (2018) about the American market, NASADQ and Costco Wholesale Corp explains that the company is one of the best companies in American market to make an investment. The future prediction about the company briefs that the position and the performance of the company is bit better in the industry. The financial ratios of the company also briefs that the various positive changes have occurred into the financial strength and position of the company (Sullivan & Gouldson, 2016). The current trend of the company explains about a better projection and trend in near future.
The profitability and financial ratios are the measurements to identify and evaluate the level of profit generation capability of an organization as well as the current financial position of the company at internal level and external level as well (Investors relation, 2018). Through the evaluation on the financial statement of the company, it has been found that the position of the company has better from last 10 years and in future, the position of the corporation would be much better. The growth ratio of the company briefs about the growth rate of the company in last 10 years. Through the evaluation on the financial statement of the company, it has been generated that the financial strategy of the company is quite strong.
MSN money (2018) has focused on the dividend strategy of the company to generate and manage the dividend against the net profit of the company. The dividend level of the company is quite better and it attracts the various investors to invest into the organization so that the good level of return could be got. It has also impacted on the market value of the stock of the company. The current price of the company is $ 186.45 which is quite higher than the book value of the company (FT, 2018). It expresses about the better market position of the company in the industry as well as in the market.
In addition, various financial analysts have briefed into their study and articles that the position of the company is quite string and various revolutionary changes have take lace into the industry due to Costco Wholesale Corp (NASDAQ, 2018). It also briefs that the retention rate and he return on equity level of the company is quite better. Internal growth rate of the company has also been higher from last 3 years which explains that the financial position of the company is quite stable (FT, 2018). The current annual report of the company states that the turnover and the total net profit of the company is US $ 129 billion and US $ 2.679 billion. It explains that the financial position of the company is quite viable (Morningstar, 2018).
Structural framework assists an organization to identify the level of profitability, financial performance, strength of the company etc to make a better conclusion about the position of the company. Financial structural framework is used by the companies to run the operations of the company efficiently and effectively. It evaluates the revenues, net profit, equity short and long term assets, liabilities etc to identify the position of the company, tee structural framework study has been done on the Costco Wholesale Corporation to evaluate and identify the level of the company and the performance of the company in near future.
Regression analysis is a process which evaluates the data of an organization to identify the future prediction and current trend about the performance of the company. This technique makes it easier for the company as well as the management of the company to evaluate the performance and the position of the company. The regression analysis study has been done on Costco Wholesale Corporation to identify the future prediction of total turnover of the company. The regression analysis table of the company is as follows:
|
Models |
BIAS |
MAD |
MSE |
MAPE |
|
Trend |
0.00 |
2.29 |
8.67 |
0.05 |
|
Naïve |
1.55 |
4.45 |
26.09 |
0.09 |
|
Moving Avg |
2.56 |
3.96 |
25.85 |
0.08 |
|
Exponential Smoothing |
2.57 |
3.85 |
23.48 |
0.08 |
|
Holt’s |
0.91 |
3.73 |
19.78 |
0.08 |
The above model explains that the future prediction and the position of sales of the company are quite strong. It explains that the level of the company is way better in current scenario as well as in future scenario. It also explains that the future investment into the company would offer huge returns to the stakeholders of the company. The regression analysis calculations of the company briefs that the position of the company is better as well as the company are financially viable.
There are various other techniques to evaluate the performance and ensures the changes into the organization as well as predict the future changes of the organization. Growth analysis is a process which evaluates the data of an organization to identify the future prediction and current changes into the performance of the company. This technique makes it easier for the company as well as the management of the company to evaluate the performance and the position of the company. The growth analysis study has been done on Costco Wholesale Corporation to identify the future prediction of total turnover of the company (Courtemanche & Carden, 2014).
The growth ratio of the company briefs about the growth rate of the company in last 10 years. Through the evaluation on the financial statement of the company, it has been generated that the financial strategy of the company is quite strong and it also explains that the positive changes would take place into the financial statements of the company in next future years.
The growth model and calculation explains that the future prediction and the position of financial position of the company are quite strong. It explains that the level of the company is way better in current scenario as well as in future scenario (Baker, 2016). It also explains that the future investment into the company would offer huge returns to the stakeholders of the company. The growth rate analysis and calculations of the company briefs that the position of the company is better as well as the company are financially viable.
Basically, the pro-forma of the company has been generated and prepared on the basis of the trend analysis and growth rate analysis. The pro forma of the company has been prepared after evaluating the financial statement of last year and measuring the trend changes of the organization from last 3 years. The pro forma calculations of the comapny explains that the various changes would be taken place into the income statement, statement of financial position and statement of cash flows of the company. The pro-forma of income statement of the company has been prepared and evaluated on the basis of trend analysis and the changes into the revenue of the company in last 10 years. It has been evaluated through the study that the changes into the financial performance of the company would be positive and it would attracted more investors towards the comapny to make investment (Gamble & Thompson, 2014).
Further, pro-forma of balance sheet has been evaluated on the basis of income statement of the company and the balance sheet of the company of last 3 years. The pro-forma of balance sheet of the company expresses that the changes into the financial performance of the company would be positive and it would attract more investors towards the comapny to make investment.
Lastly, the cash flow statement of the company has been evaluated and analyzed on the basis of the financial statements i.e. income statement and balance sheet of the company and the position of the company explains that the future performance of the company is quite better in current scenario (Gornall & Strebulaev, 2015).
The above study and findings explain that the position of the company would be much better in near future. The current data and the trend of the company and the industry are quite better and it explains that the level of the comapny would be better in near future. The income statement of the company explains that the turnover level of the company would be enhanced and due to the turnover or sales level, the net profit of the company would also be better. It would directly enhance the profit generation capaibility of the company. Further, the other financial statement of the company has also been studied and it has been recognized that the level of the company would be better in terms of capital management, assets and financial strength of the company (Appendix).
The balance sheet of the company of last 3 years has been evaluated to identify the performance of company in next 3 years. The pro-forma of balance sheet of the company expresses that the changes into the financial performance of the company would be positive and it would attract more investors towards the comapny to make investment (Appendix). It would also affect the level of the company and the performance of the company in terms of financial transaction and the level of the company.
Lastly, the cash flow statement of the company of last 3 years has been evaluated to identify the performance of company in next 3 years (Appendix). The pro-forma of cash flow statement of the company expresses that the changes into the cash inflow and outflow of the company would be in the favour of the organization. The level of free cash inflow of the company would be better as the growth rate of the company is 9% (Appendix). It would also affect the level of the company and the performance of the company in terms of financial transaction and the level of the company. The above evaluation and analysis explains that the financial performance and the position of the company are quite strong and the pro-forma also explains about better changes into the organization (Appendix). It explains that the company is quite viable.
To conclude, the financial position and performance of the company would be quite better in near future and thus the company is a good choice for the inventors to invest into. It would offer the long term as well as short term profit to the company. According to the report, financial performance of Costco Wholesale Corporation explains about the prediction of the company. It explains that the future performance of the company has been better and it has been evaluated on the basis of current trend and the position of the company in terms of finance.
It expresses that the level of the company in terms of financial position of the company is quite better as it offers the long term profit to the company. To conclude, the financial performance and financial position of the company is quite strong. The above evaluation and analysis explains that the financial performance and the position of the company are quite strong and the pro-forma also explains about better changes into the organization. It explains that the company is quite viable.
References:
Barker, A. (2016). U.S. Patent Application No. 29/494,132.
Bloomberg. (2018). Costco Wholesale Corp. Retrieved from https://www.bloomberg.com/quote/COST:US.
Borysov, S. S., Roudi, Y., & Balatsky, A. V. (2015). US stock market interaction network as learned by the Boltzmann machine. The European Physical Journal B, 88(12), 321.
Courtemanche, C., & Carden, A. (2014). Competing with Costco and Sam’s Club: Warehouse club entry and grocery prices. Southern Economic Journal, 80(3), 565-585.
Costco Wholesale Corp. Retrieved from https://markets.ft.com/data/equities/tearsheet/summary?s=COST:NSQ.
Gamble, J., & Thompson, A. A. (2014). Essentials of strategic management. Irwin Mcgraw-Hill.
Gornall, W., & Strebulaev, I. A. (2015). The economic impact of venture capital: Evidence from public companies.
History. (2018). Costco Wholesale Corp. Retrieved from https://www.costco.com/.
Investors relation. (2018). Costco Wholesale Corp. Retrieved from https://phx.corporate-ir.net/phoenix.zhtml?c=83830&p=irol-irhome.
Morningstar. (2018). Costco Wholesale Corp. Retrieved from https://quicktake.morningstar.com/stocknet/secdocuments.aspx?symbol=cost.
Morningstar. (2018). Costco Wholesale Corp. Retrieved from https://financials.morningstar.com/income-statement/is.html?t=COST®ion=usa&culture=en-US.
Morningstar. (2018). Costco Wholesale Corp. Retrieved from https://financials.morningstar.com/ratios/r.html?t=COST.
MSN money. (2018). Costco Wholesale Corp. Retrieved from https://www.msn.com/en-us/money/stockdetails/fi-126.1.COST.NAS.
NASDAQ. (2018). Costco Wholesale Corp. Retrieved from https://www.nasdaq.com/symbol/cost.
NASDAQ. (2018). Costco Wholesale Corp. Retrieved from https://www.stock-analysis-on.net/NASDAQ/Company/Costco-Wholesale-Corp.
Sullivan, R., & Gouldson, A. (2016). Comparing the climate change actions, targets and performance of UK and US retailers. Corporate Social Responsibility and Environmental Management, 23(3), 129-139.
Yahoo finance. (2018). Costco Wholesale Corp. Retrieved from https://finance.yahoo.com/q?s=cost.
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