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, BJs 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
Membership structure for customer retention

Common-size statements

An analysis of the common-size income statement reflects the following about Costcos 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.

Membership 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 membership
process are minimal, the majority of membership fees flow right to the bottom line.

The following trends can be observed from the common-size income statement regarding Costcos
operational efficiency:

The company has not sustained operational losses, despite the companys 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 accounting 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 account for the change.

It is important to note the impact that the accounting policy for membership 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 accounting policy because it
matches revenues to the period in which the company provides services, but operationally its
important to remember that Costco has the use of the cash up front.

An analysis of the common-size balance sheet reflects the following about Costcos 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 Costcos 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).

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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 accounting 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 companys 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 accounts 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.

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Asset Turnover:

Asset turnover has gradually fallen over the four-year period. This implies that the company is
generating less revenue in sales (including membership 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 years SG&A accounting 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 Costcos 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 Costcos ratios are, they are in fact quite similar to BJs,
indicating that Costcos 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 SAMS club results (12 percent of total Wal- Mart sales).

Gross margin:

Sears has a slightly higher gross margin than Wal-Mart; however, Costcos and BJs 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 WalMarts).

Sometimes differences in ratios or financial indicators compiled from financial statements are affected
from accounting methods. For instance, in this particular case (this information was not provided in the

4
case text) a direct comparison between Costcos and BJs gross margings is not appropriate because of
their differences in accounting policies. BJs cost of goods sold figure includes procurement costs,
thereby decreasing gross margin. Unless we know BJs annual procurement expenses, we cannot
directly compare the gross margins.

Operating margin:

This figure reflects profitability, taking into account both pricing strategy (gross margin) and operating
efficiency. For Costco and BJs we include membership 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 BJs higher operating margin in comparison to Costcos. We know that Costcos 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. Its also interesting to note that even though Costco and BJs have gross
margins significantly lower than Sears, their net margins are quite similar. In addition, Costcos net
margin is relatively better than BJs even though BJs operating margin is better. The swing is a
result of a material charge (loss on contingent lease obligation) that BJs incurred in 2001.

Current ratio:

We see that Costcos current ratio (0.94) and BJs (1.20) are significantly lower than Sears (2.32) and
Wal-Marts (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 BJs. 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 BJs. 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 BJs, 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, BJs, and Costco have practically no accounts receivable due to the fact that they do not
offer credit accounts 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 accounts 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 accounts payable figure, making it
difficult to determine their exact payables period. Wal-Mart, Costco, and BJs have similar payables
periods and ratios more in line with industry averages.

The competitive advantage of Costco, however, becomes clear when we take into account both the
payables period and inventory turnover. Costcos 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 Costcos 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 companys business strategy and other
qualitative information contained in annual reports and the financial press.

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Financial Statements for Costco Wholesale Corp. (1997 - 2001)
Warehouses in Operation 2001 2000 1999 1998 1997
Beginning of year (including Mexico) 331 308 292 274 265
Openings 41 27 23 19 17
Closings (7) (4) (7) (1) (8)
End of year 365 331 308 292 274
Members at Year End (thousands)
Business (primary cardholders) 4,358 4,170 3,887 3,676 3,537
Gold Star 12,737 10,521 9,555 8,654 7,845
Income Statement (millions) 2001 2000 1999 1998 1997
Revenue
Net sales 34,137 31,621 26,976 23,830 21,484
Membership fees and other 660 543 480 440 390
Total revenues 34,797 32,164 27,456 24,270 21,874
Operating expenses
Merchandise costs 30,598 28,322 24,170 21,380 19,314
SG&A 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
Total operating expenses 33,805 31,127 26,596 23,483 21,293
Operating income 992 1,037 860 787 581
Other income (expenses)
Interest expense (32) (39) (45) (48) (76)
Interest income and other 43 54 44 27 15
Provision for merger and restructuring 0 0 0 0 0
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
Cumulative effect of accting, net of tax 0 0 (118) 0 0
Income from continuing operations 602 631 397 460 312
Discontinued operations
Income (loss), net of tax 0 0 0 0 0
Loss on disposal 0 0 0 0 0
Net Income (loss) 602 631 397 460 312
Net income per common share:
Basic, before accounting change 1.34 1.41 1.17 1.07 0.76
Cumulative effect of accounting 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
Number of common shares for calculation
Basic 449,631 446,255 439,253 431,012 414,758
Diluted 475,827 475,737 471,120 463,371 449,336

7
Common size Income Statement

Income Statement 2001 2000 1999 1998 1997

Revenue
Net sales 100.00% 100.00% 100.00% 100.00% 100.00%
Membership fees and other 1.93% 1.72% 1.78% 1.85% 1.82%
Total revenues 101.93% 101.72% 101.78% 101.85% 101.82%
Operating expenses
Merchandise costs 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%
Provision for impaired assets / closings 0.05% 0.02% 0.21% 0.03% 0.35%
Total operating expenses 99.03% 98.44% 98.59% 98.54% 99.11%
Operating income 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
Current assets
Cash and equivalents 602,585 524,505 440,586 361,974 175,508
Short-term investments 4,999 48,026 256,688 75,549 0
Receivables, net 324,768 174,375 168,648 171,613 147,133
Merchandise inventories, net 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
Property and equipment
Land and rights 1,877,158 1,621,798 1,264,125 1,119,663 1,094,607
Building, leaseholds and land
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
Construction in process 133,995 200,729 176,824 91,901 81,417
Subtotal 7,375,174 6,141,389 5,024,157 4,330,975 3,950,342
Less accumulated depreciation (1,548,589) (1,307,273) (1,117,269) (935,603) (795,708)
Net property plant and equipment 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
Current liabilities 2001 2000 1999 1998 1997
Short-term borrowing 194,552 9,500 0 0 25,460
Accounts 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 membership 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
Total liabilities 5,091,016 4,284,803 3,852,111 3,188,460 2,920,015
Minority interest 115,830 108,857 120,780 105,474 88,183
Stockholders Equity
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 stockholders equity 4,882,940 4,240,280 3,532,110 2,965,886 2,468,116
Total liabilities and shareholders equity 10,089,786 8,633,940 7,505,001 6,259,820 5,476,314

9
Balance Sheet 2001 2000 1999 1998 1997
Current assets
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%
Receivables, net 3.22% 2.02% 2.25% 2.74% 2.69%
Merchandise inventories, net 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%
Property and equipment
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%
Subtotal 73.10% 71.13% 66.94% 69.19% 72.14%
Less accumulated depreciation -15.35% -15.14% -14.89% -14.95% -14.53%
Net property plant and equipment 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%
Current liabilities
Short-term borrowing 1.93% 0.11% 0.00% 0.00% 0.46%
Accounts payable 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 membership 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 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%
Stockholders Equity
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 stockholders equity 48.39% 49.11% 47.06% 47.38% 45.07%
Total liabilities and shareholders equity 100.00% 100.00% 100.00% 100.00% 100.00%

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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

Costco Share Price vs S&P500

90 1800
80 1600
70 1400
60 1200
50 1000
Price

40 800
30 600
20 400
10 200
0 0
9/1/2001
4/1/2002

6/1/2003
1/1/2004
8/1/2004
3/1/2005

5/1/2006

7/1/2007
2/1/2008
9/1/2008
4/1/2009

6/1/2010
1/1/2011
8/1/2011
11/1/2002

10/1/2005

12/1/2006

11/1/2009

11
Sustainable Growth Model
(millions) 2001 2000 1999 1998 1997
Net Income 602 631 515 460 312
Owners Equity 4,240 3,532 2,966 2,468 NA
Return on Equity (ROE) 14.20% 17.90% 17.40% 18.60% NA
Dividend 0 0 0 0 0
Net Income 602 631 515 460 312
Dividend Payout 0.0 0.0 0.0 0.0 0.0
Earnings Retention Ratio 100% 100% 100% 100% 100%
Net Income 602 631 515 460 312
Assets 8,634 7,505 6,260 5,476 NA
Return on Assets (ROA) 0.1 8.40% 8.20% 8.40% NA
Assets 8,634 7,505 6,260 5,476 NA
Owners Equity 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
Sales 34,797 32,164 27,456 24,270 21,874
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
Asset Turnover 4.03 4.29 4.39 4.43 NA
Pretax Income (continuing
operations) 1,003 1,052 859 766 520
Sales 34,797 32,164 27,456 24,270 21,874
Pretax Return on Sales 2.88% 3.27% 3.13% 3.16% 2.38%
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%

Gross Profit Margin 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%

EBIAT/Invested Capital ?

EBIAT

Invested Capital

ROIC

ROE

Profit Margin 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

ROE 12.33% 14.88% 11.24% 15.51% 12.64%

Activity Ratios

Asset Turnover

Receivables Management

Accounts Receivables 324,768 174,375 168,648 171,613 147,133

Daily Credit Sales 93,526 86,633 73,907 65,288 58,860

Average Collection Period 3.47 2.01 2.28 2.63 2.50

Inventory Management

COGS 30,598,000 28,322,000 24,170,000 21,380,000 19,314,000

Inventory 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

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
FAT
5.97 6.65 7.03 7.15 6.93

13
Leverage Ratios

Total Liabilitis 5,091,016 4,284,803 3,852,111 3,188,460 2,920,015

Total Assets 10,089,786 8,633,940 7,505,001 6,259,820 5,476,314

TL/TA 50.46% 49.63% 51.33% 50.94% 53.32%

Debt/Equity 1.02 0.99 1.05 1.04 1.14

Market Value of Equity ? ? ? ? ?

Total Liabilities/TL+MVE ? ? ? ? ?

Interest Coverage Ratio

EBIT 992 1037 860 787 581

Interest Expense 32 39 45 48 76

ICR 31.00 26.59 19.11 16.40 7.64

Number of Days in Payables

A/P 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

Liquidity Ratios

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

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