Costco Wholesale Corporation

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Costco Case Costco Wholesale Corporation | Table of Contents The Problem and Assumptions 2 The Problem 2 Assumptions 2 Qualitative Analysis 2 Quantitative Analysis 3 Industry Trends 3 Costco Strategy Expansion 3 Income Statement Industry/Competitor Comparison 3 Balance Sheet Competitor/Industry Comparison 5 Common-Size Analysis 6 Ratio Analysis 6 Statement of Cash Flow 9 Preferred Action Plan with Alternative Actions 11 The Problem and Assumptions The Problem Margarita Torres purchased shares in Costco Wholesale Corporation in 1997 and now it is 2002. She has decided to analyze her investment to see if Costco will continue to be profitable at a sustainable growth rate. The main question she needs to answer is how the company had been affected by growth. Had its operational efficiency changed? And how had it financed the growth and how its capital structure evolved? Assumptions For the year 2001 a recession occurred. This occurrence is considered when reviewing the financial numbers and statistics during this year. Qualitative Analysis The first step in analyzing Costco Wholesale Corporation is analyzing the relative qualitative data. Based on the data provided within the case the points below summarize how Costco is performing: * Industry: Wholesale clubs grew 12-15% in the 1990s and Costco is currently the largest wholesale club in the industry. * Strategy: Costco targets wealthier clientele of small business owners and middle class shoppers. The main goal of Costco is to have the lowest per unit price on the products sold. Costco is the largest retailer of wine, has expanded name-brand products, and added ancillary services. The main attribute that lead to profit for Costco is having operating efficiency. They do this one way by reducing expenses through cross docking. * Competition:

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