Financial Analysis of Costco Company Research Paper

As a result, this shift would lead to an emphasis on providing various goods and services to customers, in an effort to address changing consumer demand. This would have an impact on the Costco itself, as it would provide stability for the company and help them to be able to take advantage of the shift that was occurring. Evidence of this can be seen by examining the different financial aspects of the company. As the financial statement analysis indicates, that despite various challenges facing retailers over the last five years, Costco is continuing to see sizeable increases in net sales and net income. The different ratios indicate that the company is in strong financial condition, as they have low amounts of debt, high levels of liquidity and profitability. The only problem is that the price of the stock has become more expensive, given the fact that shares have seen such a sizeable increase over the last year. Evidence of this can be seen with the high PE ratio in comparison with its five-year average. As far as risks are concerned, the company has a significantly lower beta factor in comparison with the major market averages (by consistently trading beneath 1.0) This has had an impact upon how the company's debt is rated, with various ratings agencies posting a rating of AA-. The dividend growth model / dividend indicates, continued financial strength of the company, as this amount has been rising consistently since 2004. The Weighted Average Cost of Capital, the cost of common stock and after-tax cost of debt are highlighting continued financial strength of the company, by showing how they have low interest rates for borrowing and raising money in the capital markets.When you put all of these different elements together, they are highlighting how Costco is one of the strongest retailers in the sector. This is because the business model is allowing the company to be able to see continued earnings growth, during a time when many retailers are facing continuing economic challenges. This is important, as analyzing the various financial information of the company, is showing how Costco is a low risk trade, with possibility of providing above average growth in the future. Over the course of time, this means that earnings and sales will continue to benefit from these different advantages that they have.

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