BusinessManagement.edited xbsnss
RunningHead: BUSINESS MANAGEMENT 7
Title: Business Management
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Costco Company
SIC code: 5331
Industry name: the variety of stores
5331 variety stores
Costco Company does its operations on international membership chain warehouses under the name Costco Wholesale which entails the brand name, quality at minimal prices found in other warehouses in the area. It is in a design that aids small-sized to medium-sized companies in the reduction of costs in the resale purchasing and everyday company use. Persons might also buy their wants. Costco’s warehouses have one of the most exclusive and most significant categories of product selections in a single roof. The types vary from candy, groceries, appliances, media and television, automotive equipment, toys, tires, hardware, jewelry, sporting goods, books, cameras, apparel, house equipment, beauty and health aids, office equipment, furniture, and tobacco. The company is known for having top regional and national quality brands with a hundred percent satisfaction guarantee with prices below the traditional retail or wholesale outlets.
The current ratio for the industry that ended on February date 29th, 2020, is 1.04. The current rate is the liquidity ratio, which measures the business ability to offer payment to short obligations. The current ratio helps in giving sense in the company efficiency cycle of operation or the ability to turn products into capital (Label, 2016). Businesses that have problems receiving payments on receivables or have high turnover on inventories may end up in liquidity issues since they have problems in the alleviation of their duties. Since company business varies in every industry, it is essential to have a comparison of companies in a similar industry. Real current ratios range from sectors and are from one to three for well-doing businesses. The high the value of the current rate, the more the company has its capabilities of paying its duties. Below is a calculation of the industry’s current ratio.
The current ratio at the end of February 2020 = total number of existing assets in February 2020 / total current liabilities in February 2020
= 23703/22695
=1.04
The amount is in millions
The equity or debt ratio is the company’s measure of the financial leverage by having a division between the long term debts over the stakeholder equity (Glen & Pinto, 2014). The investment or debt ratio of the industry is 0.48 in February 2020. Below is a calculation of the industry equity ratio.
Equity ratio = total debts/ total equity of stakeholders
= capital lease obligation & short obligations + lease obligations & long debts / total equity of stakeholders
= (500 + 7545) / 16614
= 0.48
The amount is in millions
The Gross profit margin of the industry is 12.84 % as of Feb. 29 2020. There have been subsequent improvements in the Revenue to 39,072 million dollars by 5.49 percent than the increase in gross profit of 4.35 percent to 5,016 million dollars, which results in gross profit margin contraction of 12.84 percent. Below is a calculation of the gross margin profit of the industry.
Gross margin profit as of February year 2020 = gross profit/revenue
= -34056 / 39072
= (revenue – goods sold cost) / revenue
= (39072- 34056) / 39072
= 12.84%
The amount is in millions except for the percentage
The ratio on receivable turnover is the ratio that determines the ability of the company in getting loans from their customers by calculating the Revenue over the receivable accounts. A high ratio implies that companies will collect the pending receivables efficiently. The ratio of receivable turnovers for the industry is 91.29, which is above the average of the company.
Inventory turnover is in use in the measurement of the way a company can faster turn over inventories in a year. The company will, therefore, spend less capital on obsolete inventory, write-downs, and storage. If the inventory turns to be light, then there may be effects in the sale since the company has inadequate funds to meet the needs. The industry inventory turnover is 2.65. Below is a calculation of the industry inventory turnover
Inventory turnover = goods sold cost / total inventories
= sold goods cost in February 2020 / total inventories in November 2020 + total inventories in February 2020/ count
= 34056 / (13818+ 11850) / 2
= 34056 / 12834
= 2.65
The amount is in millions
Return on equity is the net income amount in return, a percentage of the equity shareholders (Stickney, Weil, Schipper & Francis, 2019). Return on equity measures the profitability corporation by revealing the amount of profit an organization gets with the capital invested by the shareholders. Industry return on equity for the three months ending on Feb. 29, 2020, was 22.93%. Annualized industry percentage of the return on equity for the quarter that ended in February 2020 is in the calculation as:
Return on equity percentage = net income which results to stockholders as of February 2020 / equity of total stockholders as of November 2019 + equity of total stockholders as of February 2020 / count
= 3724 / (15861+16614 / 2
= 3724 / 16237.5
= 22.93%
The amount is in millions except for the percentage
Assets turnover is in use in measuring how fast the company turns over the assets by sales (Weil, Schipper & Francis, 2013). It is in the calculation as the Revenue divided by the total assets. Industry’s Revenue for the three months ended in February 202 was $39,072 Million. Therefore, industry assets turnover for the quarter that came to an end in February 2020 was $50,107 million. Therefore industry asset turnover for the quarter that ended in February 2020 was 0.78 million.
Return on assets is in use as an indicator of the way profitable an organization is with its assets in total. Return of assets gives an investor, an analyst, or a manager, an idea to the efficient management of an organization that is using its assets in generating income. Return on assets is in depiction as a percentage. The return of assets for the industry is 8.09%.
The financial leverage ratio of the industry helps ion the determination of the effects on the debt of the total profit of an organization (Jain, 2017). It measures all the debts position of the industry, with all industry having any debts included, and it is in comparison with the equity. In simple terms, the higher financial leverage means the production cost, in conjunction with running the business daily, is higher. In contrast, low financial leverage implies the low fixed investment cost in the business and, in general, is considered by the investors as a good sign. Therefore if the creditors own as the majority of the industry assets, the organization is considered as having high leverage.
Understanding the structure and composition of the overall industry debt and corporate bonds outstanding provides a better idea as to how the capital structure of a business is at risk and if it is good to invest in it. The total industry debt is comparatively instability at the time as compared to the last year. The industry also reported total debt of 5.09 Billion in the year 2019. Repayment on the debt of the insurance security grows to182.7 Million in the year 2020, whereas debt with long term to the equity is likely to lower to 0.32 Million in the year 2020. The financial average is 1.75 Million.
The average ratio in this kind of business activity is more than the total average for all industries (Demmel, 2012). For this reason, in comparison to all businesses, the organization shows results of satisfaction. The financial position of the wholesale in Costco Corporation is all the same as the total financial average condition of the listed organizations that do submit their financial information to the United States exchange commission and security.
References
Demmel, R. (2012). undefined. Springer Science & Business Media.
Glen, J. D., & Pinto, B. (2014). Debt or equity?: How firms in developing countries choose. World Bank Publications.
Jain, K. &. (2017). Undefined. Tata McGraw-Hill Education.
Label, W. A. (2016). undefined. Sourcebooks.
Stickney, C., Weil, R., Schipper, K., & Francis, J. (2019). undefined. Cengage Learning.
Weil, R. L., Schipper, K., & Francis, J. (2013). Financial accounting: An introduction to concepts, methods, and uses. Cengage Learning.
by Jose G
Submission date: 23-May-2020 07:25AM (UTC-0500)
Submission ID: 1330461079
File name: Business_Management.edited x (19.66K)
Word count: 1375
Character count: 6959
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