Costco Wholesale Corporation is America’s largest membership retail company. According to its letter to stockholders:
For the first time [in 2011], four of our locations had more than $300 million in annual sales, including one which had more than $400 million in sales. This rate of top line revenue per building stands out in the retail industry and results from our ongoing focus on value—that winning combination of quality and price on every item we sell that, we believe, sets Costco apart from many of its competitors.
To achieve its strategy, Costco must organize its management by functions that relate to the principal activities of a business. Discuss the three basic activities Costco will engage in to achieve its goals, and suggest some examples of each. What is the role of Costco’s management? What functions must its management perform to carry out these activities?
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Principles of Accounting
- Costco is the largest chain of membership warehouse clubs in the world based on sales volume, and it is the fifth largest general retailer in the United States. Costco focuses on selling products at low prices, often at a very high volume. These goods are usually bulk-packaged and marketed primarily to large families and businesses. Costco became the first company to grow from zero to 3 billion in sales in less than six years. In a recent fiscal year, Costcos sales totaled 76.3 billion, a 29.3 percent increase from 2006, and its net income reached 1.30 billion, an 18.1 percent increase from 2006. This information, and much more, can be derived from the financial statements that merchandising firms such as Costco prepare on a regular basis to provide shareholders and other interested parties information about the companys activities and financial performance. 1. What type of information would a classified income statement provide to shareholders and other interested parties? 2. What type of information would a classified balance sheet provide to shareholders and other interested parties? Why would this information be important for calculating the working capital and the current ratio, for example?arrow_forward[The following information applies to the questions displayed below.] Mears and Company has been operating for five years as an electronics component manufacturer specializing in cellular phone components. During this period, it has experienced rapid growth in sales revenue and in inventory. Mr. Mears and his associates have hired you as Mears's first corporate controller. You have put into place new purchasing and manufacturing procedures that are expected to reduce inventories by approximately one-third by year-end. You have gathered the following data related to the changes: Inventory (dollars in thousands) Beginning of Year $585,700 End of Year (projected) $392,310 Current Year Cost of goods sold P7-7 Part 1 (projected) $7,018,984 Required: 1. Compute the inventory turnover ratio based on two different assumptions: Note: Round your answers to 1 decimal place. a. Those presented in the above table (a decrease in the balance in inventory). b. No change from the beginning-of-the-year…arrow_forward[The following information applies to the questions displayed below.] Mears and Company has been operating for five years as an electronics component manufacturer specializing in cellular phone components. During this period, it has experienced rapid growth in sales revenue and in inventory. Mr. Mears and his associates have hired you as Mears's first corporate controller. You have put into place new purchasing and manufacturing procedures that are expected to reduce inventories by approximately one-third by year-end. You have gathered the following data related to the changes: Inventory Cost of goods sold (dollars in thousands) Beginning of Year $585,700 End of Year (projected) $392,310 Current Year (projected) $7,018,984 P7-7 Part 2 2. What is the effect of the projected change in the inventory balance on cash flow from operating activities for the year? Effect of change in inventoryarrow_forward
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- You are analyzing two companies that manufacture electronic toys—Like Games Inc. and Our Play Inc. Like Games was launched eight years ago, whereas Our Play is a relatively new company that has been in operation for only the past two years. However, both companies have an equal market share with sales of $200,000 each. You’ve collected company data to compare Like Games and Our Play. Last year, the average sales for all industry competitors was $510,000. As an analyst, you want to make comments on the expected performance of these two companies in the coming year. You’ve collected data from the companies’ financial statements. This information is listed as follows: (Note: Assume there are 365 days in a year.) Data Collected (in dollars) Like Games Our Play Industry Average Accounts receivable 5,400 7,800 7,700 Net fixed assets 110,000 160,000 433,500 Total assets 190,000 250,000 469,200 Using this information, complete the following statements to include in your…arrow_forwardIn a recent annual report and related Global Responsibility Report, Starbucks provides information on company performance on several dimensions. Select whether the following items best fit into the financial (label your answer "Profit"), social (label your answer "People"), or environmental (label your answer "Planet") aspects of triple bottom line reporting. 1. Increased diversity training for employees. 2. Operating cash flow totaled $4.2 billion. 3. New stores are built using certified sustainable building techniques. 4. Operating income totaled $4.1 billion. 5. Decreased amounts of packaging materials used. 6. Increased aluminum recycling.arrow_forwardFruity Co is a distributors of fresh good and vegetables. It currently has 15 warehouses in the US from which it supplies produce to grocery stores. Each warehouse has an average inventory level of 3.88 million $. Due to advances in transportation services and infrastructure, management believes that if they reduce the number of warehouses to 10, they would still be able to provide timely replenishment to the grocery stores. What would be the total inventory in the system in millions of dollars, if inventory was consolidated from the 15 warehouses to only 10 warehouses? (Enter your answer in millions of dollars. E.g. if you get 30.24 million $ simply enter 30.24 without the million$ sign. Round your answer to 2 decimal places.)arrow_forward
- You are analyzing two companies that manufacture electronic toys-Like Games Inc. and Our Play Inc. Like Games was launched eight years ago, whereas Our Play is a relatively new company that has been in operation for only the past two years. However, both companies have an equal market share with sales of $100,000 each. You've collected company data to compare Like Games and Our Play. Last year, the average sales for all industry competitors was $255,000. As an analyst, you want to make comments on the expected performance of these two companies in the coming year. You've collected data from the companies' financial statements. This information is listed as follows: (Note: Assume there are 365 days in a year.) Data Collected (in dollars) Like Games Our Play Industry Average Accounts receivable 2,700 3,900 3,850 Net fixed assets 55,000 80,000 216,750 Total assets 95,000 125,000 234,600 Using this information, complete the following statements to include in your analysis. 1. A days of…arrow_forwardYou are analyzing two companies that manufacture electronic toys-Like Games Inc. and Our Play Inc. Like Games was launched eight years ago, whereas Our Play is a relatively new company that has been in operation for only the past two years. However, both companies have an equal market share with sales of $100,000 each. You've collected company data to compare Like Games and Our Play. Last year, the average sales for all industry competitors was $255,000. As an analyst, you want to make comments on the expected performance of these two companies in the coming year. You've collected data from the companies' financial statements. This information is listed as follows: (Note: Assume there are 365 days in a year.) Like Games Our Play Data Collected (in dollars) Industry Average Accounts receivable 2,700 3,900 3,850 Net fixed assets 55,000 80,000 216,750 Total assets 95,000 125,000 234,600 Using this information, complete the following statements to include in your analysis. 1. A days of…arrow_forwardAdams Furniture has a quick ratio of 2.00x, $37,575 in cash, $20,875 in accounts receivable, some inventory, total current assets of $83,500, and total current liabilities of $29,225. The company reported annual sales of $100,000 in the most recent annual report. Over the past year, how often did Adams Furniture sell and replace its inventory? O 2.86x O 4.39x O 8.01x O 3.99x The inventory turnover ratio across companies in the furniture industry is 4.389x. Based on this information, which of the following statements is true for Adams Furniture? O Adams Furniture is holding less inventory per dollar of sales compared with the industry average. O Adams Furniture is holding more inventory per dollar of sales compared with the industry average. You are analyzing two companies that manufacture electronic toys-Like Games Inc. and Our Play Inc. Like Games was launched eight years ago, whereas Our Play is a relatively new company that has been in operation for only the past two years. However,…arrow_forward
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