Financial statement analysis and common stock valuation

Analysis of Revenues

• Revenues as Reported

Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
Quarterly Data

Liabilities and stockholders’ equity components shown as percentage of total liabilities and stockholders’ equity.

Income Statement

The income statement (statement of earnings) reports on the performance of Costco Wholesale Corp., the result of its operating activities.

Analysis of Solvency Ratios

Examines Costco Wholesale Corp. capital structure in terms of the mix of its financing sources and the ability of the firm to satisfy its longer-term debt and investment obligations.

• Solvency Ratios (Summary)
• Debt to Equity
• Debt to Equity (including Operating Lease Liability)
• Debt to Capital
• Debt to Capital (including Operating Lease Liability)
• Debt to Assets
• Debt to Assets (including Operating Lease Liability)
• Financial Leverage
• Interest Coverage
• Fixed Charge Coverage

Cash Flow Statement

The cash flow statement provides information about Costco Wholesale Corp. cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on Costco Wholesale Corp. balance sheet.

Present Value of Free Cash Flow to Equity (FCFE)

The FCFE valuation approach estimates the value of equity as the present value of future FCFE discounted at the required rate of return on equity.

• Intrinsic Stock Value (Valuation Summary)
• Required Rate of Return (r)
• FCFE Growth Rate (g)

Analysis of Liquidity Ratios
Quarterly Data

Measures the adequacy of a Costco Wholesale Corp. cash resources to meet its near-term cash obligations.

• Liquidity Ratios (Summary)
• Current Ratio
• Quick Ratio
• Cash Ratio

Dividend Discount Model (DDM)

The dividend discount model (DDM) is a technique for estimating the value of a share of Costco Wholesale Corp. common stock issue as the present value of all future dividends.

• Intrinsic Stock Value (Valuation Summary)
• Required Rate of Return (r)
• Dividend Growth Rate (g)

Aggregate Accruals

Financial reporting quality relates to the accuracy with which Costco Wholesale Corp. reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows.
Aggregate accruals deriving measures of the accrual component of Costco Wholesale Corp. earnings.

• Balance-Sheet-Based Accruals Ratio
• Cash-Flow-Statement-Based Accruals Ratio

Analysis of Long-term (Investment) Activity Ratios

Measures how efficiently Costco Wholesale Corp. generates revenues from its investments in fixed or total assets.

• Long-term Activity Ratios (Summary)
• Net Fixed Asset Turnover
• Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
• Total Asset Turnover
• Equity Turnover

Statement of Comprehensive Income

Comprehensive income is the change in equity (net assets) of Costco Wholesale Corp. during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners.

Analysis of Liquidity Ratios

Measures the adequacy of Costco Wholesale Corp. cash resources to meet its near-term cash obligations.

• Liquidity Ratios (Summary)
• Current Ratio
• Quick Ratio
• Cash Ratio