.Analysis of Goodwill and Intangible Assets
Difficulty: Advanced
Analyst Adjustments: Removal of Goodwill
Costco Wholesale Corp., adjustments to financial data
USD $ in millions
| Sep 3, 2017 | Aug 28, 2016 | Aug 30, 2015 | Aug 31, 2014 | Sep 1, 2013 | Sep 2, 2012 | ||
|---|---|---|---|---|---|---|---|
| Adjustment to Total Assets | |||||||
| | Total assets (as reported) | ||||||
| | Less: Goodwill, net | ||||||
| | Total assets (adjusted) | ||||||
| Adjustment to Total Costco Stockholders' Equity | |||||||
| | Total Costco stockholders' equity (as reported) | ||||||
| | Less: Goodwill, net | ||||||
| | Total Costco stockholders' equity (adjusted) | ||||||
Adjusted Ratios: Removal of Goodwill (Summary)
Costco Wholesale Corp., adjusted ratios
| Sep 3, 2017 | Aug 28, 2016 | Aug 30, 2015 | Aug 31, 2014 | Sep 1, 2013 | Sep 2, 2012 | ||
|---|---|---|---|---|---|---|---|
| Total Asset Turnover | |||||||
| | Reported total asset turnover | ||||||
| | Adjusted total asset turnover | ||||||
| Financial Leverage | |||||||
| | Reported financial leverage | ||||||
| | Adjusted financial leverage | ||||||
| Return on Equity (ROE) | |||||||
| | Reported ROE | % | % | % | % | % | % |
| | Adjusted ROE | % | % | % | % | % | % |
| Return on Assets (ROA) | |||||||
| | Reported ROA | % | % | % | % | % | % |
| | Adjusted ROA | % | % | % | % | % | % |
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Costco Wholesale Corp.'s adjusted total asset turnover improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017. |
| Adjusted financial leverage | A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Costco Wholesale Corp.'s adjusted financial leverage declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders' equity. | Costco Wholesale Corp.'s adjusted ROE deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Costco Wholesale Corp.'s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Total Asset Turnover
| Sep 3, 2017 | Aug 28, 2016 | Aug 30, 2015 | Aug 31, 2014 | Sep 1, 2013 | Sep 2, 2012 | ||
|---|---|---|---|---|---|---|---|
| As Reported | |||||||
| | Net sales (USD $ in millions) | ||||||
| | Total assets (USD $ in millions) | ||||||
| | Total asset turnover1 | ||||||
| Adjusted for Goodwill | |||||||
| | Net sales (USD $ in millions) | ||||||
| | Adjusted total assets (USD $ in millions) | ||||||
| | Adjusted total asset turnover2 | ||||||
2017 Calculations
1 Total asset turnover = Net sales ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Costco Wholesale Corp.'s adjusted total asset turnover improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017. |
Adjusted Financial Leverage
| Sep 3, 2017 | Aug 28, 2016 | Aug 30, 2015 | Aug 31, 2014 | Sep 1, 2013 | Sep 2, 2012 | ||
|---|---|---|---|---|---|---|---|
| As Reported | |||||||
| | Total assets (USD $ in millions) | ||||||
| | Total Costco stockholders' equity (USD $ in millions) | ||||||
| | Financial leverage1 | ||||||
| Adjusted for Goodwill | |||||||
| | Adjusted total assets (USD $ in millions) | ||||||
| | Adjusted total Costco stockholders' equity (USD $ in millions) | ||||||
| | Adjusted financial leverage2 | ||||||
2017 Calculations
1 Financial leverage = Total assets ÷ Total Costco stockholders' equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Costco stockholders' equity
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted financial leverage | A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Costco Wholesale Corp.'s adjusted financial leverage declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
Adjusted Return on Equity (ROE)
| Sep 3, 2017 | Aug 28, 2016 | Aug 30, 2015 | Aug 31, 2014 | Sep 1, 2013 | Sep 2, 2012 | ||
|---|---|---|---|---|---|---|---|
| As Reported | |||||||
| | Net income attributable to Costco (USD $ in millions) | ||||||
| | Total Costco stockholders' equity (USD $ in millions) | ||||||
| | ROE1 | % | % | % | % | % | % |
| Adjusted for Goodwill | |||||||
| | Net income attributable to Costco (USD $ in millions) | ||||||
| | Adjusted total Costco stockholders' equity (USD $ in millions) | ||||||
| | Adjusted ROE2 | % | % | % | % | % | % |
2017 Calculations
1 ROE = 100 × Net income attributable to Costco ÷ Total Costco stockholders' equity
= 100 × ÷ = %
2 Adjusted ROE = 100 × Net income attributable to Costco ÷ Adjusted total Costco stockholders' equity
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders' equity. | Costco Wholesale Corp.'s adjusted ROE deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Adjusted Return on Assets (ROA)
| Sep 3, 2017 | Aug 28, 2016 | Aug 30, 2015 | Aug 31, 2014 | Sep 1, 2013 | Sep 2, 2012 | ||
|---|---|---|---|---|---|---|---|
| As Reported | |||||||
| | Net income attributable to Costco (USD $ in millions) | ||||||
| | Total assets (USD $ in millions) | ||||||
| | ROA1 | % | % | % | % | % | % |
| Adjusted for Goodwill | |||||||
| | Net income attributable to Costco (USD $ in millions) | ||||||
| | Adjusted total assets (USD $ in millions) | ||||||
| | Adjusted ROA2 | % | % | % | % | % | % |
2017 Calculations
1 ROA = 100 × Net income attributable to Costco ÷ Total assets
= 100 × ÷ = %
2 Adjusted ROA = 100 × Net income attributable to Costco ÷ Adjusted total assets
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Costco Wholesale Corp.'s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
