Costco Wholesale Corp. (NASDAQ:COST)

The financial data over the recent years reveals notable trends in the leverage and coverage ratios. Overall, the company exhibits a consistent improvement in its debt management and financial stability metrics.

Debt to Equity Ratios

There is a clear downward trend in the debt to equity ratio, decreasing from 0.45 in 2020 to 0.25 by 2025. When including operating lease liabilities, the ratio follows a similar path, dropping from 0.61 to 0.34 over the same period. This decline indicates a reduction in reliance on debt financing relative to shareholders' equity.

Debt to Capital Ratios

Both the standard and the operating lease inclusive debt to capital ratios show a gradual decrease. The debt to capital ratio falls from 0.31 in 2020 to 0.20 in 2025, while the adjusted ratio declines from 0.38 to 0.25. This reduction signifies enhanced capital structure strength and less leveraged financing.

Debt to Assets Ratios

The debt to assets ratio diminishes steadily, from 0.15 to 0.09, reflecting an improved asset base relative to debt levels. Including operating lease liabilities, this ratio decreases from 0.20 to 0.13, further supporting the trend toward lower overall indebtedness in relation to assets.

Financial Leverage

The financial leverage ratio displays some fluctuations, initially increasing from 3.04 in 2020 to 3.37 in 2021 before gradually weakening to 2.64 by 2025. This trend suggests a moderated use of borrowed funds to finance assets, enhancing financial risk management over time.

Interest Coverage Ratio

The interest coverage ratio improves markedly, rising from 34.54 in 2020 to 71.25 in 2025. This significant enhancement indicates a stronger ability to meet interest obligations from earnings, reflecting improved profitability or reduced interest expense.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio also shows a consistent increase, growing from 14.03 in 2020 to 26.45 in 2025. This improvement highlights the company's greater capacity to cover fixed financial commitments, reinforcing financial stability.

In summary, the company is progressively strengthening its financial position by reducing debt levels relative to equity, capital, and assets while simultaneously boosting its ability to cover interest and fixed charges. These patterns suggest prudent financial management practices contributing to enhanced solvency and reduced financial risk.

Total Debt

The total debt shows a general downward trend over the observed periods. Starting at 8,297 million US dollars in 2020, it slightly increased to 8,543 million in 2021 but then steadily declined to 7,267 million by 2025. This suggests a consistent effort to reduce debt levels after 2021.

Total Costco Stockholders’ Equity

Stockholders’ equity presents an overall increasing pattern. Beginning at 18,284 million US dollars in 2020, it experienced a small decline in 2021 to 17,564 million, followed by a marked increase through subsequent years. By 2025, equity had risen substantially to 29,164 million, indicating growth in the company’s net assets or retained earnings over time.

Debt to Equity Ratio

The debt to equity ratio consistently decreased across the years, starting from 0.45 in 2020 and reaching a low of 0.25 in 2025. This decline reflects a strengthening balance sheet with reduced leverage and a higher equity base relative to debt. The ratio’s sharp drop from 0.49 in 2021 to 0.40 in 2022 and continuing downwards signifies improved financial stability and potentially lower financial risk.

Total Debt (including operating lease liability)

The total debt figures exhibit a gradual decline over the observed periods. Starting from 11,086 million US dollars in 2020, the debt slightly increased to 11,407 million in 2021 but then steadily decreased each subsequent year, reaching 9,935 million in 2025. This trend suggests a deliberate effort to reduce leverage or optimize capital structure over time.

Total Stockholders’ Equity

Stockholders' equity demonstrates a generally upward trajectory, with values rising from 18,284 million US dollars in 2020 to 29,164 million in 2025. After a minor dip in 2021 to 17,564 million, equity increased substantially in the following years, particularly notable between 2022 and 2023, where it grew from 20,642 million to 25,058 million. This growth signifies strengthening financial stability and accumulation of net assets.

Debt to Equity Ratio (including operating lease liability)

The debt-to-equity ratio consistently decreases throughout the periods under review, moving from 0.61 in 2020 to 0.34 in 2025. This downward trend is reflective of the simultaneous decrease in total debt and increase in equity. The ratio reduction indicates an improvement in the company's financial leverage position, suggesting a lower reliance on debt relative to shareholders' equity, which generally implies reduced financial risk.

Total Debt

The total debt exhibited a gradual decline over the observed periods. Starting at 8,297 million USD, the debt slightly increased to 8,543 million USD in the subsequent year, then decreased steadily to 7,267 million USD by the final period. This demonstrates a consistent effort to reduce debt levels in the latter years.

Total Capital

Total capital showed a generally increasing trend with some fluctuations. It began at 26,581 million USD and experienced a dip in the second period before rising significantly to 32,948 million USD two periods later. Despite a slight decrease afterward, the capital increased in the final period to 36,431 million USD, indicating growth in the company's capital base over time.

Debt to Capital Ratio

The debt to capital ratio steadily decreased from 0.31 to 0.20 across the periods, reflecting improvement in the company’s financial leverage. The ratio peaked at 0.33 before consistently declining, which implies a strengthening capital structure and a lower proportion of debt relative to total capital.

Overall Analysis

The financial trends collectively indicate a strategic movement towards reducing reliance on debt financing while expanding the capital base. The decreasing debt alongside increasing total capital and lowering debt to capital ratio suggests improved financial stability and a more conservative approach to debt management over the observed timeframe.

Total Debt (Including Operating Lease Liability)

The total debt exhibited a generally decreasing trend over the observed periods. Starting at 11,086 million USD, it slightly increased to 11,407 million USD in the subsequent year but then declined steadily to 9,935 million USD by the last recorded period. This downward movement suggests a strategic effort to reduce leverage or refinance existing obligations.

Total Capital (Including Operating Lease Liability)

Total capital demonstrated an overall upward trajectory despite some fluctuations. Initially positioned at 29,370 million USD, it experienced a minor dip in the following year before rising markedly to 39,099 million USD at the end of the timeline. This increase indicates expanded capital base, potentially reflecting growth in equity or reinvested earnings.

Debt to Capital Ratio (Including Operating Lease Liability)

The debt to capital ratio represents the proportion of debt to the total capital structure. It remained relatively stable around 0.38-0.39 for the first two years but then showed a consistent decline, falling to 0.25 by the latest period. This declining ratio underscores a strengthening capital position, with debt forming a smaller component of total capital. The pattern is consistent with the observed reduction in total debt coupled with the increase in total capital.

The financial data indicates a consistent decline in total debt over the observed periods, decreasing from $8,297 million to $7,267 million. Concurrently, total assets exhibit a steady upward trend, rising significantly from $55,556 million to $77,099 million. This divergence between rising assets and falling debt has contributed to a declining debt-to-assets ratio, which moved from 0.15 down to 0.09 over the timeframe.

The downward trend in total debt suggests an improved leverage position, with the company reducing its reliance on borrowed funds. Meanwhile, the growth in total assets reflects expansion or accumulation of resources, enhancing the company's overall financial strength. The debt-to-assets ratio, which measures leverage by indicating the proportion of assets financed through debt, shows a clear decrease, underscoring a more conservative capital structure and improved balance sheet stability.

Overall, the data portrays a strengthening financial position characterized by cautious debt management and asset growth, which may contribute positively to the company's creditworthiness and capacity for future investments or operational resilience.

Total Debt (including operating lease liability)

The total debt exhibits a gradual decline over the observed periods, beginning at $11,086 million in 2020 and decreasing steadily to $9,935 million by 2025. This downward trend suggests a consistent effort to reduce leverage or improve debt management over time.

Total Assets

Total assets show a continuous upward trajectory, rising from $55,556 million in 2020 to $77,099 million in 2025. This increase reflects sustained asset growth, which may be associated with expansion, investment, or accumulation of resources, enhancing the company's asset base significantly over the five-year span.

Debt to Assets Ratio (including operating lease liability)

The debt to assets ratio decreases steadily from 0.20 in 2020 to 0.13 in 2025. This declining ratio indicates an improved capital structure, with the company's debt burden diminishing relative to its asset base. It suggests enhanced financial stability and potentially greater capacity to absorb financial obligations through asset growth rather than increased liabilities.

The analysis of the financial data reveals several notable trends over the six-year period in question.

Total Assets

Total assets have shown a consistent upward trajectory, increasing from $55,556 million in 2020 to $77,099 million by 2025. This increase reflects steady growth in the company's asset base year over year, indicating continued investment and expansion.

Total Stockholders’ Equity

Stockholders’ equity experienced some fluctuations but generally exhibited an upward trend. Initially, it decreased slightly from $18,284 million in 2020 to $17,564 million in 2021. Subsequently, equity rose significantly over the following years, reaching $29,164 million in 2025. This growth suggests strengthening financial stability and accumulation of retained earnings over the period.

Financial Leverage Ratio

The financial leverage ratio began at 3.04 in 2020 and peaked at 3.37 in 2021, indicating a high level of debt relative to equity at that point. After 2021, the ratio steadily declined to 2.64 by 2025. This decline implies a reduced reliance on debt financing and an improving equity position, enhancing the company’s financial risk profile.

Overall, the company has demonstrated asset growth coupled with an improving equity base and decreasing financial leverage. This combination suggests a trend towards a stronger balance sheet and potentially improved financial flexibility and solvency over the analyzed period.

The financial data reveals a consistent and robust upward trend in earnings before interest and tax (EBIT) over the examined periods. EBIT increased steadily from 5,527 million US dollars in the earliest period to 10,972 million US dollars in the latest period, more than doubling over the time frame. This points to improving operational profitability and efficiency in generating earnings from core business activities.

Interest expense exhibited relative stability throughout the periods, fluctuating slightly within a narrow band between 154 million and 171 million US dollars. This suggests that the company maintained a consistent level of debt and borrowing costs, without major increases or reductions in interest-bearing liabilities.

The interest coverage ratio demonstrates a significant and continuous improvement, rising from 34.54 to 71.25 over the periods. This metric, which measures the ability to cover interest expenses with EBIT, more than doubled, indicating strengthening financial health and a greater margin of safety in meeting debt obligations. The increasing ratio reflects the larger growth in EBIT relative to the stable interest expense, signaling reduced risk related to interest payments.

EBIT (Earnings Before Interest and Taxes)

Consistently increased across all periods, indicating strong growth in operational earnings.

Interest Expense

Maintained within a narrow range, indicating stable debt servicing costs.

Interest Coverage Ratio

Substantially improved, more than doubling, reflecting enhanced capacity to meet interest obligations and lower financial risk.

Earnings before fixed charges and tax

The earnings before fixed charges and tax displayed a consistent upward trend over the reported periods. Starting at 5,779 million US dollars in the first period, it increased steadily each year, reaching 11,243 million US dollars in the most recent period. This represents nearly a doubling of earnings over the span analyzed, indicating solid growth in operational profitability before accounting for fixed financial obligations.

Fixed charges

Fixed charges showed relatively minor fluctuations without a clear upward or downward trend. Beginning at 412 million US dollars, the values oscillated slightly, peaking at 469 million US dollars, and ultimately decreasing to 425 million US dollars in the final period. This stability suggests controlled and consistent fixed financial commitments over time.

Fixed charge coverage ratio

The fixed charge coverage ratio exhibited a notable and consistent increase throughout the periods, rising from 14.03 to 26.45. This significant upward shift indicates a strengthening ability to cover fixed charges from earnings before interest and taxes. The continual improvement in this ratio reflects enhanced financial health and lower risk related to fixed financial obligations, as earnings increased at a higher rate relative to fixed charges.