Costco Wholesale Corp. (NASDAQ:COST)

The financial leverage ratios demonstrate a gradual decline over the observed periods, indicating a steady reduction in the reliance on borrowed funds relative to equity. Initially, the ratio stood above 4.0 but progressively decreased, reaching values below 3.0 in the later quarters, which suggests enhanced equity financing or asset base growth outpacing liabilities.

Debt-related ratios, including debt to equity, debt to capital, and debt to assets, exhibit a consistent downward trend. The standard debt to equity ratio decreased from around 0.51 to 0.19 over the evaluated timeline, signifying a substantial reduction in debt relative to shareholder equity. When operating lease liabilities are included, these ratios are predictably higher but similarly decline, revealing efforts to manage and lower overall leverage including off-balance sheet financing obligations.

Specifically, the debt to capital ratio reduces from 0.34 to 0.16, reflecting improved capital structure resilience. Debt to assets also falls modestly from approximately 0.13 to 0.07, indicating a lower proportion of assets funded through debt financing. These reductions imply an improved solvency position and reduced financial risk.

Interestingly, there is a slight increase or stabilization in some debt ratios during mid-periods (around early 2024), potentially reflecting temporary increases in debt or leases before continuing the downward trend. However, the overall pattern supports a strategy of deleveraging.

The interest coverage ratio reveals a strong and improving capacity to meet interest obligations, growing substantially from about 36.6 to nearly 74 by the end of the period. This improvement indicates increased operating earnings relative to interest expenses, enhancing the company's ability to service its debt comfortably and signaling lower credit risk.

Key Trends and Interpretations

Decreased Financial Leverage

The financial leverage metric shows a steady decline, reflecting growing equity or retention of earnings relative to liabilities.

Lower Debt Ratios

Progressive reductions in debt to equity, capital, and assets ratios, both standard and including operating leases, demonstrate active reduction in overall indebtedness.

Strong Interest Coverage

Rising interest coverage indicates enhanced earnings and a stronger ability to meet interest expenses, reducing credit risk.

Temporary Fluctuations

Short-term increases in some leverage ratios around early 2024 suggest temporary shifts in debt structure or lease obligations but do not alter the overall downward trend.

Overall, the data indicate a disciplined approach to debt management, improved financial stability, and a robust capacity to service interest expenses, contributing to a healthier financial position over the time analyzed.

Total debt

The total debt level exhibits a general declining trend over the observed periods. Starting from approximately 7.5 billion USD, the debt decreases gradually to around 5.4 billion USD by the later quarters. Notably, there is a significant drop between the quarters around mid-2023, with debt falling from near 6.5 billion USD to approximately 5.4 billion USD, followed by relatively stable figures fluctuating slightly around the 5.6 to 5.8 billion USD range. This reduction suggests ongoing deleveraging or repayment of debts over time.

Total stockholders’ equity

Stockholders’ equity demonstrates a consistent upward trajectory throughout the periods. Beginning near 14.9 billion USD, it steadily increases, peaking above 30.3 billion USD in the most recent period. This upward movement indicates substantial growth in net assets and possibly retained earnings accumulation or capital influx. A noteworthy plateau or slight slowdown in growth occurs around early 2024 before accelerating again in subsequent quarters.

Debt to equity ratio

The debt to equity ratio declines steadily across the timeframe, moving from a starting point of approximately 0.51 to below 0.2 in the final periods. This reduction aligns with decreases in total debt and increases in equity, indicating an improving balance sheet structure. The ratio's downward movement signifies reduced financial leverage and potentially a lower risk profile. A minor increase around early 2024 suggests temporary changes in debt or equity levels but does not alter the overall improving trend.

Summary

The overall financial structure improves over the observed periods. Decreasing total debt combined with rising stockholders’ equity leads to a significantly lower debt to equity ratio, reflecting stronger capitalization and reduced reliance on debt financing. These trends suggest enhanced financial stability and potentially greater capacity for sustainable growth or investment. The company's balance sheet shows signs of strengthening and conservative financial management during the timeframe analyzed.

Total debt (including operating lease liability)

The total debt exhibits a generally declining trend over the observed periods. Starting at approximately 10,103 million US dollars in late 2020, the debt level gradually decreased with minor fluctuations, reaching a low point of about 7,803 million US dollars in early 2023. Following this trough, the debt fluctuated moderately, staying within the range of approximately 8,100 to 8,350 million US dollars through to late 2025. Overall, the company's total debt reduced by roughly 20% from the initial level, indicating a consistent effort to manage or retire liabilities despite occasional minor increases.

Total Costco stockholders’ equity

Stockholders’ equity shows a steady upward trajectory throughout the reported quarters. Commencing at 14,860 million US dollars in November 2020, the equity base expanded notably, reaching around 25,058 million by September 2023. A temporary decline is observable in early 2024, falling to about 20,760 million US dollars, which might reflect a specific event or adjustment during that time frame. Subsequent quarters display a recovery and continued growth, with equity ultimately rising to about 30,303 million US dollars by late 2025. This persistent increase highlights strong capital accumulation and potentially robust retained earnings or reinvestments.

Debt to equity (including operating lease liability)

The debt to equity ratio demonstrates a clear and sustained downward trend from 0.68 in November 2020 to approximately 0.27 by late 2025. This reflects the concurrent increase in equity and the reduction in debt, signaling an improved capital structure and reduced leverage risk over the period. Notably, in early 2024, when equity temporarily dipped, the ratio slightly increased to 0.40 but then resumed its declining path. The continuous decrease in this ratio suggests enhancing financial stability and a conservative approach to debt management.

The analysis of the financial data for the periods presented reveals several key trends related to the company's capital structure and debt management.

Total Debt

The total debt exhibits a general declining trend over the time span. Beginning at approximately $7.53 billion, the total debt decreases gradually with some fluctuations, reaching about $5.67 billion by the final period. Notably, there is a significant drop around the period marked "Sep 3, 2023," where debt decreases from approximately $6.5 billion to around $5.38 billion. This decline is somewhat steady afterward with minor variations but maintains a downward direction, indicating effective debt reduction strategies or repayment activities during these intervals.

Total Capital

Total capital shows a steady increase through most of the periods. Starting near $22.4 billion, it grows with a few fluctuations and reaches over $35.9 billion by the last recorded period. A noteworthy dip occurs around "Feb 18, 2024," where total capital declines from approximately $32.0 billion to about $26.6 billion, followed by a recovery and continued upward movement. Overall, this upward trend signals an accumulation of equity or retained earnings and possibly an expansion in the company's equity base or asset capitalization.

Debt to Capital Ratio

The debt to capital ratio demonstrates a consistent downward trend from 0.34 at the beginning to 0.16 at the end of the period analyzed. This reduction aligns with the decline in total debt and the increase in total capital, indicating improved financial leverage and a stronger equity position. The ratio falls steadily, with minor interruptions where it temporarily stabilizes or slightly increases, particularly around early 2024. The continuous decline reflects enhanced balance sheet strength and a strategic reduction in reliance on debt financing.

In summary, the company has effectively managed its capital structure by steadily reducing its total debt while expanding total capital. This has resulted in a significant decrease in the debt to capital ratio, pointing to an improved financial risk profile and potentially greater financial flexibility going forward. The observed fluctuations suggest periodic tactical adjustments, but the overall trajectory indicates strengthening creditworthiness and financial stability.

The analyzed financial data reveals distinct trends concerning the debt and capital structure over the observed periods.

Total Debt (including operating lease liability)

The total debt remained relatively stable initially, fluctuating around 10 billion US dollars from late 2020 through early 2023. Thereafter, a notable decline is observed starting in September 2023, dropping to approximately 7.8 billion US dollars. Subsequent quarters show slight increases and decreases, but overall, the debt level continues a modest downward trajectory, ending near 8.1 billion US dollars by November 2025.

Total Capital (including operating lease liability)

Total capital exhibited a consistent upward trend throughout the entire period. Starting from about 25 billion US dollars in late 2020, capital increased steadily each quarter, reaching nearly 38.4 billion US dollars by the end of the observed timeframe. This growth suggests ongoing capital investment or accumulation of equity.

Debt to Capital Ratio (including operating lease liability)

The debt to capital ratio progressively declined throughout the observed period. Initially at 0.40 in late 2020, the ratio decreased steadily to around 0.24 by September 2023, indicating a reduction in leverage relative to total capital. Although minor fluctuations occurred subsequently, the ratio continued its downward trend, reaching 0.21 by November 2025. This suggests an improving capital structure with reduced reliance on debt financing relative to overall capital.

Overall, the data points to a strategic reduction in debt levels alongside consistent growth in capital, resulting in a steadily improving debt to capital ratio. This pattern implies strengthening financial stability and potentially greater financial flexibility over time.

Total Debt

The total debt shows a general declining trend over the observed periods, decreasing from approximately $7,529 million to $5,666 million. Notable reductions occur after August 2022, with total debt dropping from $6,506 million in February 2023 to $5,377 million by September 2023, followed by some fluctuations but maintaining an overall downward trajectory through to November 2025.

Total Assets

Total assets indicate an overall increasing trend from around $60,217 million to $82,790 million. There are fluctuations within this upward trend, including a peak near $73,723 million in November 2023 followed by a dip to $66,323 million in February 2024, but the asset base recovers and continues to grow steadily, reaching the highest value by the end of the period observed.

Debt to Assets Ratio

The debt to assets ratio demonstrates a decreasing pattern from 0.13 to a low of 0.07 by November 2025. The ratio remains relatively stable at about 0.10 through early 2023 but then falls noticeably after September 2023 in correlation with the decline in total debt and rise in total assets. This reduction in leverage suggests an improvement in the company’s capital structure and potentially a lower financial risk profile over the time analyzed.

Summary

The company’s financial data reveals a strengthening balance sheet characterized by growth in total assets and a reduction in total debt, leading to a declining debt to assets ratio. This trend implies a deliberate effort to reduce leverage and potentially enhance financial stability. The overall improvement in asset base alongside controlled debt levels may position the company favorably for future operations and investment opportunities.

The analysis of the quarterly financial data reveals several notable trends in the company's debt and asset management over the period examined.

Total Debt (including operating lease liability)

The total debt remained relatively stable from late 2020 through early 2023, generally fluctuating within a narrow range between approximately 8,000 million and 10,000 million US dollars. A gradual decline can be observed starting from early 2023, dropping from around 9,000 million to approximately 8,100 million by the end of the period in late 2025. This indicates a modest reduction in overall debt levels, suggesting an effort to deleverage slightly over time.

Total Assets

The total assets exhibited a generally upward trend, increasing from about 60,000 million US dollars in late 2020 to over 82,000 million US dollars by the end of 2025. Despite some fluctuations, including a slight dip during early 2024, the overall asset base expanded significantly throughout the period. This growth suggests continued investment and expansion of the company’s asset holdings.

Debt to Assets Ratio (including operating lease liability)

The debt to assets ratio demonstrates a clear downward trajectory over the observed periods, moving from approximately 0.17 in late 2020 to about 0.10 by late 2025. This decline reflects a reduction in financial leverage relative to total assets, indicating improved solvency and a stronger balance sheet position. The weaker ratio implies that the company is relying less on debt financing in relation to its total assets as time progresses.

In summary, the company shows a strategic approach toward reducing debt and enhancing its asset base simultaneously, resulting in improved financial stability and lower leverage over the assessed timeframe. This combination of asset growth and debt management likely positions the company favorably for future financial flexibility and risk mitigation.

Total Assets

Total assets demonstrated a generally upward trajectory over the analyzed periods. Starting at approximately $60.2 billion, assets fluctuated moderately but showed an overall increase reaching around $82.8 billion by the final quarter. Notable increments occurred at several points, particularly between Nov 2023 and Nov 2024, followed by steady growth through the subsequent quarters. Some short-term declines were observed, such as the drop from Nov 2023 to Feb 2024, indicating possible asset reallocation or divestments before growth resumed.

Total Stockholders’ Equity

Stockholders' equity exhibited consistent growth during most periods, increasing from roughly $14.9 billion to over $30.3 billion by the end of the timeline. This steady rise reflects a strengthening equity base, albeit with a notable dip between Nov 2023 and Feb 2024, which temporarily interrupted the upward trend. Following this decline, equity levels recovered and continued to expand through the remaining quarters, suggesting effective capital management and retention of earnings contributing to equity enhancement.

Financial Leverage Ratio

The financial leverage ratio, an indicator of the company’s reliance on debt relative to equity, trended downward overall, starting at 4.05 and reducing to approximately 2.73 by the latest period. This decline signifies a decreasing dependence on debt financing and an improved equity position relative to total assets. However, there were intermittent increases in the ratio, such as in early 2024, reflecting temporary rises in leverage before the trend towards lower leverage reasserted itself. The progressive reduction in leverage ratio over the longer term may suggest a strategic focus on de-risking the capital structure.

Earnings Before Interest and Tax (EBIT)

The EBIT values exhibit significant fluctuations over the observed periods, with a general upward trajectory. Starting at 1,459 million USD, EBIT experienced peaks and troughs, reaching notable highs such as 3,019 million USD in September 2023 and 3,556 million USD in August 2025. Despite some intermittent declines, the overall trend suggests growth in operational profitability, with recent periods showing strong performance compared to earlier quarters.

Interest Expense

Interest expense demonstrates relatively modest variability, maintaining values generally in the range of 34 to 56 million USD. While there are occasional increases, notably in August 2023 and August 2022, the interest charges remain stable relative to EBIT, indicating controlled borrowing costs or favorable interest rate conditions over time.

Interest Coverage Ratio

The interest coverage ratio shows a consistent and marked improvement throughout the periods, rising from approximately 36.58 to nearly 74 by November 2025. This upward trend reflects significantly enhanced ability to meet interest obligations from operating earnings. The increasing ratio implies stronger financial health and lower risk concerning debt servicing capacity, driven primarily by the growth in EBIT combined with stable interest expenses.

Overall Financial Trends

The combination of rising EBIT and stable interest expenses has positively influenced the interest coverage ratio, pointing to improved profitability and financial stability. Peaks in EBIT align with corresponding increases in interest coverage, reinforcing operational strength. The data suggest that the company has effectively managed operational performance alongside financial obligations, resulting in progressively enhanced financial resilience over the analyzed intervals.