Costco Wholesale Corporation Financial Statement Analysis (A)

By Maureen McNichols, Brian Tayan
2003 | Case No. A186A
The A case is a financial statement, ratio analysis case involving a high-growth retail company. The case begins with an individual shareholder in the Costco Wholesale Corporation who is trying to evaluate the operational performance of the business she has invested in over the last five years. She seeks to answer two questions: has Costco become more or less efficient over this time period? And how has it financed its growth? She organizes her analysis into three parts: common-size financial statements, sustainable growth modeling, and benchmarking ratios particular to retail companies. The case provides information on developments in mass merchandising in the United States, with an emphasis on discounter retailing over the last forty years. Costco’s performance is therefore set in historical context, which provides the relative background information necessary to make a comparative evaluation between Costco and other industry participants. In the B case, the investor is called on to make a forecast and valuation for Costco, using data presented in the A case. The B case adds new information about the history of Costco as an investment, industry growth drivers, and forecasting models.
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