financial analysis

financial analysis - VI. Financial Analysis: When Jim...

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VI. Financial Analysis: When Jim Sinegal founded Costco in 1983, the mission was to continually provide its members with quality goods and services at the lowest possible prices. In looking at the company’s performance in the fiscal years 2000-2006, the mission, to build a financially healthy company, has paid off well for those stockholders who invested in the membership warehouse idea. Our analysis looks at four areas to understand their financial performance, the first, their ability to secure loans from banks and how much of their assets are financed from debt, next, their ability to be able to liquate assets if needed, their inventory turnover in a years time period, and finally the sales and profit margins. What we found was that Costco is doing well financially in key areas, with one area of caution being their profititability, which is below their direct competitors, and industry averages. Beginning with the leverage ratios, how a company is financed is important in determining company performance and if it remains a sound investment. The Leverage Ratio “Debts to Assets” in 2006, indicates that Costco has been able to successfully maximize how much it receives in loans from banks and other sources.
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The Debts to Assets ratio was 58.41% in 2006, meaning that over 58% of the company’s assets were financed by debt (both long and
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financial analysis - VI. Financial Analysis: When Jim...

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