Costco 's Total Debt / Equity Ratio

Generating high sales volume and rapid inventory turnover by offering fee-paying members low prices on nationally branded and private-label products. Yes, it is appealing because the fees paid by members allowed for sufficient supplemental revenues while the turnover rates allowed Costco to receive cash for inventory before it had to pay many of its merchandise vendors.

Costco’s common stock is traded on the NASDAQ global market under the symbol “COST.” Preferred stock: $.005 par value; 100,000,000 shares authorized; no shares issued and outstanding. Common stock: $.005 par value; 900,000,000 shares authorized; 437,952,000 and 437,683,000 shares issued and outstanding. Costco stockholders’ equity, according to the balance sheet, is $10,617,000,000 for the August 31, 2014 – August 30, 2015, fiscal year.

Costco 's assets-to-equity ratio has fallen slightly from 2.21 to 2.06. This means that for every dollar of invested capital Costco acquires $2.06 worth of assets in 2001 verses $2.21 worth of assets in 1997. This may indicate that less assets are being acquired. If less assets are acquired, less sales may be generated and if less sales are generated there is less net income yielding less return for shareholders and a less attractive investment opportunity.

Costco’s business model is appealing because they are able to continually sell to a niche market. This niche market has

The 6% Return on Assets percentage shows that Costco’s assets are being well-used to generating revenue. The ROE demonstrates $0.13 of profit for every dollar of net assets.

Costco has a target market that it is trying to reach. The target market that it is trying to reach is usually a suburban group that is somewhat older and in the middle class. (knowthis.com) The target consumer is in the middle class because the membership costs about fifty-five dollars a year. Therefore, the member is typically financially stable to afford this yearly cost. Costco also targets businesses by offering a special membership called the business membership. The company appeals to many different people.

Costco as a company began operations in 1983 with its headquarters in Issaquah, Washington (Costo 1). It was founded in Washington, United States by James Sinegal and Jeffrey Brotman. Brotman comes from a family that had been involved in retail business before the establishment of Costco. Therefore assuming that his background may have prepared him for running Costco

Costco's mission is to “continually provide our members with quality goods and services at the lowest possible prices (Costco Wholesale Mission Statement - Profits and Prices Revolve Around Ethics, 2013)

In September 1983 Costco's first warehouse opened in Seattle, Washington. At this time, warehouse outlets had long existed, but the concept of a wholesale club was relatively new and promising. Dubbed "buyers' clubs" and begun in 1976, these warehouses were wholesalers that required shoppers to become members and pay an annual membership fee. The membership fee helped reduce already-low overhead, so that items could be sold at an average of 9 percent over cost from the manufacturer. At the time Costco was formed, membership warehouses were primarily a West Coast phenomenon; however, since then, their popularity has spread throughout the United States, across the borders to Canada and Mexico, and beyond to many other countries.

The mixture of debt-equity mix is important so as to maximize the stock price of the Costco. However, it will be significant to consider the Weighted Average Cost of Capital (WACC) as well so that it can evaluate the company targeted capital structure. Cost of capital (OC) may be used by the companies as for long term decision making, so industries that faced to take the important of Cost of capital seriously may not make the right choice by choosing the right project(Gitman’s, ).

On September 15,1983 the world had witness the opening of Costco the first warehouse on Seattle, Washington by James Senegal and Jeffrey H. Brotman. The owners had started in distribution their wholesale by working for Price at both FedMart and Price Club and Brotman, an attorney from an old Seattle retailing family, had also been involved in retail distribution from an early age.

The first of Porter’s Five Forces that impact Costco is the threat of new entrants. The threat of new entrants into the wholesale and membership retail space is low. There are several reasons why the threat of entrants into the market is low. The leading reason why the threat of entry is low is because an emerging company will struggle to have the volume necessary to compete with Costco. Costco is the sixth largest retailer in the U.S. As a major retailer, Costco has the highest discounts on a majority of its

Costco’s business model focuses on selling limited selection of products at low prices, often at very high volume and rapid inventory turnover. These goods are bulk-packaged and marketed primarily to large families and businesses. Costco does not carry multiple brands or varieties where the item is essentially the same. It provides members with a selection of only about 4000 items, this results in a high volume of sales from a single vendor, allowing further reductions in price, and reducing marketing costs. Costco also saves money by not stocking extra bags or packing materials; to carry out their goods, customers must bring their own

Costco is the best cost provider in the wholesale club category and the strategy is associated with Costco’s capabilities and resources, which includes; a streamlined supply chain, good supplier relationships, purchasing power, high sales volumes, quick inventory turnover, and excellent customer service. The three vital components of the company strategy are low pricing, limited product selection and high-end products acquired in closeouts and liquidations. While Costco strives to beat the competitors pricing, it also delivers exceptional value in its high-end offerings and customer service, giving consumers more for their money. Given its customers are the most affluent of all the warehouse clubs, with average incomes around $75,000 and this strategy works well for Costco. However, these customers are conscious not only about money but also value for the product, this fact is supported by the members who choose for executive

At the end of 2012, Costco was a successful business, but there are some issues that they would need to deal with. These issues mainly arise from their previous successful ventures as a warehouse wholesale company. The first issue is that Costco has competitors that can actually be and are a threat to their success. Competition allows a company to improve itself and prove its prowess to its customers. However, when a competitor is able to provide the service at a much reduced cost, problems will arise. As for the second issue, it seems that Costco’s efforts to become an international company are moving slowly. They have not reached a point where their US and Canadian warehouses provide a backbone for their finances. Costco’s third issue is that their finances are too reliant on acquiring new members and not on selling their products. If they cannot keep acquiring new members at a steady rate, their financial infrastructure could suffer.