Kira Eck December 2, 2011 FIN3000 Term Project Costco Wholesale Corporation

Introduction: Costco Wholesale Corporation sells a wide variety of quality, brand name products at substantially lower prices than other discount or retail stores from electronics, to produce, to clothing. In order to operate in this way, the company buys products straight from the manufactures and then sells them in bulk in a warehouse. Consumers must become a member of Costco, which requires the payment of an annual fee, to gain access into the warehouse and to be able to purchase its merchandise. Costco’s intent is to create an environment where both small business and personal needs can be met at the lowest possible price. The company’s dedication to customer satisfaction and price guarantee place Costco at the very top of the variety/discount stores industry and has allowed the company to expand well beyond the United States into international markets. Costco’s top competition is Sam’s Club. While Sam’s Club may have more warehouse stores, Costco has a larger customer base, giving it the edge in the discount/variety stores industry. Analysis: Current Ratio: Costco 2011 - 1.14 Industry Average - 1.18 The current ratio describes a company’s ability to meet short-term, or current, liabilities. Costco’s current ratio is greater than one and thus it is clear the company has enough current assets to cover its current liabilities. Because Costco’s current ratio falls just short of the industry average, Costco may encounter slight disadvantages such as higher interest rates on new loans or difficulty buying on credit. The fact that Costco’s current ratio is barely over one may alarm management. However, the industry average is just over one as well making this fact less of an issue than it would be otherwise. Quick Ratio: Costco 2011: 0.59 Industry Average: 0.48 The quick ratio is a measure