ACC 250 · In-Class Case

Costco: Reading the Real Financial Statements

Know what each account means, and you can find it in the statements.

Form 10-K, fiscal year ended August 31, 2025 · $ millions

Income statement as a picture

Where each revenue dollar goes

*Here gross profit = total revenue − merchandise costs, so it includes membership income. The worksheet’s gross profit margin uses net sales only. Green = profit, red = costs.

Find it in the statements

Know the concept, find the account

1 Expects to collect from customers → Receivables3,203
2 Cost of the merchandise sold → Cost of sales / merchandise costs239,886
3 Expense for wages, rent, utilities, advertising → Operating (SG&A) expenses24,966
4 Cost of goods still on the shelves → Inventories18,116
5 Owes suppliers for goods bought on credit → Accounts payable19,783
6 The government’s share of the profit → Provision for income taxes2,719

Find it in the statements

Know the concept, find the account

7 Left of revenue after all expenses → Net income8,099
8 Cost of buildings and equipment used up so far → Accumulated depreciation18,931
9 What buildings and equipment originally cost → Property and equipment, at cost50,840
10 Owed to lenders on long-term loans → Long-term debt5,713
11 Paid to shareholders → Dividends2,183
12 Profit earned and kept over the years → Retained earnings22,650

How the numbers connect

Cost, used up, and what is left

Property and equipment	$M
Property and equipment, at cost	50,840
Less: Accumulated depreciation	(18,931)
Property and equipment, net	31,909

Retained earnings	$M
Retained earnings, Sep 1, 2024	17,619
Add: Net income	8,099
Less: Dividends	(2,183)
Less: Others (incl. share repurchases, Ch11)	(885)
Retained earnings, Aug 31, 2025	22,650

Two connectionsNet = cost − accumulated depreciation. Net income flows into retained earnings.

Ratios

Three numbers that describe Costco

Gross profit margin

11.1%

Net profit margin

2.9%

13 (269,912 − 239,886) ÷ 269,912 = 11.1% · 14 8,099 ÷ 275,235 = 2.9%

15 Current ratio = 38,380 ÷ 37,108 = 1.03

TakeawayCostco keeps about 3 cents of every sales dollar as profit, and only about 11 cents after paying for the goods: it makes much of its profit from membership fees.