Costco: Reading the Real Financial Statements
Source: Costco Wholesale Corporation Form 10-K, fiscal year ended August 31, 2025 (some lines combined; amounts in millions) ·
sec.gov/Archives/edgar/data/909832/000090983225000101/cost-20250831.htm
Costco Wholesale Corporation
Consolidated Statement of Income
| Fiscal 2025 |
|---|
| Net sales | $269,912 |
| Membership fees | 5,323 |
| Total revenue | 275,235 |
| Merchandise costs | 239,886 |
| Selling, general and administrative | 24,966 |
| Operating income | 10,383 |
| Interest and other income, net | 435 |
| Income before income taxes | 10,818 |
| Provision for income taxes | 2,719 |
| Net income | $8,099 |
Costco Wholesale Corporation
Statement of Retained Earnings
| Fiscal 2025 |
|---|
| 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 |
Costco Wholesale Corporation
Consolidated Balance Sheet
| Aug 31, 2025 |
|---|
| Cash and cash equivalents | $14,161 |
| Short-term investments and other | 2,900 |
| Receivables, net | 3,203 |
| Merchandise inventories | 18,116 |
| Total current assets | 38,380 |
| Property and equipment, at cost | 50,840 |
| Less: Accumulated depreciation | (18,931) |
| Property and equipment, net | 31,909 |
| Lease right-of-use and other assets | 6,810 |
| Total assets | $77,099 |
| Accounts payable | $19,783 |
| Accrued salaries and other current liabilities | 14,471 |
| Deferred membership fees | 2,854 |
| Total current liabilities | 37,108 |
| Long-term debt | 5,713 |
| Lease and other long-term liabilities | 5,114 |
| Total liabilities | 47,935 |
| Common stock and paid-in capital | 8,284 |
| Retained earnings | 22,650 |
| Others (AOCI) | (1,770) |
| Total equity | 29,164 |
| Total liabilities and equity | $77,099 |
Find it in the statements Write the amount ($ millions). Definitions are on the back.
- 1How much does Costco expect to collect from its customers?
- 2What did the merchandise Costco sold this year cost it?
- 3What expense did it record for wages, rent, utilities and advertising?
- 4What is the cost of the goods still on its shelves and in warehouses?
- 5How much does it owe suppliers for goods bought on credit?
- 6What is the government’s share of this year’s profit?
- 7What was left of revenue after all expenses this year?
- 8How much of its buildings’ and equipment’s cost has been used up so far?
- 9What did its buildings and equipment originally cost?
- 10How much does it owe lenders on long-term loans?
- 11How much did it pay its shareholders as dividends?
- 12How much profit has it earned over the years and kept in the business?
Key concepts (hints)
Income statement · a whole year
- Revenue (net sales)
- What the company earns from selling goods and services, recorded when earned.
- Cost of sales (cost of goods sold, merchandise costs)
- The cost of the inventory that was sold. It leaves the balance sheet and becomes an expense.
- Operating expenses (SG&A)
- Costs of running the business other than the goods: wages, rent, utilities, advertising.
- Depreciation
- The part of a building’s or equipment’s cost recorded as an expense each year as it is used up. No cash is paid when it is recorded.
- Income tax expense (provision)
- The government’s share of the profit.
- Net income
- Revenue minus all expenses, including interest and taxes.
Statement of retained earnings
- Retained earnings
- Profit earned since the start and kept in the business. Beginning + Net income − Dividends = Ending.
- Dividends
- Profit paid out to shareholders. Not an expense.
Balance sheet · one date
- Assets = Liabilities + Equity
- Everything the company owns is financed by creditors or by owners.
- Current assets / current liabilities
- Expected to be used up or paid within one year.
- Accounts receivable
- Amounts customers owe the company, expected to be collected in cash.
- Inventory
- Goods held for sale, recorded at cost until sold.
- Accumulated depreciation
- All depreciation recorded so far on buildings and equipment. Cost − accumulated depreciation = net (book value).
- Accounts payable
- Amounts owed to suppliers for goods or services bought on credit.
- Long-term debt
- Money borrowed (loans, bonds) that is due after more than one year.
Finally, calculate (use the numbers on the front)
| 13 | Gross profit margin
= (Net sales − Cost of sales) ÷ Net sales | |
| 14 | Net profit margin
= Net income ÷ Total revenue | |
| 15 | Current ratio
= Total current assets ÷ Total current liabilities | |
13: (269,912 − 239,886) ÷ 269,912 = 11.1% · 14: 8,099 ÷ 275,235 = 2.9% · 15: 38,380 ÷ 37,108 = 1.03.
Costco 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.
Some lines are combined. “Interest and other income, net” = interest income and other minus interest expense. Property and equipment at cost = net + accumulated depreciation. Costco reports its allowance on receivables as immaterial.