Tidmax Due Diligence - Costco

Tidmax Due Diligence (Costco)

Overview of the Company

The business that is chosen for this essay is Existing Business i.e. Costco. Tidmax Due Diligence - Costco is one of the largest warehouse clubs retailer as well as second largest general retailer in United States. This company came into existence in 1976 and headquartered in Issaquah - Washington. The main operation of the company is to sell foods and general merchandise i.e. bulk of household goods and appliances at high discounted prices. The main competitors of Costco are Sam's Club & BJ's Wholesale Club (BJ) and these companies are following same business strategies as Costco has been following.

Summary of Forecasted Operational and Financial Results

For making adequate planning decisions, it is necessary to observe precious financial trend and on the basis of that, future performance can easily be forecasted. After determining this, we would be making decision on whether to further expand the business or apply strategies for better performance of existing company (Bragg, 2012).

Common Size Financial Statement

Common size financial statement states that company overall trend have been increasing. Total revenue increased with 11.5% in 2012 while operating income increased with 13.1% and net income attributed to shareholders enhanced with 16.9% in 2012. Considering this increasing trend, it is expected that in future years, company would be sustaining this trend.

As far as income balance sheet trend is concern, total current assets reduced with -1% while Net property and equipment increased with 4%. Liabilities and equity trend has been also been partially increased. In coming years, since sales are increasing, company expects that balance sheet main item heads will increased by 5% (Bragg, 2012).

Ration Analysis

Ratio Analysis trend state that historically company has been performing well with respect of profitability, debt management and efficiency ratios while liquidity has been reducing. Efficiency Ratios state that company has been receiving their receivable on time ad they have strong management over their collection. As far as inventory turnover is concern, company's trend is better off since it is in line with the industry and according to theory, this should be balance, higher rate indicate inventories has been piled up in the warehouse while low rate shows that inventories are stuck in sales (Helfer, 2012).

Liquidity trend is constant i.e. within 1 to 1.1 which state that they might face problem in future with respect to short term obligations. As far as quick ratio is concern which deals with pure cash and is lower than 1, shows that majority of the portion of current assets is with inventory. Debt management is outstanding of this company since their trend has been reducing which state that company has been avoiding to finance their operation with debt. This is a good indication for company as well as for stakeholders. Profitability trend has been slowing increasing and since it is forecasted that company sales would be increasing, this would overall increase return on equity that is minimum return that company would be paying to ...