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Do Profitability analysis for the company. How do they compare to others in their industry?
The excel sheet provides the profitability of three companies which are Costco, Target and Walmart. The competitors for Costco are Target and Walmart. Therefore, Costco has a Return on Capital (ROC) worth 17.3%, while Target has 12.0%, and Walmart 19.6 %. Basing on these figures, Target performs lower, while Walmart is the best in terms of generating profit from shareholder’s equity. Costco is the best when assessed in terms of the Returns on Net Operating Assets (RNOA) with 21.8%. The value relates to the company’s small shop design. However, the Non-Operating Return (ROE-RNOA) for Costco is -4.5%, which is the lowest value when compared to Target and Walmart. This means that they inefficiently utilize their cash. They should invest the cash in stock and bonds or pay their debts in order to raise the company’s ROE. Therefore, the Costco has to raise its ROE-RNOA in order to get more ROE.
Do Profitability analysis for the company. How do they compare to others in their industry?
Calculate the EPS and Diluted EPS. How do they compare to others in their industry?
Determine how effective the firm is in collecting receivables, turning inventory, & turning PPE.
Effectiveness in Utilizing Interest Free Financing
The company has a high ability to raise the stock because its value of APDO of 31.25 allows it to borrow again with the intention of raising more stock.
Implications and Recommendation