Expert Answer:Business report

  

Solved by verified expert:The company I have chosen for my SEC 10-K project is Costco.Please see link below.https://www.sec.gov/Archives/edgar/data/909832/000…Project Four ( please see project 1,2 &3 for your review.) 1 page!!! Business Report One to two full in pages in length: single spaced; 12 pt. font. One Inch margins. In your own words. If you create any small charts they will count for page space. Goal:tell the story of your company in the parameters described below. Each of the five projects requires you to map out your message, for your supervisor, illustrating your mastery of concepts from our course as they relate to your SEC 10-K Company. Consider this as your employer.As a starting point, for project four: Consider the concept of break even analysis and target income.How do these analytical tools relate to product pricing and cost management? Why would a company seek to position themselves as low price or high price item in the market place?How might this affect sales dollars, sales volume, and profits? Search and review your course materials for pricing strategies.Search specifically for the word pricing. Summarize the concepts and issues from the course materials.Explain the interrelationships with accounting, information systems, and sales, marketing, and profit planning.
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BUSINESS REPORT
1
Sec 10-K business report for Costco Company
Project Four
Tiara McCray
ACCT 301
2/25/2019
BUSINESS REPORT
2
Costco financials
Other comprehensive income describes an entry in the balance sheet that includes
expenses, losses, revenues, and gains under the GAAP principles and IFRS standards that are not
included in the net income in the company’s statement of earnings. These items are included in
other comprehensive income section because they are yet to be realized.
In the Costco company financial report, the other comprehensive income comprises the
investments that are categorized as available-for-sale, the unrealized losses, and gains associated
with changes in the market movements and interest rates. These investments are reported at fair
market value (Costco Wholesale Corporation, 2019).
Treasury stock
Treasury stock describes the company repurchased or reacquired stock which is intended
for resale to the investors or retirement. It’s a contra account reported in the equity section of a
company’s balance sheet. It portrays the variance between the number of issued shares and
outstanding shares. Normally, treasury stock decreases the values of the stockholder’s equity by
the value paid for the stock since it denotes the number of shares reacquired or repurchased from
the market. Treasury stock comprises of shares that are issued but are not outstanding and as
such, they are not embodied in the calculations for the EPS. Additionally, treasury shares are not
used in issuing dividends and do not have any voting rights.
Notably, in the financial year ending 2018 and 2017, Costco Company did not report any
treasury stock in its equity section on the company’s balance sheet.
Share repurchases
A share repurchase describes are a company’s program by which it purchases back its
shares from an open market place, normally because the management views its shares as being
undervalued, and as such decreasing the number of shares outstanding. The firm buys back its
shares directly from the open market or gives its investors the choice tendering a part of their
shareholding to the corporation at a fixed price. Share repurchases decrease the total business
assets so that the return on equity, return on assets, and other financial metrics are improved. A
company also buys back its shares in order to increase dividend yield or growth. Share
repurchase fills the void between the excess capital and dividends which makes the business to
return more to its owners.
In 2018, the company reported 1,756,000 in share repurchases which were a decrease
from 2,998,000 in the previous year. However, in the financial year 2016, the company reported
3,184, 000 in share repurchases. As such, the amount of share repurchases has been decreasing
over the 3-year period. The company’s repurchased shares are retired.
BUSINESS REPORT
3
References
Costco Wholesale Corporation. (2019). 2018 10-k report. Retrieved from
https://www.sec.gov/Archives/edgar/data/909832/000090983218000013/cost10k9218.ht
m
Running Head: SEC10-K BUSINESS REPORT
Sec 10-K business report for Costco Company
Project Two
Tiara McCray
ACCT 301
2/18/2019
1
Running Head: SEC10-K BUSINESS REPORT
Statement of Cash Flows
Statement of cash flows is one of the key financial statements for a company. It indicates
how changes in balance sheet accounts and income affect cash and cash equivalents. The
statement of cash flow reports the amount of cash generated and used over a specified time
period, usually a year. The three sections that make up the statement of cash flows include
operating activities, investing activities, and financing activities.
a) Operating Activities
In this section, the principal revenue-generating activities are reported as well as other
activities but not investing and financing. Hence any cash flows from current assets and current
liabilities are entered in this section. Costco Corporation included net income, non-cash expenses
and changes in working capital under this section. The non-cash expenses comprised of
depreciation and amortization. Costco added back non-cash expenses and the changes in working
capital to the net income from the income statement to arrive at net cash from operating activities
of $6,726 million and $5,774 million for the years 2017 and 2018 respectively.
b) Investing Activities
In this section, any cash flows that a company realized either through additional
purchase or disposal of non-current assets are reported. Other investments which are not included
in the operating activities are entered in this section as well. These items are obtained from the
assets section of the balance sheet. Costco Corporation’s financing activities comprised of
additions to property plant and equipment, purchase of short term investments, as well as
maturities and sale of short term investments. The net cash used in investing activities amounted
to $2,366 million and $2,947 million in 2017 and 2018 respectively.
c) Financing Activities
Any cash flows that will affect the composition and size of the equity contributed or
equity borrowings such as stock, bonds, and dividends. The changes recorded in this section are
obtained from the balance sheet’s equity section. The cash flows in this section include cash
flows associated with borrowing and loan repayments, as well as issuance and buying back
shares. The dividend payment is also treated as a financing activity. Costco’s cash flows in this
section majorly comprised of repayment of borrowings, issuance of bonds, repurchase of
common stock and cash dividend payments.
Purpose of Positive and Negative Values
Positive numbers represent cash inflows while negative values represent cash outflows.
They are used to show that inflows increase the amount of cash while outflows reduce. For
instance, Costco’s net cash from operating activities have positive value implying that there was
an increase in the amount of cash as a result of the inflows, while the net cash from operating
activities has a negative value, meaning that there was a reduction in the amount of cash because
of the outflows. The statement of cash flows is important as gives a clear picture of what is
happening to the company’s bank account. It provides a piece of detailed information on how the
2
Running Head: SEC10-K BUSINESS REPORT
company’s cash is being generated and used. Furthermore, from the statement, one can figure out
whether a company is able to finance new loans, invest in equipment, and hire new personnel
among others.
Cash flows from operating activities constitutes a company’s revenue-generating
activities. This section shows the amount of cash generated by a company from its primary
operations. In contrast, the investing cash flows report changes in a company’s long term
investments and capital expenditure. The distinction is significant because the cash flows from
operating activities do not include long-term capital expenditures or investment costs, which may
happen only once in a period. Cash flows from operating activities solely focus on primary
activities. In the last two years, there has been a change in the amount of Costco’s cash and cash
equivalents. 2017 cash and cash equivalents stood at $4,546 million, and 6,055 in 2018. This
change was a result of the decrease in net cash expended from investing activities from $2,366
million to $2,947 million. The decrease in net cash from operating activities was not sufficient to
warrant a reduction in the year-end cash and cash equivalents.
Sec 10-K link for Costco Company
https://www.sec.gov/Archives/edgar/data/909832/000090983218000013/cost10k9218.htm
3
Running Head: SEC10-K BUSINESS REPORT
Sec 10-K business report for Costco Company
Tiara McCray
ACCT 301
1/28/2019
1
SEC10-K BUSINESS REPORT
2
Costco is an American multinational retailer company that specializes in warehousing and selling
products including computers, furniture, electronics, home appliances, jewelry, outdoor living
among other products. The company operates as a chain of stores in the over 12 countries
(United States, Iceland, Canada, Japan, France, Mexico, UK, Australia, South Korea, Taiwan,
and Spain.) with 762 warehouses as at August 28, 2018. Costco does not manufacture products
but buy merchandise directly from manufacturers and ship them to depots or warehouses.
From the consolidated statement of income, net sales for Costco have been increasing
tremendously from the year 2016 to 2018. As indicated by the chart below, the company had a
net sale of $116, 073 million, which increased to $126,172 million in 2017 and further increased
to $138,434 million in the year 2018.
Year
2016
2017
2018
Net sales
$116, 073 million
$126,172 million
$138,434 million
The above trend for net sales deduces a positive performance by the company. Relatively, the
increase in the net sales increases the inventory and accounts receivables. For instance, from a
balance sheet, Costco had a merchandise inventory of $9,834million in the year 2017 which
increased to $11,040millon in 2018. Typically, where the company sales are higher, it
proportionally translates an increase in inventory. Likewise, the account’s inventory increased
from 2017 to 2018 with $1,432million and $1,669million respectively.
Issues related to risks
Costco Company experience several risks, both business and operational. First, the company
relies on the operational performance of U.S and Canadian markets that comprise 87% and 83%
respectively of the total net sales of the company. This means that slow growth rate and adverse
market destabilization might hinder the company progress and lead to its collapse. Among the
risks that the company experience in the U.S market includes shifts in sales, changes in
economic conditions such as increased labor and lack to meet customer needs due to slow
innovation and adoption. Additionally, due to unfavourable local laws that regulate operations in
a business environment such as leasing and construction of warehouses and depots, the company
might experience a risk of inability to successfully implement its strategic plans. Hence, this may
affect business expansion thus hindering profitability. Again, as the company aspires to expand
its operations in foreign markets, some of the risk associated with this expansion includes
difficulties relating and attracting customers due to language and cultural barrier and lucrative
competition among the local retailers.
Natural calamities such as fire, earthquakes, hurricanes and other catastrophic events may disrupt
the company’s operations. The calamities might affect the process of receiving merchandise,
shipping, warehousing, and distribution. In addition, failure in the back-up system and other
technological tools may limit the company daily operations. For instance, website down times
might scare away customers. Computer viruses and telecommunication failures coupled with
security breaches affect customer loyalty and ultimately leading to the loss of customer
satisfaction and confidence.
SEC10-K BUSINESS REPORT
3
Weak internal control systems (ICS) might impact the organization’s stock price and loss of
confidence from potential and existing investors. Issues of assurance and financial frauds due to
weak auditing systems might also make the company lose millions of money which might
consequently delay growth and expansion in long term.
Challenges
The loyalty of warehouse club members is adversely maintained by business growth and market
penetration. Where the company profits decline, members withdraw their support thus impacting
the operations. Moreover, Costco experience competition from other warehouse club operators.
However, the company has developed strategic plans to mitigate the challenge of competition in
the market. The competitive advantage includes adopting the evolution of online selling and
purchasing through digital websites and social media which has meticulously improved the
financial conditions and convenience in operations. Although Costco has made incredible
strategies in digitizing operations, competitors also have better technology capabilities which
influence access to merchandise and market entrance thus posing challenge in maintaining
market dominance.
Sec 10-K link for Costco Company
https://www.sec.gov/Archives/edgar/data/909832/000090983218000013/cost10k9218.htm
SEC10-K BUSINESS REPORT
4

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