Longitudinal Analysis:

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Longitudinal Analysis: When doing a longitudinal financial analysis on Costco, Costco’s profit margin has been slightly increasing between 1999 and 2008. It had a profit margin of 12.79% in 1999 to 13.29% in 2008. This gives the company an average profit margin of 13.16% compared to the industry average of 20.40%. This shows that even though Costco has been gradually increasing its profit margin, it is still below the industry average. The company needs to improve their financial performance by controlling cost to increase their profit margin. Costco’s total asset turnover has stayed relatively the same from 1999 to 2008. The average total asset turnover in that time period was 3.40 compared to the industry average of 2.85. Compared to the industry Costco has a moderately high total asset turn over. This means that Costco is doing a very efficient job in using its assets in creating sales. Costco’s equity multiplier has ranged from 1.88 to 2.27 from 1999 to 2008. The average equity multiplier in this time period was 2.06 compared to the industry average of2.34. Costco is slightly lower than the industry average. To increase their financial performance the company should increase their financial leverage and rely on more debt to finance their assets. The average return on equity for Costco between 1999 and 2008 was .92 compared to the industry average of 1.19. Costco’s below average return on equity is mainly because of its profit margin. Since Costco’s profit margin is significantly below the average, it is affecting the company’s return on equity. In order for Costco to improve on their financial performance, the company needs to handle their cost associated with their operations. Costco has had gradually increasing sales from 1999 to 2008. The sales growth shows an average growth of 11.43% for Costco compared to the industry average of 10.48%. This

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