The company currently holds 9.25
B in liabilities with Debt to Equity (D/E) ratio of 0.46, which is about average as compared to similar companies. Costco Wholesale has a current ratio of 1.01, suggesting that it is in a questionable position to pay out its financial obligations when due. Debt can assist Costco Wholesale until it has trouble settling it off, either with new capital or with free cash flow. So, Costco Wholesale's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Costco Wholesale sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Costco to invest in growth at high rates of return. When we think about Costco Wholesale's use of debt, we should always consider it together with cash and equity.
Costco Wholesale financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Costco Wholesale, including all of Costco Wholesale's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Costco Wholesale assets, the company is considered highly leveraged. Understanding the
composition and structure of overall Costco Wholesale debt and outstanding corporate bonds gives a good idea of
how risky the capital structure of a business is and if it is worth investing in it. Please read more on our
technical analysis page.
Understanding Costco Total Liabilities
Costco Wholesale Corp liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Costco Wholesale Corp has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Costco Wholesale balance sheet include debt obligations and money owed to different Costco Wholesale vendors, workers, and loan providers. Below is the chart of Costco short long-term liabilities accounts currently reported on its balance sheet.
You can use Costco Wholesale Corp
financial leverage analysis tool to get a better grip on understanding its financial position
How important is Costco Wholesale's Liquidity
Costco Wholesale
financial leverage refers to using borrowed capital as a funding source to finance Costco Wholesale Corp ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Costco Wholesale financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Costco Wholesale's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Costco Wholesale's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the
breakdown between Costco Wholesale's total debt and its cash.
Another Deeper Perspective
Costco Wholesale price drop over the last few months could raise concerns from private investors as the firm is trading at a share price of
464.99 on
5,765,487 in volume. The company executives were not very successful in positioning the firm resources to exploit
market volatility in
April. However, diversifying your holdings with Costco Wholesale or similar stocks can still protect your portfolio during high-volatility market scenarios. The stock standard deviation of daily returns for 90 days investing horizon is currently 2.47. The current volatility is consistent with the ongoing market swings in
April 2022 as well as with Costco Wholesale unsystematic, company-specific events.
Liabilities Breakdown
18.1 B
Current Liabilities
7.1 B
Long-Term Liabilities
| Total Liabilities | 25.13 Billion |
| Current Liabilities | 18.06 Billion |
| Long-Term Liabilities | 7.07 Billion |
| Tax Liabilities | 1 Billion |
Can Costco Wholesale build up on the newest gain?
The potential upside is down to 3.1 as of today. Costco Wholesale exhibits very low volatility with skewness of -2.31 and kurtosis of 10.47. However, we advise investors to further study Costco Wholesale technical indicators to make sure all market info is available and is reliable. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Costco Wholesale's stock risk against market volatility during both bullying and bearish trends. The higher level of volatility that comes with bear markets can directly impact Costco Wholesale's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.
Costco Wholesale Implied Volatility
Costco Wholesale's implied volatility exposes the market's sentiment of Costco Wholesale stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Costco Wholesale's implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that Costco Wholesale stock will not fluctuate a lot when Costco Wholesale's options are near their expiration.
Our Takeaway on Costco Wholesale Investment
Whereas other companies in the discount stores industry are either recovering or due for a correction, Costco Wholesale may not be performing as strong as the other in terms of long-term growth potentials. To summarize, as of the 26th of May 2022, our research shows that Costco Wholesale is a rather very steady investment opportunity with a
very low probability of distress in the next two years. From a slightly different view, the entity currently appears to be
undervalued. Our overall 90 days buy-or-sell advice on the firm is
Buy.
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Vlad Skutelnik is a Macroaxis Contributor. Vlad covers stocks, funds, cryptocurrencies, and ETFs that are traded in North America, focusing primarily on fundamentals, valuation and market volatility. He has many years of experience in fintech, predictive investment analytics, and risk management.
View Profile This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Vlad Skutelnik do not own shares of Costco Wholesale Corp. Please refer to our
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