Costco Wholesale Corp (COST)
Solvency ratios
| Sep 1, 2024 | Sep 3, 2023 | Aug 28, 2022 | Aug 29, 2021 | Aug 30, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.08 | 0.08 | 0.10 | 0.11 | 0.14 |
| Debt-to-capital ratio | 0.20 | 0.18 | 0.24 | 0.28 | 0.29 |
| Debt-to-equity ratio | 0.25 | 0.21 | 0.31 | 0.38 | 0.41 |
| Financial leverage ratio | 2.96 | 2.75 | 3.11 | 3.37 | 3.04 |
Solvency ratios provide insights into a company's ability to meet its long-term financial obligations. Costco Wholesale Corp's solvency ratios exhibit a favorable trend over the last five years, indicating a strong financial position.
The debt-to-assets ratio has remained relatively stable, ranging from 0.08 to 0.14, suggesting that Costco has maintained low levels of debt in relation to its total assets. This indicates a conservative approach to financing and a lower risk of financial distress.
Similarly, the debt-to-capital ratio has also shown consistency, indicating that Costco relies mainly on equity to finance its operations rather than debt. The ratio has ranged from 0.18 to 0.29, reflecting a healthy balance between debt and equity in the company's capital structure.
The debt-to-equity ratio has decreased steadily from 0.41 in 2020 to 0.25 in 2024, signaling a decreasing reliance on debt financing compared to shareholder equity. This decreasing trend indicates improved financial stability and reduced financial risk for Costco.
The financial leverage ratio, which measures the extent to which a company is using debt to finance its assets, has shown fluctuations but has largely trended downwards over the five-year period. This suggests that Costco is becoming less reliant on debt to fund its operations, enhancing its solvency position.
Overall, Costco's solvency ratios demonstrate a prudent financial strategy, with a conservative approach to debt management and a strengthening solvency position over the years.
Coverage ratios
| Sep 1, 2024 | Sep 3, 2023 | Aug 28, 2022 | Aug 29, 2021 | Aug 30, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | 58.63 | 54.04 | 50.17 | 39.64 | 34.19 |
Costco Wholesale Corp's interest coverage ratio has shown a consistent upward trend over the past five years, indicating the company's ability to comfortably meet its interest obligations. The ratio has improved steadily from 34.19 in 2020 to 58.63 in 2024, reflecting a strengthening financial position. This suggests that Costco's earnings before interest and taxes (EBIT) have been more than sufficient to cover its interest expenses, providing a clear margin of safety for creditors and investors. The increasing trend in the interest coverage ratio signifies the company's capacity to service its debt obligations effectively and highlights its operational efficiency and financial stability.