Costco Wholesale Corp (COST)

Financial leverage ratio

		Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020	Sep 1, 2019
Total assets	US$ in thousands	68,994,000	64,166,000	59,268,000	55,556,000	45,400,000
Total stockholders’ equity	US$ in thousands	25,058,000	20,642,000	17,564,000	18,284,000	15,243,000
Financial leverage ratio		2.75	3.11	3.37	3.04	2.98

September 3, 2023 calculation

Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $68,994,000K ÷ $25,058,000K
= 2.75

The financial leverage ratio measures the extent to which a company's operations are funded by equity versus debt. A lower ratio indicates a greater reliance on equity financing, while a higher ratio suggests a heavier reliance on debt.

Looking at Costco Wholesale Corp's financial leverage ratio over the past five years, we can observe the following trends:

- In the most recent period, as of September 3, 2023, the financial leverage ratio stands at 2.75. This indicates a decrease from the previous year, signaling that Costco has reduced its reliance on debt to finance its operations.

- In the prior year, as of August 28, 2022, the financial leverage ratio was higher at 3.11, suggesting an increase in the use of debt to fund operations compared to the current year.

- Similarly, in the fiscal year ending August 29, 2021, the ratio stood at 3.37, which was notably higher than the current and prior year. This indicates an even greater reliance on debt financing during that period.

- However, the financial leverage ratio decreased to 3.04 as of August 30, 2020, suggesting a reduction in reliance on debt compared to the preceding year.

- Going back to September 1, 2019, the financial leverage ratio was 2.98. This indicates a slight decrease in reliance on debt compared to the fiscal year ending August 30, 2020.

Overall, the trend in Costco Wholesale Corp's financial leverage ratio shows fluctuations in the degree of reliance on debt financing over the years. It is important to note that while some fluctuations occurred, the general trend in recent years has been a reduction in the company's reliance on debt, indicating an increased reliance on equity to support its operations. This may signify a strategy to strengthen its financial position and reduce financial risk.