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Grand Canyon University *

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Nov 24, 2024

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Uploaded by BrigadierMonkeyMaster1195

Examining Costco's profitability ratios reveals a promising trend in year-over-year (YOY) net profit margin improvement compared to Walmart. Costco's $.026 profit per collected dollar outperforms Walmart's $.019, showcasing effective revenue, management, and operational practices. Furthermore, Costco's ability to generate 9.45 cents of net income per dollar invested in assets surpasses Walmart's 4.79 cents, indicating superior efficiency in converting investments into profits. Despite industry averages being influenced by Home Depot's net income, Costco demonstrates mixed results compared to Walmart and the industry. While Costco has lower gross and net profit margins, it excels in revenue per fixed asset, return on equity, and total asset turnover, showcasing efficient asset management and strong returns for shareholders. These indicators complement the liquidity and solvency ratios, suggesting that while Costco manages short-term debts well, there's room for enhancing overall profitability. Costco's robust financial performance, even if not surpassing industry averages, positions it as a strong competitor to Walmart, supported by unique business strategies, efficient asset utilization, and a customer- centric approach, making it an attractive investment option.

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