Chapter 12, Problem 1A

Costco is the largest chain of membership warehouse clubs in the world based on sales volume, and it is the fifth largest general retailer in the United States. Costco focuses on selling products at low prices, often at a very high volume. These goods are usually bulk-packaged and marketed primarily to large families and businesses. Costco became the first company to grow from zero to $3 billion in sales in less than six years. In a recent fiscal year, Costco’s sales totaled $76.3 billion, a 29.3 percent increase from 2006, and its net income reached $1.30 billion, an 18.1 percent increase from 2006. This information, and much more, can be derived from the financial statements that merchandising firms such as Costco prepare on a regular basis to provide shareholders and other interested parties information about the company’s activities and financial performance.

1. 1. What type of information would a classified income statement provide to shareholders and other interested parties?
2. 2. What type of information would a classified balance sheet provide to shareholders and other interested parties? Why would this information be important for calculating the working capital and the current ratio, for example?