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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Costco Wholesale Corp., economic profit calculation

US$ in millions

12 months ended:	Aug 31, 2025	Sep 1, 2024	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020
Net operating profit after taxes (NOPAT)¹	7,834)	7,032)	5,694)	6,421)	5,292)	4,254)
Cost of capital²	14.80%	14.80%	14.61%	14.49%	14.37%	14.22%
Invested capital³	37,996)	32,993)	34,903)	31,671)	28,508)	29,043)

Economic profit⁴	2,210)	2,149)	596)	1,833)	1,195)	125)

Based on: 10-K (reporting date: 2025-08-31), 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2025 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 7,834 – 14.80% × 37,996 = 2,210

The financial analysis indicates a consistent generation of positive economic profit over the observed six-year period, signaling that the operational returns have consistently exceeded the cost of capital. While growth has been non-linear, the overall trend reflects an increase in the company's ability to create value above its required return.

Net Operating Profit After Taxes (NOPAT): A general upward trajectory is observed in NOPAT, which increased from 4,254 million US dollars in 2020 to 7,834 million US dollars by 2025. A notable exception occurred in 2023, where a decline to 5,694 million US dollars was recorded, though this was followed by a robust recovery in the subsequent two years.
Cost of Capital: The cost of capital exhibited a steady and marginal increase, rising from 14.22% in 2020 to a stabilized rate of 14.80% in 2024 and 2025. This incremental rise indicates a slightly higher threshold for required returns over the analyzed period.
Invested Capital: Invested capital grew from 29,043 million US dollars in 2020 to 37,996 million US dollars in 2025. The trend remained largely positive, with a minor contraction observed in 2024, suggesting periods of strategic asset reallocation or debt reduction prior to further expansion in 2025.
Economic Profit Performance: Economic profit demonstrated significant volatility, starting at 125 million US dollars in 2020 and reaching a high of 2,210 million US dollars by 2025. A significant contraction was observed in 2023, where economic profit fell to 596 million US dollars; this decline was driven by the simultaneous reduction in NOPAT and an increase in invested capital, which heightened the capital charge. The subsequent surge to 2,149 million US dollars in 2024 and 2,210 million US dollars in 2025 confirms a strengthened capacity for value creation.

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Costco Wholesale Corp., NOPAT calculation

US$ in millions

12 months ended:	Aug 31, 2025	Sep 1, 2024	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020
Net income attributable to Costco	8,099)	7,367)	6,292)	5,844)	5,007)	4,002)
Deferred income tax expense (benefit)¹	(80)	(101)	33)	(57)	61)	90)
Increase (decrease) in LIFO reserve²	—)	—)	(438)	438)	—)	—)
Increase (decrease) in equity equivalents³	(80)	(101)	(405)	381)	61)	90)
Interest expense	154)	169)	160)	158)	171)	160)
Interest expense, operating lease liability⁴	81)	68)	65)	61)	62)	62)
Adjusted interest expense	235)	237)	225)	219)	233)	222)
Tax benefit of interest expense⁵	(49)	(50)	(47)	(46)	(49)	(47)
Adjusted interest expense, after taxes⁶	186)	187)	178)	173)	184)	176)
Interest income	(469)	(533)	(470)	(61)	(41)	(89)
Investment income, before taxes	(469)	(533)	(470)	(61)	(41)	(89)
Tax expense (benefit) of investment income⁷	98)	112)	99)	13)	9)	19)
Investment income, after taxes⁸	(371)	(421)	(371)	(48)	(32)	(70)
Net income (loss) attributable to noncontrolling interest	—)	—)	—)	71)	72)	57)
Net operating profit after taxes (NOPAT)	7,834)	7,032)	5,694)	6,421)	5,292)	4,254)

Based on: 10-K (reporting date: 2025-08-31), 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in LIFO reserve. See details »

³ Addition of increase (decrease) in equity equivalents to net income attributable to Costco.

⁴ 2025 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 2,668 × 3.05% = 81

⁵ 2025 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 235 × 21.00% = 49

⁶ Addition of after taxes interest expense to net income attributable to Costco.

⁷ 2025 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 469 × 21.00% = 98

⁸ Elimination of after taxes investment income.

Net Income Attributable to Costco: The net income showed a consistent upward trend over the six-year period. Starting at 4,002 million USD, it increased steadily each year, reaching 8,099 million USD in the latest period. The largest year-over-year growth appeared from the 2023 to 2024 period, with an increase of approximately 1,075 million USD. Overall, net income approximately doubled from the first to the last reported year, reflecting strong profitability growth.
Net Operating Profit After Taxes (NOPAT): NOPAT followed a generally increasing pattern as well, starting at 4,254 million USD in the earliest period and rising to 7,834 million USD in the most recent year. There was a slight deviation from the upward trend between 2022 and 2023, where NOPAT decreased from 6,421 million USD to 5,694 million USD before resuming growth. The recovery that followed saw a notable increase to 7,032 million USD and then to 7,834 million USD. This suggests a temporary operational challenge was overcome, leading to renewed profitability improvements.
General Observations: Both net income and NOPAT exhibited significant growth over the examined period, reinforcing a positive operational and financial trajectory. The temporary dip in NOPAT suggests some operational or cost-related challenges in the 2023 fiscal year, yet the strong rebound indicates effective management response or favorable market conditions. The steadier growth in net income compared to the fluctuating pattern of NOPAT could suggest impacts of non-operating factors or variations in tax effects during the period.

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Costco Wholesale Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Aug 31, 2025	Sep 1, 2024	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020
Provision for income taxes	2,719)	2,373)	2,195)	1,925)	1,601)	1,308)
Less: Deferred income tax expense (benefit)	(80)	(101)	33)	(57)	61)	90)
Add: Tax savings from interest expense	49)	50)	47)	46)	49)	47)
Less: Tax imposed on investment income	98)	112)	99)	13)	9)	19)
Cash operating taxes	2,750)	2,412)	2,111)	2,015)	1,580)	1,246)

Based on: 10-K (reporting date: 2025-08-31), 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30).

The financial data indicates a consistent upward trend in both the provision for income taxes and cash operating taxes over the analyzed period. This upward trajectory suggests increasing profitability or taxable income, requiring higher tax allocations.

Provision for Income Taxes: The provision for income taxes has increased from $1,308 million in 2020 to $2,719 million in 2025. This steady growth reflects a compounded annual increase, highlighting the company's growing tax liability over the years. The year-over-year increases range between approximately 17% to 24%, showing sustained expansion without volatility.
Cash Operating Taxes: Cash operating taxes also show a consistent rise from $1,246 million in 2020 to $2,750 million in 2025. Notably, cash operating taxes slightly exceed the provision for income taxes, which could indicate timing differences or tax payment strategies. The year-over-year growth in cash operational taxes aligns closely with the provision, reinforcing the narrative of increased cash outflows related to tax expenses.

Overall, the data reveals a parallel and proportionate increase in tax provisioning and payments, reflecting robust business performance and likely higher earnings. The absence of any decline or irregularity in these amounts suggests stable tax management and continuous financial growth throughout the period under review.

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Costco Wholesale Corp., invested capital calculation (financing approach)

US$ in millions

	Aug 31, 2025	Sep 1, 2024	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020
Current portion of long-term debt	75)	103)	1,081)	73)	799)	95)
Current finance lease liabilities	78)	147)	129)	245)	72)	31)
Long-term debt, excluding current portion	5,713)	5,794)	5,377)	6,484)	6,692)	7,514)
Long-term finance lease liabilities	1,401)	1,351)	1,303)	1,383)	980)	657)
Operating lease liability¹	2,668)	2,554)	2,646)	2,721)	2,864)	2,789)
Total reported debt & leases	9,935)	9,949)	10,536)	10,906)	11,407)	11,086)
Total Costco stockholders’ equity	29,164)	23,622)	25,058)	20,642)	17,564)	18,284)
Net deferred tax (assets) liabilities²	132)	221)	304)	279)	310)	259)
LIFO reserve³	—)	—)	—)	438)	—)	—)
Equity equivalents⁴	132)	221)	304)	717)	310)	259)
Accumulated other comprehensive (income) loss, net of tax⁵	1,770)	1,828)	1,805)	1,829)	1,137)	1,297)
Noncontrolling interests	—)	—)	—)	5)	514)	421)
Adjusted total Costco stockholders’ equity	31,066)	25,671)	27,167)	23,193)	19,525)	20,261)
Construction in progress⁶	(1,882)	(1,389)	(1,266)	(1,582)	(1,507)	(1,276)
Short-term investments⁷	(1,123)	(1,238)	(1,534)	(846)	(917)	(1,028)
Invested capital	37,996)	32,993)	34,903)	31,671)	28,508)	29,043)

Based on: 10-K (reporting date: 2025-08-31), 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of LIFO reserve. See details »

⁴ Addition of equity equivalents to total Costco stockholders’ equity.

⁵ Removal of accumulated other comprehensive income.

⁶ Subtraction of construction in progress.

⁷ Subtraction of short-term investments.

Total reported debt & leases: The total reported debt and leases exhibit a generally declining trend over the observed periods. Starting from approximately $11.1 billion, the amount slightly increased to around $11.4 billion in the second year, then consistently decreased in the subsequent years, reaching approximately $9.9 billion in the latest period. This suggests a gradual reduction in leverage or obligations related to debt and leases over time.
Total Costco stockholders’ equity: Stockholders' equity demonstrates significant growth across the years. There is an initial slight decline from about $18.3 billion to $17.6 billion, followed by a substantial increase to over $20.6 billion in the third period. This upward trajectory continues more markedly in the following years, reaching nearly $29.2 billion in the most recent period. The growth in equity indicates strengthening financial stability and retained earnings accumulation.
Invested capital: Invested capital shows a consistent upward trend, rising from approximately $29.0 billion at the beginning of the period to nearly $38.0 billion in the latest year. Despite a slight dip in one of the middle years, the general movement is positive, suggesting ongoing investment in the company's operations and assets. This increase in invested capital aligns with the growth observed in stockholders’ equity, reflecting expansion and reinvestment activities.

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Costco Wholesale Corp., cost of capital calculations

Aug 31, 2025

	Capital (fair value)¹	Weights					Cost of capital
Equity²	405,420)	405,420)	÷	414,937)	=	0.98	0.98	×	15.10%	=	14.76%
Long-term debt, including current portion and finance lease liabilities³	6,849)	6,849)	÷	414,937)	=	0.02	0.02	×	2.49% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	2,668)	2,668)	÷	414,937)	=	0.01	0.01	×	3.05% × (1 – 21.00%)	=	0.02%
Total:	414,937)					1.00					14.80%

Based on: 10-K (reporting date: 2025-08-31).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Sep 1, 2024

	Capital (fair value)¹	Weights					Cost of capital
Equity²	402,798)	402,798)	÷	412,262)	=	0.98	0.98	×	15.10%	=	14.76%
Long-term debt, including current portion and finance lease liabilities³	6,910)	6,910)	÷	412,262)	=	0.02	0.02	×	2.48% × (1 – 21.00%)	=	0.03%
Operating lease liability⁴	2,554)	2,554)	÷	412,262)	=	0.01	0.01	×	2.67% × (1 – 21.00%)	=	0.01%
Total:	412,262)					1.00					14.80%

Based on: 10-K (reporting date: 2024-09-01).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Sep 3, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	250,379)	250,379)	÷	260,195)	=	0.96	0.96	×	15.10%	=	14.53%
Long-term debt, including current portion and finance lease liabilities³	7,170)	7,170)	÷	260,195)	=	0.03	0.03	×	2.48% × (1 – 21.00%)	=	0.05%
Operating lease liability⁴	2,646)	2,646)	÷	260,195)	=	0.01	0.01	×	2.47% × (1 – 21.00%)	=	0.02%
Total:	260,195)					1.00					14.61%

Based on: 10-K (reporting date: 2023-09-03).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Aug 28, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	212,592)	212,592)	÷	222,974)	=	0.95	0.95	×	15.10%	=	14.40%
Long-term debt, including current portion and finance lease liabilities³	7,661)	7,661)	÷	222,974)	=	0.03	0.03	×	2.42% × (1 – 21.00%)	=	0.07%
Operating lease liability⁴	2,721)	2,721)	÷	222,974)	=	0.01	0.01	×	2.26% × (1 – 21.00%)	=	0.02%
Total:	222,974)					1.00					14.49%

Based on: 10-K (reporting date: 2022-08-28).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Aug 29, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	198,529)	198,529)	÷	210,137)	=	0.94	0.94	×	15.10%	=	14.27%
Long-term debt, including current portion and finance lease liabilities³	8,744)	8,744)	÷	210,137)	=	0.04	0.04	×	2.42% × (1 – 21.00%)	=	0.08%
Operating lease liability⁴	2,864)	2,864)	÷	210,137)	=	0.01	0.01	×	2.16% × (1 – 21.00%)	=	0.02%
Total:	210,137)					1.00					14.37%

Based on: 10-K (reporting date: 2021-08-29).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Aug 30, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	160,175)	160,175)	÷	171,639)	=	0.93	0.93	×	15.10%	=	14.09%
Long-term debt, including current portion and finance lease liabilities³	8,675)	8,675)	÷	171,639)	=	0.05	0.05	×	2.43% × (1 – 21.00%)	=	0.10%
Operating lease liability⁴	2,789)	2,789)	÷	171,639)	=	0.02	0.02	×	2.23% × (1 – 21.00%)	=	0.03%
Total:	171,639)					1.00					14.22%

Based on: 10-K (reporting date: 2020-08-30).

¹ US$ in millions

² Equity. See details »

³ Long-term debt, including current portion and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Costco Wholesale Corp., economic spread ratio calculation, comparison to benchmarks

	Aug 31, 2025	Sep 1, 2024	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020
Selected Financial Data (US$ in millions)
Economic profit¹	2,210)	2,149)	596)	1,833)	1,195)	125)
Invested capital²	37,996)	32,993)	34,903)	31,671)	28,508)	29,043)
Performance Ratio
Economic spread ratio³	5.82%	6.51%	1.71%	5.79%	4.19%	0.43%
Benchmarks
Economic Spread Ratio, Competitors⁴
Target Corp.	-3.14%	-2.20%	-3.97%	8.70%	-0.77%	—
Walmart Inc.	2.64%	1.17%	-1.25%	-0.71%	0.75%	—

Based on: 10-K (reporting date: 2025-08-31), 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2025 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 2,210 ÷ 37,996 = 5.82%

⁴ Click competitor name to see calculations.

The analysis of economic value added reveals a period of significant volatility in value creation, characterized by a general upward trajectory in both economic profit and the efficiency of capital utilization. While the capital base has expanded over the six-year period, the ability to generate returns above the cost of capital has fluctuated substantially, particularly between 2022 and 2024.

Economic Profit Trends: Economic profit exhibited a sharp increase from 125 million US dollars in 2020 to 1,833 million US dollars by 2022. A notable contraction occurred in 2023, where profit fell to 596 million US dollars, representing a significant deviation from the growth trend. However, a strong recovery followed, with values ascending to 2,149 million US dollars in 2024 and reaching a peak of 2,210 million US dollars by August 31, 2025.
Invested Capital Dynamics: The total invested capital has grown from 29,043 million US dollars in 2020 to 37,996 million US dollars in 2025. This growth was relatively steady, with minor fluctuations observed in 2021 and 2024. The overall expansion of the capital base indicates continued investment in operations, though the growth in capital did not always correlate linearly with the growth in economic profit.
Economic Spread Ratio Analysis: The economic spread ratio, which measures the difference between the return on invested capital and the cost of capital, mirrors the volatility seen in economic profit. After a negligible start of 0.43% in 2020, the ratio climbed to 5.79% in 2022. A sharp decline to 1.71% was recorded in 2023, coinciding with the drop in economic profit. The ratio peaked at 6.51% in 2024 before settling at 5.82% in 2025, suggesting that while the entity has significantly improved its value creation efficiency compared to 2020, it remains subject to periodic fluctuations.

The relationship between these metrics suggests that the entity experienced a period of diminished capital efficiency in 2023, where economic profit declined despite an increase in invested capital. The subsequent rebound in 2024 and 2025 indicates a successful restoration of the spread, demonstrating an improved capacity to generate economic value relative to the size of the investment base.

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Costco Wholesale Corp., economic profit margin calculation, comparison to benchmarks

	Aug 31, 2025	Sep 1, 2024	Sep 3, 2023	Aug 28, 2022	Aug 29, 2021	Aug 30, 2020
Selected Financial Data (US$ in millions)
Economic profit¹	2,210)	2,149)	596)	1,833)	1,195)	125)
Net sales	269,912)	249,625)	237,710)	222,730)	192,052)	163,220)
Performance Ratio
Economic profit margin²	0.82%	0.86%	0.25%	0.82%	0.62%	0.08%
Benchmarks
Economic Profit Margin, Competitors³
Target Corp.	-1.06%	-0.70%	-1.10%	2.47%	-0.25%	—
Walmart Inc.	0.63%	0.28%	-0.31%	-0.20%	0.22%	—

Based on: 10-K (reporting date: 2025-08-31), 10-K (reporting date: 2024-09-01), 10-K (reporting date: 2023-09-03), 10-K (reporting date: 2022-08-28), 10-K (reporting date: 2021-08-29), 10-K (reporting date: 2020-08-30).

¹ Economic profit. See details »

² 2025 Calculation
Economic profit margin = 100 × Economic profit ÷ Net sales
= 100 × 2,210 ÷ 269,912 = 0.82%

³ Click competitor name to see calculations.

An analysis of the financial performance between August 2020 and August 2025 reveals a consistent upward trajectory in net sales contrasted with significant volatility in economic profit and its corresponding margin. While top-line growth remained steady, the ability to generate value above the cost of capital experienced a period of sharp fluctuation before stabilizing at higher levels.

Net Sales Growth: Net sales demonstrated uninterrupted annual growth, rising from 163,220 million USD in 2020 to 269,912 million USD by 2025. This represents a sustained expansion of the revenue base throughout the observed period.
Economic Profit Trends: Economic profit exhibited substantial variance. After a modest start of 125 million USD in 2020, the figure surged to 1,833 million USD by 2022. A significant contraction occurred in 2023, where economic profit fell to 596 million USD. However, a strong recovery followed, with values climbing to 2,149 million USD in 2024 and reaching a peak of 2,210 million USD in 2025.
Economic Profit Margin Volatility: The economic profit margin mirrored the fluctuations of the absolute economic profit. The margin expanded from 0.08% in 2020 to 0.82% in 2022, before dropping sharply to 0.25% in 2023. This decline occurred despite the continued increase in net sales, suggesting a temporary increase in the cost of capital or a reduction in operational efficiency relative to invested capital during that period. The margin recovered to a peak of 0.86% in 2024 and remained stable at 0.82% in 2025.

The overall trend indicates that while the scale of operations expanded linearly, the generation of economic value was subject to cyclical pressures. The recovery observed in 2024 and 2025 suggests a return to an efficient capital allocation strategy, resulting in the highest levels of economic value added over the analyzed timeframe.

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Costco Wholesale Corp. (NASDAQ:COST)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin