Research and obtain Target corporation (retailer) last few years (at least two)
ID: 2600438 • Letter: R
Question
Research and obtain Target corporation (retailer) last few years (at least two) financial statements (information that is available to the public online) in order to answer the following questions:
A. Based on the information that you have gathered, explain the changes in financial ratios. Has anything changed in the few years of financial statements that you have obtained?
i. What are the reasons for these changes?
B. Based on the information you have gathered, analyze the changes in the financial reports regarding cash. Be sure to examine the statement of cash flows.
i. What are the reasons for these changes?
C. Based on the information you have gathered, analyze the changes in the financial reports regarding the account balance.
i. What are the reasons for these changes?
D. Describe the type of valuation method that your company uses and explain why it uses this method.
i. What are the benefits of this method?
E. Based on industry trends, future plans of Target Corporation, and the information you have gathered, predict how Target Corporation will perform in the following year compared to competitors.
Explanation / Answer
Particulars
2017
2016
2015
Current Ratio
94%
112%
116%
Quick Ratio
29%
44%
46%
Cash Ratio
20%
32%
19%
I have taken above financial ratios for my analysis and I have observed that all the ratios have significantly lowered down in 2017. Possible reasons of these changes could be:
- Changes in consumer behavior have significantly lowered the sales, ultimately lowering down of cash receipts and associated ratios
- Cash disbursement of nearly $ 10 Billion to shareholders via share repurchase and dividends.
2.
Company experienced negative cash flows during the year 2016-17 of $ 1534000000. The reason for the same can be attributed to high capital expenditures during the year and only $ 46000000 earnings from investment activities in comparison to $ 1922000000 during 2015-16. However, there were no major changes in cashflows from operating activities but company did experience higher cash outflows in borrowing activities. Resultantly, Cash and Cash Equivalents declined from $ 4046000000 in 2015-16 to $ 2512000000 in 2016-17.
3.
Particulars
28-1-2017
30-01-2016
31-01-2015
Accounts Receivable
0
0
0
Accounts Payable
$ 10989000000
$ 11654000000
$ 11542000000
Company have zero account receivables because of cash sales but account payable has a balance of $ 10989000000 in 2016. This has lowered down from previous year level due to lower purchases and sales.
4.
The vast majority of Target's inventory is accounted for under the retail inventory accounting method (RIM) using the last-in, first-out (LIFO) method. Inventory is stated at the lower of LIFO cost or market.
Under RIM, inventory cost and the resulting gross margins are calculated by applying a cost-to-retail ratio to the inventory retail value. RIM is an averaging method that has been widely used in the retail industry due to its practicality. The use of RIM will result in inventory being valued at the lower of cost or market because permanent markdowns are taken as a reduction of the retail value of inventory.
The major benefit of using RIM is that it is the method approved by IRS for tax reporting and company don’t have to keep two methods of valuation for obtaining credit and tax purposes. Secondly it is very easy to implement.
5.
Company is planning to open 100 small stores and increase its sales per capita, they are also aiming for new markets and segments and it is expected that company will perform much better than their peers in long run.
Particulars
2017
2016
2015
Current Ratio
94%
112%
116%
Quick Ratio
29%
44%
46%
Cash Ratio
20%
32%
19%
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.