Look again at Target’s 2010 financial statements contained in its 2010 annual report. For instructions on how to access the report online, see the Continuing Financial Statement Analysis Problem in Chapter 2. On page 33 of the annual report you’ll find Target’s income statement for the year ending January 29, 2011 (called the Consolidated Statement of Operations). On page 34 you’ll find Target’s balance sheet as of January 29, 2011 (called the Consolidated Statement of Financial Position). Now answer the following questions:
1. What makes up Target’s inventory? Look at footnote 11 of the financial statements (page 44 of the financial statements found in Target’s 2010 annual report). What inventory method (such as FIFO and LIFO) does Target use?
2. Look at Target’s balance sheet. How much has Target invested in inventory as of January 29, 2011, and January 30, 2010?
3. Look at Target’s balance sheet. How much inventory does Target have per store as of January 29, 2011, and January 30, 2010? (Divide total inventory by the number of stores Target operated in each of these years [1,750 at January 29, 2011, and 1,740 at January 30, 2010].) Is inventory per store increasing or decreasing?
4. Look at Target’s balance sheet and income statement. What is Target’s inventory turnover rate for the year ending January 29, 2011? What does this tell you?
5. Look at Target’s balance sheet and income statement. What is Target’s days-sales-in-inventory ratio for the year ending January 29, 2011? What does this tell you?
6. Looking back over your answers to questions 1 through 5, how do you think Target is performing?