2009 2008 $63,435,000,000 44,062,000,000 19,373,000,000 13,078,000,000 1,521,000,000 4,673,000,000 801,000,000 3,872,000,000 1,384,000,000 $2,488,000,000 496,000,000 $0.67 $62,884,000,000 44,157,000,000 18,727,000,000 12,954,000,000 1,609,000,000 4,402,000,000 866,000,000 3,536,000,000 1,322,000,000 $2,214,000,000 465,000,000 $0.62 Target Corporation Selected Income Statement, Balance Sheet, and Related Data- Income Statement 2010 Sales $65,786,000,000 Less: Cost of goods sold 45,725,000,000 Gross profit 20,061,000,000 Less: Selling, general, and administrative expenses 13,469,000,000 Less: Other expenses 860,000,000 Earnings before interest and taxes (EBIT) 5,252,000,000 Less: Interest expense 757,000,000 Earnings before taxes (EBT) 4,495,000,000 Less: Taxes 1,575,000,000 Net income $2,920,000,000 Less: Common dividends paid 609,000,000 Dividends per share $0.92 Balance Sheet Data Assets: 2010 Cash and marketable securities $1,712,000,000 Receivables 6,153,000,000 Inventory 7,596,000,000 Other current assets 1,752,000,000 Total current assets 17,213,000,000 Net fixed assets 25,493,000,000 Other long-term assets 999,000,000 Total assets $43,705,000,000 Liabilities and Equity: Accounts payable $6,625,000,000 Accruals 3,326,000,000 Other current liabilities 119,000,000 Total current liabilities 10,070,000,000 Long-term liabilities 18,148,000,000 Total debt 28,218,000,000 2009 2008 $2,200,000,000 6,966,000,000 7,179,000,000 2,079,000,000 18,424,000,000 25,280,000,000 829,000,000 $44,533,000,000 $864,000,000 8,084,000,000 6,705,000,000 1,835,000,000 17,488,000,000 25,756,000,000 862,000,000 $44,106,000,000 $6,511,000,000 3,120,000,000 1,696,000,000 11,327,000,000 17,859,000,000 29,186,000,000 $6,337,000,000 2,913,000,000 1,262,000,000 10,512,000,000 19,882,000,000 30,394,000,000 Common stock Additional paid-in capital Retained earnings Total equity Total debt and equity Other Relevant Data Common shares outstanding Total dividends paid Market price per share 59,000,000 3,311,000,000 12,117,000,000 15,487,000,000 $43,705,000,000 62,000,000 2,919,000,000 12,366,000,000 15,347,000,000 $44,533,000,000 63,000,000 2,762,000,000 10,887,000,000 13,712,000,000 $44,106,000,000 704,038,218 609,000,000 $54.35 744,644,454 496,000,000 $51.27 752,712,464 465,000,000 $31.20 Assume that you are a prospective lending bank of Target Corporation (TGT), a retailer of "everyday essentials and fashionable, differentiated merchandise at discounted prices," and are interested in the company's historical and current financial activities and performance. Use the following financial data for Target to complete and conduct your financial ratio analysis. Then answer the questions that follow. Remember, the results of a ratio analysis often identify issues requiring additional investigation. Compute the current and quick ratios for 2008 through 2010 and evaluate the behavior of the ratios and the related accounts in Target's financial statements. (Note: Round all intermediate and final calculations to two decimal places.) Target Corporation Liquidity Ratios Current ratio 2010 2009 2008 Quick ratio 2010 2009 2008 1. Which of the following statements are correct? Check all that apply. Target's sales are consistently decreasing, but its receivables are increasing and its inventory balances are decreasing. In general, creditors will prefer high current and quick ratios to low current and quick ratios. The cash and marketable securities and other current asset balances exhibit a mixed or variable pattern, increasing between 2008 and 2009 and decreasing between 2009 and 2010. 2. Which of the following statements are correct? Check all that apply. The quick ratio is the more rigorous test of Target's liquidity, compared to the current ratio. Therefore, it is reasonable to conclude that Target does not have a dollar's worth of immediately available current assets available to repay a dollar's worth of current liabilities that are due immediately. Although they should not be interpreted in isolation, it is reasonable to conclude that unfavorable liquidity ratios will tend to increase the market price of Target's shares, all other considerations remaining constant. The quick ratio data suggest that in 2008 and 2009 Target had less than a dollar's worth of current assets available to repay a dollar's worth of outstanding accounts payable. Among the factors decreasing Target's quick ratios are the year-to-year increases in the firm's inventory holdings and decreases in accounts receivable. The three-year trend of Target's current ratios can be explained by its increasing cash and other current asset balances and decreasing other current liability balances