A Financial Ratio Analysis of Target Corporation A Liquidity Assessment 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 nvestigation Target Corporation Selected Income Statement, Balance Sheet, and Related Data1 Income Statement Sales Less: Cost of goods sold Gross profit Less: Selling, general, and administrative expenses Less: Other expenses Earnings before interest and taxes (EBIT) Less: Interest expense Earnings before taxes (EBT) Less: Taxes Net income Less: Common dividends paid Dividends per share 2008 $65,786,000,000 $63,435,000,000 $62,884,000,000 44,157,000,000 20,061,000,000 19,373,000,000 18,727,000,000 13,469,000,000 13,078,000,000 12,954,000,000 1,609,000,000 4,402,000,000 866,000,000 3,536,000,000 1,322,000,000 $2,920,000,000 $2,488,000,000 $2,214,000,000 465,000,000 $0.62 2010 2009 45,725,000,000 44,062,000,000 860,000,000 5,252,000,000 757,000,000 4,495,000,000 1,575,000,000 1,521,000,000 4,673,000,000 801,000,000 3,872,000,000 1,384,000,000 609,000,000 $0.92 496,000,000 $0.67 Given Target's financial data, answer the following questions: Does Target have sufficient liquid assets on hand to fulfill those financial obligations that are expected to become due within the next year? Target Corporation Liquidity Ratios 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: Current ratio 2010 2009 2008 Quick ratio 2010 2009 2008 1. Which of the following statements are correct? Check all that apply The ratio data for Target indicate that over the period of 2008-2010, its current ratios have exhibited an increasing trend, while the trend for the quick ratios is decreasing Target's sales are consistently decreasing, but its receivables are increasing and its inventory balances are decreasing Target's sales are consistently increasing, but its receivables are decreasing and its inventory balances are increasing 2. Which of the following statements are correct? Check all that apply Target's current ratio suggests that it has sufficient liquid assets to pay its current obligations, but its quick ratio indicates that much of this apparent liquidity is illusory-and attributable to increases in its inventory holdings. Target's inventory is probably relatively illiquid, and should not be counted on to pay immediately due bills. Target's inventory holdings are decreasing, which helps explain why the company's current ratio is increasing over time while its quick ratio is simultaneously decreasing Among the behaviors that should be investigated further are the reasons behind the trends in the amounts of the accounts receivable and inventory held The current ratio data suggests that during the period of 2008 to 2010, Target has more than $1.65 of current assets available to repay a dollar's worth of outstanding accounts payable. It would appear that Target is becoming less liquid when relying solely on its holdings of cash, marketable securities, and receivables but more liquid when relying on its entire holdings of current assets. This implies that Target's inventory holdings are increasing. The next step should be to determine if the firm's inventory levels are appropriate for the corresponding level of sales or if any operational changes have been made that would explain the inventory buildup A Financial Ratio Analysis of Target Corporation A Liquidity Assessment 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 nvestigation Target Corporation Selected Income Statement, Balance Sheet, and Related Data1 Income Statement Sales Less: Cost of goods sold Gross profit Less: Selling, general, and administrative expenses Less: Other expenses Earnings before interest and taxes (EBIT) Less: Interest expense Earnings before taxes (EBT) Less: Taxes Net income Less: Common dividends paid Dividends per share 2008 $65,786,000,000 $63,435,000,000 $62,884,000,000 44,157,000,000 20,061,000,000 19,373,000,000 18,727,000,000 13,469,000,000 13,078,000,000 12,954,000,000 1,609,000,000 4,402,000,000 866,000,000 3,536,000,000 1,322,000,000 $2,920,000,000 $2,488,000,000 $2,214,000,000 465,000,000 $0.62 2010 2009 45,725,000,000 44,062,000,000 860,000,000 5,252,000,000 757,000,000 4,495,000,000 1,575,000,000 1,521,000,000 4,673,000,000 801,000,000 3,872,000,000 1,384,000,000 609,000,000 $0.92 496,000,000 $0.67 Given Target's financial data, answer the following questions: Does Target have sufficient liquid assets on hand to fulfill those financial obligations that are expected to become due within the next year? Target Corporation Liquidity Ratios 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: Current ratio 2010 2009 2008 Quick ratio 2010 2009 2008 1. Which of the following statements are correct? Check all that apply The ratio data for Target indicate that over the period of 2008-2010, its current ratios have exhibited an increasing trend, while the trend for the quick ratios is decreasing Target's sales are consistently decreasing, but its receivables are increasing and its inventory balances are decreasing Target's sales are consistently increasing, but its receivables are decreasing and its inventory balances are increasing 2. Which of the following statements are correct? Check all that apply Target's current ratio suggests that it has sufficient liquid assets to pay its current obligations, but its quick ratio indicates that much of this apparent liquidity is illusory-and attributable to increases in its inventory holdings. Target's inventory is probably relatively illiquid, and should not be counted on to pay immediately due bills. Target's inventory holdings are decreasing, which helps explain why the company's current ratio is increasing over time while its quick ratio is simultaneously decreasing Among the behaviors that should be investigated further are the reasons behind the trends in the amounts of the accounts receivable and inventory held The current ratio data suggests that during the period of 2008 to 2010, Target has more than $1.65 of current assets available to repay a dollar's worth of outstanding accounts payable. It would appear that Target is becoming less liquid when relying solely on its holdings of cash, marketable securities, and receivables but more liquid when relying on its entire holdings of current assets. This implies that Target's inventory holdings are increasing. The next step should be to determine if the firm's inventory levels are appropriate for the corresponding level of sales or if any operational changes have been made that would explain the inventory buildup