Adjusting Financial Information Prior to Credit Analysis Target reports the following financial information in its form 10-K dated February 2, 2019. Note: Target had not yet adopted the new lease standard. $ millions Feb. 2, 2019 Feb. 3, 2018 Total liabilities $28,493 $27,219 Equity 11,297 11,651 Operating lease liabilities (not included on balance sheet) 2,062 1,968 EBIT* 4,137 4,283 Interest expense* 438 609 Operating lease interest included in selling, general, & admin (rent expense)* 79 75 *Adjusted for a 53rd week in year ended February 3, 2018 Required a. Compute Liabilities to equity and Times interest earned for both years. Note: Round your answers to two decimal places (for example, enter 7.65 for 7.645555). FY 2019 FY 2018 Liabilities to equity Answer Answer Times interest earned Answer Answer b. 1. Before calculating solvency ratios, credit rating agencies routinely adjust total liabilities by adding operating lease liabilities. Adjust Targets total liabilities and recalculate the liabilities to equity ratio. Note: Round your answers to two decimal places (for example, enter 7.65 for 7.645555). FY 2019 FY 2018 Liabilities to equity Answer Answer 2. Does the adjustment make a material difference in the ratio? Answer c. 1. Before calculating coverage ratios, credit rating agencies routinely adjust interest expense by adding operating lease interest. Adjust Targets interest expense and recalculate the times interest earned ratio. Note: Round your answers to two decimal places (for example, enter 7.65 for 7.645555). 2. Does the adjustment make a material difference in the ratio? Answer FY 2019 FY 2018 Times interest earned Answer Answer