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 companys 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 Targets financial statements. (Note: Round all intermediate and final calculations to two decimal places.)

Target Corporation \begin{tabular}{cc} \hline \multicolumn{2}{c}{ Liquidity Ratios } \\ \hline Current ratio \\ 2010 & \\ 2009 & \\ 2008 & \end{tabular} Quick ratio 201020092008 Target Corporation Selected Income Statement, Balance Sheet, and Related Data 1 Liabilities and Equity: Liabilities and Equity: 1. Which of the following statements are correct? Check all that apply. 2009 and decreasing between 2009 and 2010. In general, creditors will prefer high current and quick ratios to low current and quick ratios. Target's sales are consistently decreasing, but its receivables are increasing and its inventory balances are decreasing. 2. Which of the following statements are correct? Check all that apply. 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. Target's current increasing ratio is as much a result of its increasing current assets as it is the result of its decreasing current liabilities balances. 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