Assume that you are an existing sharehoider of Target Corporation (TGT), a retailer of "everyday essentials and merchandise at discounted prices," and are interested in the company's historical and current financial activities and performance. financial data for Target to complete and conduct your financial ratio analysis. Then answer the questions that fo ratio analysis often identify issues requiring additional Investigation. Note: Assume that there are 365 days in a year, turnover ratio is computed by dividing its net sales by its ending inventory balance. Use the folowing low. Remember, the results of a and that Target's inventory Target Corporation Selected Income Statement, Balance Sheet, and Related Data Income Statement Sales Less: Cost of goods sold Gross profit 2010 2009 2008 $65,786,000,000 $63,435,000,000 $62,884,000,000 45,725,000,000 44,062,000,000 44,157,000,000 20,061,000,000 19,373,000,000 18,727,000,000 13,469,000,000 13,078,000,000 12,954,000,000 860,000,000 1,521,000,000 1,609,000,000 5,252,000,000 4,673,000,000 4,402,000,000 866,000,000 4,495,000,000 3,872,000,000 3,536,000,000 1,575,000,000 1,384,000,000 1,322,000,000 $2,920,000,000$2,488,000,000 $2,214,000,000 465,000,000 Less: Seling, 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 757,000,000 801,000,000 609,000,000 496,000,000 $0.67 $0.92 Given Target's financial data, answer the following questions: Given its current and projected future sales, does Target hold a reasonable quantity of current and fixed assets? How well is it managing its fixed assets and all its assets? To answer these questions, compute the listed asset management, or efficiency, ratios for 2008 through 2010 and evaluate each ratio and the trend of Given Target's financial data, answer the following questions: Given its current and projected future sales, does Target hold a reasonable quantity of current and fioxed assets? How well is it managing its fixed assets and all its assets? To answer these questions, mpute the listed asset management, or efficiency, ratios for 2008 through 2010 and evaluate each ratio and the trend of its component account balances 1. Which of the following statements addressing the use of asset management ratios, in general, and the inventory turnover and days sales outstanding (DSO) ratios, in particular, are correct? Target Corporation Asset Management Ratios The observed trend in Target's DSO ratio is consistent with either decreases in the firm's sales, increases in Its Accounts receivable account balance, or both. The trend of Target's DSO ratio suggests that over time it is collecting its receivables mone quickly In the absence of extraordinary events, the three-year trend of the inventory turnover ratio should be interpreted as unfavorable management performance In general, asset management ratios are designed to report the number of dollars of sales generated per dollar of investment made in the company's receivables, inventory, plant and equipment, or total assets. Inventory turnover ratio 2010 2009 2008 DSO 2010 2009 2008 Fixed asset turnover ratio 2. Which of the following behaviors could explain the trend in the inventory turnover ratio and therefore merit additional investigation? Check all that apply. 2010 2009 2008 The firm expanded an existing product line or developed a new product line. The purchasing manager placed orders with suppliers even when sales didn't justify them. one or more suppliers offered favorable prices for making bulk purchases. Total asset turnover ratio 3. Consider the trend of Target's osSO ratios, as well as the pattern of its Sales and Accounts receivable balances 2010 2009 2008 future economic conditions and preventing defaults and unrecoverable accounts receivable, then this finding could reflect favorably in your assessment of management's If Target is making fewer credit sales because management is concerned about If Target is making fewer credit sales because management is concerned about future economic conditions and preventing defaults and unrecoverable accounts receivable, then this finding could reflect favorably in your assessment of management's performance On the other hand, if credit sales are declining because sales associates in the company's stores are failing to encourage customers to open new Target credit cards, then this isn't a favorable behavior because the company may be earned interest income. opportunities for greater future sales and 4. Which statement addressing Target's fixed asset turnover ratios or its component accounts is correct? Q The reason why the fixed asset turnover ratio increases from 2009 to 2010 is that the Sales account increases by 0.84%, while the Net fixed asset account increases by only 3.71%. O The behavior of Target's fixed asset turnover ratios is consistent with the pattern of its Sales account balances and inconsistent with the trend of its Accounts receivable balances In general, a higher, rather than a lower, fixed asset turnover ratio will reflect practice of generating ever-greater sales dollars using the same stock of property, plant, and equipment can be taken to extreme. Which practice would increase a company's fixed asset turnover ratio to the detriment of the company's long-term viability and profitability? on management's performance. However, the O A company doesn't replace won-out plant and equipment and operates the remaining assets over additional work shifts. O A company cuts back on the downtime and maintenance and repair activities necessary to preserve the performance of the property and equipment 5. The trend of the total asset turnover ratio indicates that Target is moderately successful in generating sales dollars using its entire holding of assets. In general, it earns $1.42 to $1.51 of for every dollar of assets owned 6. Given these insigbts and information, which of the following statements are correct? Check all that apply Each year during the period of 2008 to 2010, Target's inventory turned over more slowly-primarily because its percentage growth in inventory exceeded is percentage growth in sales. D Target's accumulation of inventory merits additional investigation to ensure that it is not the result of obsolete, missing, or unsalable items An inventory that turns over 8.66 times per year, such as Target's 2010 inventory, will be sold and replaced, on average, every 42.15 days. In general, Target's management should prefer a small total asset turnover ratio to a larger ratio because it reflectsmore favorably on their The observed trend in the company's DSO and Accounts Receivable account also helps explain the pattern of its current ratio. Assume that you are an existing sharehoider of Target Corporation (TGT), a retailer of "everyday essentials and merchandise at discounted prices," and are interested in the company's historical and current financial activities and performance. financial data for Target to complete and conduct your financial ratio analysis. Then answer the questions that fo ratio analysis often identify issues requiring additional Investigation. Note: Assume that there are 365 days in a year, turnover ratio is computed by dividing its net sales by its ending inventory balance. Use the folowing low. Remember, the results of a and that Target's inventory Target Corporation Selected Income Statement, Balance Sheet, and Related Data Income Statement Sales Less: Cost of goods sold Gross profit 2010 2009 2008 $65,786,000,000 $63,435,000,000 $62,884,000,000 45,725,000,000 44,062,000,000 44,157,000,000 20,061,000,000 19,373,000,000 18,727,000,000 13,469,000,000 13,078,000,000 12,954,000,000 860,000,000 1,521,000,000 1,609,000,000 5,252,000,000 4,673,000,000 4,402,000,000 866,000,000 4,495,000,000 3,872,000,000 3,536,000,000 1,575,000,000 1,384,000,000 1,322,000,000 $2,920,000,000$2,488,000,000 $2,214,000,000 465,000,000 Less: Seling, 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 757,000,000 801,000,000 609,000,000 496,000,000 $0.67 $0.92 Given Target's financial data, answer the following questions: Given its current and projected future sales, does Target hold a reasonable quantity of current and fixed assets? How well is it managing its fixed assets and all its assets? To answer these questions, compute the listed asset management, or efficiency, ratios for 2008 through 2010 and evaluate each ratio and the trend of Given Target's financial data, answer the following questions: Given its current and projected future sales, does Target hold a reasonable quantity of current and fioxed assets? How well is it managing its fixed assets and all its assets? To answer these questions, mpute the listed asset management, or efficiency, ratios for 2008 through 2010 and evaluate each ratio and the trend of its component account balances 1. Which of the following statements addressing the use of asset management ratios, in general, and the inventory turnover and days sales outstanding (DSO) ratios, in particular, are correct? Target Corporation Asset Management Ratios The observed trend in Target's DSO ratio is consistent with either decreases in the firm's sales, increases in Its Accounts receivable account balance, or both. The trend of Target's DSO ratio suggests that over time it is collecting its receivables mone quickly In the absence of extraordinary events, the three-year trend of the inventory turnover ratio should be interpreted as unfavorable management performance In general, asset management ratios are designed to report the number of dollars of sales generated per dollar of investment made in the company's receivables, inventory, plant and equipment, or total assets. Inventory turnover ratio 2010 2009 2008 DSO 2010 2009 2008 Fixed asset turnover ratio 2. Which of the following behaviors could explain the trend in the inventory turnover ratio and therefore merit additional investigation? Check all that apply. 2010 2009 2008 The firm expanded an existing product line or developed a new product line. The purchasing manager placed orders with suppliers even when sales didn't justify them. one or more suppliers offered favorable prices for making bulk purchases. Total asset turnover ratio 3. Consider the trend of Target's osSO ratios, as well as the pattern of its Sales and Accounts receivable balances 2010 2009 2008 future economic conditions and preventing defaults and unrecoverable accounts receivable, then this finding could reflect favorably in your assessment of management's If Target is making fewer credit sales because management is concerned about If Target is making fewer credit sales because management is concerned about future economic conditions and preventing defaults and unrecoverable accounts receivable, then this finding could reflect favorably in your assessment of management's performance On the other hand, if credit sales are declining because sales associates in the company's stores are failing to encourage customers to open new Target credit cards, then this isn't a favorable behavior because the company may be earned interest income. opportunities for greater future sales and 4. Which statement addressing Target's fixed asset turnover ratios or its component accounts is correct? Q The reason why the fixed asset turnover ratio increases from 2009 to 2010 is that the Sales account increases by 0.84%, while the Net fixed asset account increases by only 3.71%. O The behavior of Target's fixed asset turnover ratios is consistent with the pattern of its Sales account balances and inconsistent with the trend of its Accounts receivable balances In general, a higher, rather than a lower, fixed asset turnover ratio will reflect practice of generating ever-greater sales dollars using the same stock of property, plant, and equipment can be taken to extreme. Which practice would increase a company's fixed asset turnover ratio to the detriment of the company's long-term viability and profitability? on management's performance. However, the O A company doesn't replace won-out plant and equipment and operates the remaining assets over additional work shifts. O A company cuts back on the downtime and maintenance and repair activities necessary to preserve the performance of the property and equipment 5. The trend of the total asset turnover ratio indicates that Target is moderately successful in generating sales dollars using its entire holding of assets. In general, it earns $1.42 to $1.51 of for every dollar of assets owned 6. Given these insigbts and information, which of the following statements are correct? Check all that apply Each year during the period of 2008 to 2010, Target's inventory turned over more slowly-primarily because its percentage growth in inventory exceeded is percentage growth in sales. D Target's accumulation of inventory merits additional investigation to ensure that it is not the result of obsolete, missing, or unsalable items An inventory that turns over 8.66 times per year, such as Target's 2010 inventory, will be sold and replaced, on average, every 42.15 days. In general, Target's management should prefer a small total asset turnover ratio to a larger ratio because it reflectsmore favorably on their The observed trend in the company's DSO and Accounts Receivable account also helps explain the pattern of its current ratio