Assume that you are an existing shareholder 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.

A Financial Ratio Analysis of Target Corporation A Debt Management Assessment Assume that you are an existing shareholder 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. Income Statement 2010 2009 2008 Sales $65,786,000,000 $63,435,000,000 $62,884,000,000 Less: Cost of goods 45,725,000,000 44,062,000,000 44,157,000,000 sold Gross profit 20,061,000,000 19,373,000,000 18,727,000,000 Less: Selling, 13,469,000,000 13,078,000,000 12,954,000,000 general, and administrative expenses Less: Other expenses 860,000,000 1,521,000,000 1,609,000,000 Earnings before 5,252,000,000 4,673,000,000 4,402,000,000 interest and taxes (EBIT) Less: Interest 757,000,000 801,000,000 866,000,000 expense Earnings before taxes 4,495,000,000 3,872,000,000 3,536,000,000 (EBT) Less: Taxes 1,575,000,000 1,384,000,000 1,322,000,000 Net income $2,920,000,000 $2,488,000,000 $2,214,000,000 Less: Common 609,000,000 496,000,000 465,000,000 dividends paid Dividends per share $0.87 $0.67 $0.62 Balance Sheet Data Assets: 2010 2009 2008 Cash and marketable $1,712,000,000 $2,200,000,000 $864,000,000 securities Receivables 6,153,000,000 6,966,000,000 8,084,000,000 Inventory 7,596,000,000 7,179,000,000 6,705,000,000 Other current assets 1,752,000,000 2,079,000,000 1,835,000,000 Total current assets 17,213,000,000 18,424,000,000 17,488,000,000 Net fixed assets 25,493,000,000 25,280,000,000 25,756,000,000 Other long-term 999,000,000 829,000,000 862,000,000 assets Total assets $43,705,000,000 $44,533,000,000 $44,106,000,000 Liabilities and Equity: Accounts payable $6,625,000,000 $6,511,000,000 $6,337,000,000 Accruals 3,326,000,000 3,120,000,000 2,913,000,000 Other current 119,000,000 1,696,000,000 1,262,000,000 liabilities Total current 10,070,000,000 11,327,000,000 10,512,000,000 liabilities Long-term liabilities 18,148,000,000 17,859,000,000 19,882,000,000 Total debt 28,218,000,000 29,186,000,000 30,394,000,000 Common stock 59,000,000 62,000,000 63,000,000 Additional paid in 3,311,000,000 0 2,919,000,000 2,919,000,000 2,762,000,000 capital Retained earnings 12,117,000,000 12,366,000,000 10,887,000,000 Total equity 15,487,000,000 15,347,000,000 13,712,000,000 Total debt and equity $43,705,000,000 $44,533,000,000 $44,106,000,000 Other Relevant Data Common shares 704,038,218 744,644,454 752,712,464 outstanding Total dividends paid 609,000,000 496,000,000 465,000,000 Market price per $54.35 $51.27 $31.20 share Given Target's financial data, answer the questions that follow: What percentage of the company is currently financed by existing shareholders and bondholders? Can Target afford to service its debt obligations? To answer these questions, evaluate each debt management ratio and the trend of the component account balances. (Note: Round your answers to two decimal places.) 1. Over the period of 2008 to 2010, Target's use of debt capital, in dollar terms, decreased consistently from year to year, as did the company's debt ratio. increased To identify the accounts that contributed to these behaviors, consider the fluctuations in the asset and liability accounts over the three-year period. Therefore, from 2008 to 2010, the accounts that contributed to the previously identified change in the debt ratio include which of the following? Check all that apply. Other long-term assets, which changed by $137,000,000 Inventory, which changed by $891,000,000 Other current assets, which changed by $83,000,000 Cash and marketable securities, which changed by $848,000,000 Payables, which changed by $288,000,000 Receivables, which changed by $1,931,000,000 Long-term liabilities, which changed by $1,734,000,000 Accruals, which changed by $413,000,000 Net fixed assets, which changed by $263,000,000 Duvalier Other current liabilities, which changed by $1,143,000 equity multiplier debt ratio expenditure multiplier Davids 2. The reciprocal of the equity ratio , called the equity multiple , indicates the Rockefeller dollars of total assets financed per dollar of equity financing. This value is one component of the DuPont equation, which is used to disaggregate the company's return on equity (ROE) into three important drivers of financial performance: the company's sales-generating ability , asset utilization efficiency, and use of profitability tax-deductible expenses financial leverage Fill out the following table of Debt Management Ratios. (Note: Round all intermediate and final calculations to two decimal places.) Target Corporation Debt Management Ratios Debt ratio 2010 2009 2008 Equity ratio 2010 2009 2008 Equity multiplier 2010 2009 2008 TIE ratio 2010 2009 2008 The data indicates that as Target's debt ratio decreases, its equity multiplier decreases 3. Which of the following statements are correct? Check all that apply. increases The behavior of the debt ratio at least partially explains the observed behavior of Target's Accounts payable account between 2008 and 2010. One contributing factor to the observed behavior of the TIE ratio is the trend in Target's interest expense. The 37.66% increase in Target's EBIT, between 2008 and 2010, contributes to the observed behavior of the times-interest-earned (TIE) ratio. The behavior of the debt ratio at least partially explains the observed behavior of Target's Other Current liabilities account between 2008 and 2010. The behavior of the debt ratio at least partially explains the 7.16% reduction in the Total Debt account between 2008 and 2010. A Financial Ratio Analysis of Target Corporation A Debt Management Assessment Assume that you are an existing shareholder 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. Income Statement 2010 2009 2008 Sales $65,786,000,000 $63,435,000,000 $62,884,000,000 Less: Cost of goods 45,725,000,000 44,062,000,000 44,157,000,000 sold Gross profit 20,061,000,000 19,373,000,000 18,727,000,000 Less: Selling, 13,469,000,000 13,078,000,000 12,954,000,000 general, and administrative expenses Less: Other expenses 860,000,000 1,521,000,000 1,609,000,000 Earnings before 5,252,000,000 4,673,000,000 4,402,000,000 interest and taxes (EBIT) Less: Interest 757,000,000 801,000,000 866,000,000 expense Earnings before taxes 4,495,000,000 3,872,000,000 3,536,000,000 (EBT) Less: Taxes 1,575,000,000 1,384,000,000 1,322,000,000 Net income $2,920,000,000 $2,488,000,000 $2,214,000,000 Less: Common 609,000,000 496,000,000 465,000,000 dividends paid Dividends per share $0.87 $0.67 $0.62 Balance Sheet Data Assets: 2010 2009 2008 Cash and marketable $1,712,000,000 $2,200,000,000 $864,000,000 securities Receivables 6,153,000,000 6,966,000,000 8,084,000,000 Inventory 7,596,000,000 7,179,000,000 6,705,000,000 Other current assets 1,752,000,000 2,079,000,000 1,835,000,000 Total current assets 17,213,000,000 18,424,000,000 17,488,000,000 Net fixed assets 25,493,000,000 25,280,000,000 25,756,000,000 Other long-term 999,000,000 829,000,000 862,000,000 assets Total assets $43,705,000,000 $44,533,000,000 $44,106,000,000 Liabilities and Equity: Accounts payable $6,625,000,000 $6,511,000,000 $6,337,000,000 Accruals 3,326,000,000 3,120,000,000 2,913,000,000 Other current 119,000,000 1,696,000,000 1,262,000,000 liabilities Total current 10,070,000,000 11,327,000,000 10,512,000,000 liabilities Long-term liabilities 18,148,000,000 17,859,000,000 19,882,000,000 Total debt 28,218,000,000 29,186,000,000 30,394,000,000 Common stock 59,000,000 62,000,000 63,000,000 Additional paid in 3,311,000,000 0 2,919,000,000 2,919,000,000 2,762,000,000 capital Retained earnings 12,117,000,000 12,366,000,000 10,887,000,000 Total equity 15,487,000,000 15,347,000,000 13,712,000,000 Total debt and equity $43,705,000,000 $44,533,000,000 $44,106,000,000 Other Relevant Data Common shares 704,038,218 744,644,454 752,712,464 outstanding Total dividends paid 609,000,000 496,000,000 465,000,000 Market price per $54.35 $51.27 $31.20 share Given Target's financial data, answer the questions that follow: What percentage of the company is currently financed by existing shareholders and bondholders? Can Target afford to service its debt obligations? To answer these questions, evaluate each debt management ratio and the trend of the component account balances. (Note: Round your answers to two decimal places.) 1. Over the period of 2008 to 2010, Target's use of debt capital, in dollar terms, decreased consistently from year to year, as did the company's debt ratio. increased To identify the accounts that contributed to these behaviors, consider the fluctuations in the asset and liability accounts over the three-year period. Therefore, from 2008 to 2010, the accounts that contributed to the previously identified change in the debt ratio include which of the following? Check all that apply. Other long-term assets, which changed by $137,000,000 Inventory, which changed by $891,000,000 Other current assets, which changed by $83,000,000 Cash and marketable securities, which changed by $848,000,000 Payables, which changed by $288,000,000 Receivables, which changed by $1,931,000,000 Long-term liabilities, which changed by $1,734,000,000 Accruals, which changed by $413,000,000 Net fixed assets, which changed by $263,000,000 Duvalier Other current liabilities, which changed by $1,143,000 equity multiplier debt ratio expenditure multiplier Davids 2. The reciprocal of the equity ratio , called the equity multiple , indicates the Rockefeller dollars of total assets financed per dollar of equity financing. This value is one component of the DuPont equation, which is used to disaggregate the company's return on equity (ROE) into three important drivers of financial performance: the company's sales-generating ability , asset utilization efficiency, and use of profitability tax-deductible expenses financial leverage Fill out the following table of Debt Management Ratios. (Note: Round all intermediate and final calculations to two decimal places.) Target Corporation Debt Management Ratios Debt ratio 2010 2009 2008 Equity ratio 2010 2009 2008 Equity multiplier 2010 2009 2008 TIE ratio 2010 2009 2008 The data indicates that as Target's debt ratio decreases, its equity multiplier decreases 3. Which of the following statements are correct? Check all that apply. increases The behavior of the debt ratio at least partially explains the observed behavior of Target's Accounts payable account between 2008 and 2010. One contributing factor to the observed behavior of the TIE ratio is the trend in Target's interest expense. The 37.66% increase in Target's EBIT, between 2008 and 2010, contributes to the observed behavior of the times-interest-earned (TIE) ratio. The behavior of the debt ratio at least partially explains the observed behavior of Target's Other Current liabilities account between 2008 and 2010. The behavior of the debt ratio at least partially explains the 7.16% reduction in the Total Debt account between 2008 and 2010