- Bad/indeterminate
- 48,674,246/8,068,010,40,606,236
- Increase/decrease
- Decreased/increased
- Decrease/increase
- Greater/less
- Common/preferred/common and preferred
- Total assetset income
- 24.25%/32.32%/44.67%
- 49.70%/38.79/50.91
6. An assessment of Target Corporation's market value ratios 9920000000 704038218 A Financial Ratio Analysis of Target Corporation An Assessment of Its Market Value Ratios Assume that you are an existing supplier 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 Targetto 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. Now consider Target's market value ratios. That is, how does the company's financial condition and performance relate to the observed market price of the company's shares? (Note: Round intermediate calculations to two decimal places.) Target Corporation Market Value Ratios Book value per share 2010 S 2009 S 2008 S EPS 2010 S 2009 S 2008 S P/E ratio 2010 2009 2008 M/B ratio 2010 2009 2008 1. From 2008 through 2010, Target's market capitalization increased. Specifically, it increased from $23,494,628,877 to $38,177,921,157 between 2008 and 2009 and to $38,254,477,148 in 2010. Which of the following statements are correct? Check all that apply. During the periods 2003 to 2009 and 2009 to 2010, the positive pressure from the increasing market prices was greater, or stronger than the offsetting, or negative, pressure from the decreased number of shares outstanding. During the periods 2008 to 2009 and 2009 to 2010, the market price of Target's common shares increased by 39.15% and 5.67%, respectively, During the periods 2008 to 2009 and 2009 to 2010, the number of common shares outstanding decreased by 1.07% and 5.45%, respectively. During the periods 2008 to 2009 and 2009 to 2010, the market price of Target's common shares increased by 54.33% and 6.01% respectively. These changes in the company's market capitalization should be construed as news and should be investigated further One reasonable question that should be asked is: For what reason were the shares, or approximately 6.47% of 2008's outstanding shares, repurchased during the period 2008 through 2010? Was it part of earlier planned program, or were they repurchased to reduce the supply of shares available in the equity market and thereby the market price of the shares? (Note: The answer to this question can be found, in part, by reading the company's annual reports.) 2. Similarly, from 2008 through 2010, the company's book value from year to year. In general, and assuming that everything else remains constant, this behavior should have tended to the company's market-to-book (M/B) ratio. However, over time, Target's M/B ratio had increased, which suggests that the percentage increase in the market price had been than the percentage increase in the company's book value. Because the denominator of both the market price per share and the book value per share ratios is the number of shares outstanding, the trend of the M/B ratio indicates which of the following? The market placed an increasing value on the portion of the company owned by the common shareholders. The market placed a decreasing value on the portion of the company owned by the common shareholders. The market placed an increasing value on the portion of the company owned by the creditors and debtholders. 3. Target's earnings per share (EPS) ratio, which is calculated by dividing its by the number of common shares outstanding, exhibited a consistently increasing trend, growing by between 2008 and 2009 and by between 2009 and 2010. 4. From 2008 through 2010, Target's price-to-earnings (P/E) ratio exhibited an inconsistent trend. Which of the following phenomena contributed to this pattern? Check all that apply. Between 2009 and 2010, the market price per share of Target's common stock increased by a greater percentage than that exhibited by co its EPS. Between 2008 and 2009, the market price per share of Target's common stock increased by a greater percentage than that exhibited by its EPS. Between 2008 and 2009, Target's EPS increased by a greater percentage than the market price of its common shares. Grade It Now Save & Continue Continue without saving 2008 2009 $63,435,000,000 1,922,000,000 44,062,000,000 $19,373,000,000 13,078,000,000 1,521,000,000 2,023,000,000 $4,673,000,000 801,000,000 $3,872,000,000 1,384,000,000 $2,488,000,000 $496,000,000 $62,884,000,000 2,064,000,000 44,157,000,000 $18,727,000,000 12,954,000,000 1,609,000,000 1,826,000,000 $4,402,000,000 866,000,000 $3,536,000,000 1,322,000,000 $2.214,000,000 $465,000,000 $0.62 50.67 2009 2008 Target Corporation Selected Income Statement, Balance Sheet, and Related Data Income Statement 2010 Sales $65,786,000,000 Credit card revenues 1,604,000,000 Less: Cost of goods sold 45,725,000,000 Gross profit $20,061,000,000 Less: Selling, general, and administrative expenses 13,469,000,000 Less: Other expenses 860,000,000 Less: Depreciation and amortization 2,084,000,000 Earnings before interest and taxes (EBIT) $5,252,000,000 Less: Interest expense 757,000,000 Earnings before taxes (EBT) $4,495,000,000 Less: Taxes 1,575,000,000 Net income $2,920,000,000 Less: Common dividends paid $609,000,000 Dividends per share $0.92 Balance Sheet Data Assets: 2010 Cash and marketable securities $1,712,000,000 Receivables 6,153,000,000 Inventory 7,596,000,000 Other current assets 1,752,000,000 Total current assets $17.213,000,000 Net fixed assets 25,493,000,000 Other long-term assets 999,000,000 Total assets $43,705,000,000 Liabilities and Equity: Accounts payable $6,625,000,000 Accruals 3,326,000,000 Other current liabilities 119,000,000 Total current liabilities $10,070,000,000 Long-term liabilities 18,148,000,000 Total debt $28,218,000,000 Common stock $59,000,000 Additional paid-in capital 3,311,000,000 Retained earnings 12,117,000,000 Total equity $15,487,000,000 Total debt and equity $43,705,000,000 Other Relevant Data Common shares outstanding 704,038,218 Total dividends paid $609,000,000 Market price per share $54.35 $2,200,000,000 6,966,000,000 7,179,000,000 2,079,000,000 $18,424,000,000 25,280,000,000 829,000,000 $44,533,000,000 5864,000,000 8,084,000,000 6,705,000,000 1,835,000,000 $17,488,000,000 25,756,000,000 862,000,000 $44,106,000,000 $6,511,000,000 3,120,000,000 1,696,000,000 $11,327,000,000 17,859,000,000 $29,186,000,000 $62,000,000 2,919,000,000 12,366,000,000 $15,347,000,000 $44,533,000,000 $6,337,000,000 2,913,000,000 1,262,000,000 $10,512,000,000 19,882,000,000 $30,394,000,000 $63,000,000 2,762,000,000 10,887,000,000 $13,712,000,000 $44,106,000,000 744,644,454 $496,000,000 $51.27 752,712,464 $465,000,000 $31.20
