Question
Balance sheets and income statements for Target Corporation follow. Income Statement For Fiscal Years Ended ($ millions) 2006 2005 2004 Sales $ 51,271 $ 45,682
Balance sheets and income statements for Target Corporation follow.
Income Statement | |||
---|---|---|---|
For Fiscal Years Ended ($ millions) | 2006 | 2005 | 2004 |
Sales | $ 51,271 | $ 45,682 | $ 40,928 |
Credit card revenues | 1,349 | 1,157 | 1,097 |
Total revenues | 52,620 | 46,839 | 42,025 |
Cost of sales | 34,927 | 31,445 | 28,389 |
Selling, general and administrative expenses | 11,185 | 9,797 | 8,657 |
Credit card expenses | 776 | 737 | 722 |
Depreciation and amortization | 1,409 | 1,259 | 1,098 |
Earnings before interest and income taxes | 4,323 | 3,601 | 3,159 |
Net interest expense | 463 | 570 | 556 |
Earnings before income taxes | 3,860 | 3,031 | 2,603 |
Provisions for income taxes | 1,452 | 1,146 | 984 |
Net earnings | $ 2,408 | $ 1,885 | $ 1,619 |
Balance Sheet | ||
---|---|---|
($ millions, except footnotes) | January 28, 2006 | January 29, 2005 |
Assets | ||
Cash and cash equivalents | $ 1,648 | $ 2,245 |
Credit card receivables | 5,666 | 5,069 |
Inventory | 5,838 | 5,384 |
Other current assets | 1,253 | 1,224 |
Total current assets | 14,405 | 13,922 |
Property and equipment | ||
Land | 4,449 | 3,804 |
Buildings and improvements | 14,174 | 12,518 |
Fixtures and equipment | 3,219 | 2,990 |
Computer hardware and software | 2,214 | 1,998 |
Construction-in-progress | 1,158 | 962 |
Accumulated depreciation | (6,176) | (5,412) |
Property and equipment, net | 19,038 | 16,860 |
Other noncurrent assets | 1,552 | 1,511 |
Total assets | $ 34,995 | $ 32,293 |
Liabilities and shareholders' investment | ||
Accounts payable | $ 6,268 | $ 5,779 |
Accrued and other current liabilities | 2,567 | 1,937 |
Current portion of long-term debt and notes payable | 753 | 504 |
Total current liabilities | 9,588 | 8,220 |
Long-term debt | 9,119 | 9,034 |
Deferred income taxes | 851 | 973 |
Other noncurrent liabilities | 1,232 | 1,037 |
Shareholders' investment | ||
Common stock | 73 | 74 |
Additional paid-in-capital | 2,121 | 1,810 |
Retained earnings | 12,013 | 11,148 |
Accumulated other comprehensive income (loss) | (2) | (3) |
Total shareholders' investment | 14,205 | 13,029 |
Total liabilities and shareholders' equity | $ 34,995 | $ 32,293 |
(a) Compute the following for Target Corporation. Hint: RNOA is 12.60% and NOPAT is $2,694. Rounding instructions: Do not round until your final answer. Round FLEV and NCI ratio four decimal places. Round Spread and NNEP two decimal places.) Remember to use negative signs in answers when appropriate. 2006 NNO (Net non-operating obligations) =Answer
($ millions) 2005 NNO (Net non-operating obligations) =Answer($ millions) 2006 NNE (Net non-operating expense) =Answer($ millions) 2006 NNEP (Net nonoperating expense percent) =Answer% 2006 FLEV =Answer 2006 Spread =Answer% (b) Assume that Target Corporation's return on equity (ROE) for 2006 is 17.68% and its return on net operating assets (RNOA) is 12.60%. Confirm computations to yield the relation: ROE = [RNOA + (FLEV X Spread)] X NCI ratio.HINT: NCI ratio = 1.0 (since there is no noncontrolling interest). 2006 ROE =Answer% = [Answer%+(Answer X Answer%)] X Answer
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