DuPont Analysis A Perform the trend (time series) analysis of ROA (NI TA) for Target using data provided What can you say about the ROA Is it improving or worsening b Perform the trend (time series) analysis on profit margin and total asset turnover respectively using data provided Based on your calculations, does the change in ROA seem to be due to the change in profitability (i e profit margin) or asset utilization (i e total asset turnover) c How does Targets asset turnover and equity multiplier compare to its peer, Wal Mart Interpret the comparison results based on the definition of asset turnover and equity multiplier d Based on your trend (time series) analysis of Target and comparison to Wal Mart , in which area among profit margin, asset turnover and equity multiplier, should Target improve most to increase its ROE In your answer, show ROE decomposition of Target in the years e If the area you identified in part d, where most improvement is needed, is profit margin, use the profitability ratios and suggest a way to improve profit margin If the area where most improvement is needed is asset turnover ratio, use the asset management ratios listed in table and suggest a way to improve asset turnover If the area where most improvement is needed is equity multiplier, use the debt management ratios and evaluate whether Target can adjust equity multiplier to increase ROE f includes discussions of cautions or limitations in using financial statement information Note well that analysis based on financial statements can be purely quantitative and has limitations Identify those limitations and explain them g As an alternative to quantitative analysis (such as analysis required in parts a through e above,) a qualitative approach can be considered Some of the frequently used questions in this approach are given below For each question, explain how the question can supplement the quantitative analysis done in parts a through e Are Revenues tied to a single customer Are the companys revenues tied to a single product Does the company rely on a single supplier How much of the companies business is generated overseas How much competition does the firm face Is it necessary to for the company to continually invest in research and development Are changes in laws and regulations likely to have important implications for the firm h Based on your analysis in previous parts, would you invest in this company Why or why not Support your decision by referring back to your analysis in prior parts i Now calculate liquidity ratios and market value ratios Would you invest in this company Why or why not Support your decision by showing your analysis Table 1 TARGET CORP (TGT) CashFlowFlag INCOME STATEMENT Fiscal year ends in January USD in millions except per share data 2011 01 2012 01 2013 01 2014 01 2015 01 TTM Revenue 67390 69865 73301 72596 72618 73550 Cost of revenue 46585 48306 51035 51160 51278 51694 Gross profit 20805 21559 22266 21436 21340 21856 Operating expenses Sales, General and administrative 13469 14106 14914 15375 14676 14711 Other operating expenses 2084 2131 1981 1832 2129 2170 Total operating expenses 15553 16237 16895 17207 16805 16881 Operating income 5252 5322 5371 4229 4535 4975 Interest Expense 760 869 762 1126 Other income (expense) 3 3 882 602 Income before income taxes 4495 4456 4609 3103 3653 4373 Provision for income taxes 1575 1527 1610 1132 1204 1462 Net income from continuing operations 2920 2929 2999 1971 2449 2911 Net income from discontinuing ops 4085 3812 Net income 2920 2929 2999 1971 1636 901 Net income available to common shareholders 2920 2929 2999 1971 1636 901 Earnings per share Basic 4 03 4 31 4 57 3 1 2 58 1 41 Diluted 4 4 28 4 52 3 07 2 58 1 41 Weighted average shares outstanding Basic 724 679 657 635 635 637 Diluted 729 684 663 642 640 643 EBITDA 7339 7456 7513 6452 6664 7145 Table 2 TARGET CORP (TGT) CashFlowFlag BALANCE SHEET Fiscal year ends in January USD in millions except per share data 2011 01 2012 01 2013 01 2014 01 2015 01 Assets Current assets Cash Cash and cash equivalents 583 600 654 695 2210 Short term investments 1129 194 130 Total cash 1712 794 784 695 2210 Receivables 6153 5927 1347 1122 Inventories 7596 7918 7903 8766 8790 Deferred income taxes 177 188 Prepaid expenses 272 231 Other current assets 1752 1810 7701 316 1546 Total current assets 17213 16449 16388 11573 14087 Non current assets Property, plant and equipment Land 5928 6122 6206 6234 6127 Fixtures and equipment 4939 5141 7929 8347 7899 Other properties 26181 30268 29829 31199 27038 Property and equipment, at cost 37048 41531 43964 45780 41064 Accumulated Depreciation 11555 12382 13311 14402 15106 Property, plant and equipment, net 25493 29149 30653 31378 25958 Equity and other investments 305 322 Goodwill 151 147 Intangible assets 206 155 Deferred income taxes 469 Other long term assets 999 1032 1122 471 735 Total non current assets 26492 30181 31775 32980 27317 Total assets 43705 46630 48163 44553 41404 Liabilities and stockholders' equity Liabilities Current liabilities Short term debt 119 3036 2994 1160 91 Accounts payable 6625 6857 7056 7683 7759 Taxes payable 804 896 890 576 Accrued liabilities 3326 1386 2853 2772 1504 Other current liabilities 2204 232 272 1806 Total current liabilities 10070 14287 14031 12777 11736 Non current liabilities Long term debt 15607 13447 14654 12622 12705 Deferred taxes liabilities 934 1191 1311 1433 1321 Pensions and other benefits 115 151 Other long term liabilities 1607 1884 1609 1375 1494 Total non current liabilities 18148 16522 17574 15545 15671 Total liabilities 28218 30809 31605 28322 27407 Stockholders' equity Common stock 56 54 53 53 Additional paid in capital 3311 3487 3925 4470 4899 Retained earnings 12698 12959 13155 12599 9644 Accumulated other comprehensive income 522 681 576 891 599 Total stockholders' equity 15487 15821 16558 16231 13997 Total liabilities and stockholders' equity 43705 46630 48163 44553 41404 table 1 WAL MART STORES INC (WMT) CashFlowFlag INCOME STATEMENT Fiscal year ends in January USD in millions except per share data 2011 01 2012 01 2013 01 2014 01 2015 01 TTM Revenue 421849 446950 469162 476294 485651 485517 Cost of revenue 315287 335127 352488 358069 365086 364855 Gross profit 106562 111823 116674 118225 120565 120662 Operating expenses Sales, General and administrative 81020 85265 88873 91353 93418 94028 Total operating expenses 81020 85265 88873 91353 93418 94028 Operating income 25542 26558 27801 26872 27147 26634 Interest Expense 2205 2322 2251 2335 2461 2712 Other income (expense) 201 162 187 119 113 108 Income before income taxes 23538 24398 25737 24656 24799 24030 Provision for income taxes 7579 7944 7981 8105 7985 7644 Minority interest 604 688 757 673 736 545 Other income 604 688 757 673 736 545 Net income from continuing operations 15959 16454 17756 16551 16814 16386 Net income from discontinuing ops 1034 67 144 285 270 Other 604 688 757 673 736 545 Net income 16389 15699 16999 16022 16363 16111 Net income available to common shareholders 16389 15699 16999 16022 16363 16111 Earnings per share Basic 4 48 4 54 5 04 4 9 5 07 4 99 Diluted 4 47 4 52 5 02 4 88 5 05 4 97 Weighted average shares outstanding Basic 3656 3460 3374 3269 3230 3230 Diluted 3670 3474 3389 3283 3243 3242 EBITDA 33384 34850 36489 35861 36433 35984 Table 2 WAL MART STORES INC (WMT) CashFlowFlag BALANCE SHEET Fiscal year ends in January USD in millions except per share data 2011 01 2012 01 2013 01 2014 01 2015 01 Assets Current assets NI Sales Sales TA TA TE NI TA NI TE Cash WalMart PM AT EM ROA ROE Cash and cash equivalents 7395 6550 7781 7281 9135 2011 0 03885 2 335005 2 6358 0 090716 0 239109 Total cash 7395 6550 7781 7281 9135 2012 0 035125 2 310942 2 711996 0 081171 0 220136 Receivables 5089 5937 6768 6677 6778 2013 0 036233 2 309948 2 660427 0 083696 0 222666 Inventories 36318 40714 43803 44858 45141 2014 0 033639 2 326211 2 685083 0 078251 0 210111 Prepaid expenses 2960 1685 1588 1909 2224 2015 0 033693 2 384078 2 502715 0 080327 0 201034 Other current assets 131 89 460 AVG 0 035508 2 333237 2 639204 0 082832 0 218611 Total current assets 51893 54975 59940 61185 63278 Costco AVG 0 017612 3 426327 2 420836 0 060393 0 147179 Non current assets Property, plant and equipment Land 24386 23499 25612 26184 26261 Fixtures and equipment 40885 41916 43699 45756 47851 Other properties 89218 95523 102413 106738 108522 Property and equipment, at cost 154489 160938 171724 178678 182634 Accumulated Depreciation 46611 48614 55043 60771 65979 Property, plant and equipment, net 107878 112324 116681 117907 116655 Goodwill 16763 20651 20497 19510 18102 Other long term assets 4129 5456 5987 6149 5671 Total non current assets 128770 138431 143165 143566 140428 Total assets 180663 193406 203105 204751 203706 Liabilities and stockholders' equity Liabilities Current liabilities Short term debt 5686 6022 12392 11773 6402 Capital leases 336 326 327 309 287 Accounts payable 33557 36608 38080 37415 38410 Taxes payable 157 1164 5062 3520 3613 Accrued liabilities 18701 18154 15957 16239 16560 Other current liabilities 47 26 89 Total current liabilities 58484 62300 71818 69345 65272 Non current liabilities Long term debt 40692 44070 38394 41771 41086 Capital leases 3150 3009 3023 2788 2606 Deferred taxes liabilities 6682 7862 7613 8017 8805 Minority interest 2705 4446 5395 5084 4543 Other long term liabilities 408 404 519 1491 Total non current liabilities 53637 59791 54944 59151 57040 Total liabilities 112121 122091 126762 128496 122312 Stockholders' equity Common stock 342 332 323 323 Additional paid in capital 3577 3692 3620 2362 2462 Retained earnings 63967 68691 72978 76566 85777 Accumulated other comprehensive income 998 1410 587 2996 7168 Total stockholders' equity 68542 71315 76343 76255 81394 Total liabilities and stockholders' equity 180663 193406 203105 204751 203706

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DuPont Analysis .A. Perform the trend (time series) analysis of ROA (NI/TA) for Target using data provided. What can you say about the ROA? Is

DuPont Analysis

.A. Perform the trend (time series) analysis of ROA (NI/TA) for Target using data provided. What can you say about the ROA? Is it improving or worsening?

b. Perform the trend (time series) analysis on profit margin and total asset turnover respectively using data provided. Based on your calculations, does the change in ROA seem to be due to the change in profitability (i.e. profit margin) or asset utilization (i.e. total asset turnover)?

c. How does Targets asset turnover and equity multiplier compare to its peer, Wal-Mart? Interpret the comparison results based on the definition of asset turnover and equity multiplier.

d. Based on your trend (time series) analysis of Target and comparison to Wal-Mart, in which area among profit margin, asset turnover and equity multiplier, should Target improve most to increase its ROE? In your answer, show ROE decomposition of Target in the years.

e. If the area you identified in part d, where most improvement is needed, is profit margin, use the profitability ratios and suggest a way to improve profit margin. If the area where most improvement is needed is asset turnover ratio, use the asset management ratios listed in table and suggest a way to improve asset turnover. If the area where most improvement is needed is equity multiplier, use the debt management ratios and evaluate whether Target can adjust equity multiplier to increase ROE.

f. includes discussions of cautions or limitations in using financial statement information. Note well that analysis based on financial statements can be purely quantitative and has limitations. Identify those limitations and explain them.

g. As an alternative to quantitative analysis (such as analysis required in parts a through e above,) a qualitative approach can be considered. Some of the frequently used questions in this approach are given below. For each question, explain how the question can supplement the quantitative analysis done in parts a through e.

Are Revenues tied to a single customer?

Are the companys revenues tied to a single product?

Does the company rely on a single supplier?

How much of the companies business is generated overseas?

How much competition does the firm face?

Is it necessary to for the company to continually invest in research and development?

Are changes in laws and regulations likely to have important implications for the firm?

h. Based on your analysis in previous parts, would you invest in this company? Why or why not? Support your decision by referring back to your analysis in prior parts.

i. Now calculate liquidity ratios and market value ratios. Would you invest in this company? Why or why not? Support your decision by showing your analysis.

Table 1

TARGET CORP (TGT) CashFlowFlag INCOME STATEMENT
Fiscal year ends in January. USD in millions except per share data.	2011-01	2012-01	2013-01	2014-01	2015-01	TTM
Revenue	67390	69865	73301	72596	72618	73550
Cost of revenue	46585	48306	51035	51160	51278	51694
Gross profit	20805	21559	22266	21436	21340	21856
Operating expenses
Sales, General and administrative	13469	14106	14914	15375	14676	14711
Other operating expenses	2084	2131	1981	1832	2129	2170
Total operating expenses	15553	16237	16895	17207	16805	16881
Operating income	5252	5322	5371	4229	4535	4975
Interest Expense	760	869	762	1126
Other income (expense)	3	3			-882	-602
Income before income taxes	4495	4456	4609	3103	3653	4373
Provision for income taxes	1575	1527	1610	1132	1204	1462
Net income from continuing operations	2920	2929	2999	1971	2449	2911
Net income from discontinuing ops					-4085	-3812
Net income	2920	2929	2999	1971	-1636	-901
Net income available to common shareholders	2920	2929	2999	1971	-1636	-901
Earnings per share
Basic	4.03	4.31	4.57	3.1	-2.58	-1.41
Diluted	4	4.28	4.52	3.07	-2.58	-1.41
Weighted average shares outstanding
Basic	724	679	657	635	635	637
Diluted	729	684	663	642	640	643
EBITDA	7339	7456	7513	6452	6664	7145

Table 2

TARGET CORP (TGT) CashFlowFlag BALANCE SHEET
Fiscal year ends in January. USD in millions except per share data.	2011-01	2012-01	2013-01	2014-01	2015-01
Assets
Current assets
Cash
Cash and cash equivalents	583	600	654	695	2210
Short-term investments	1129	194	130
Total cash	1712	794	784	695	2210
Receivables	6153	5927		1347	1122
Inventories	7596	7918	7903	8766	8790
Deferred income taxes				177	188
Prepaid expenses				272	231
Other current assets	1752	1810	7701	316	1546
Total current assets	17213	16449	16388	11573	14087
Non-current assets
Property, plant and equipment
Land	5928	6122	6206	6234	6127
Fixtures and equipment	4939	5141	7929	8347	7899
Other properties	26181	30268	29829	31199	27038
Property and equipment, at cost	37048	41531	43964	45780	41064
Accumulated Depreciation	-11555	-12382	-13311	-14402	-15106
Property, plant and equipment, net	25493	29149	30653	31378	25958
Equity and other investments				305	322
Goodwill				151	147
Intangible assets				206	155
Deferred income taxes				469
Other long-term assets	999	1032	1122	471	735
Total non-current assets	26492	30181	31775	32980	27317
Total assets	43705	46630	48163	44553	41404
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt	119	3036	2994	1160	91
Accounts payable	6625	6857	7056	7683	7759
Taxes payable		804	896	890	576
Accrued liabilities	3326	1386	2853	2772	1504
Other current liabilities		2204	232	272	1806
Total current liabilities	10070	14287	14031	12777	11736
Non-current liabilities
Long-term debt	15607	13447	14654	12622	12705
Deferred taxes liabilities	934	1191	1311	1433	1321
Pensions and other benefits				115	151
Other long-term liabilities	1607	1884	1609	1375	1494
Total non-current liabilities	18148	16522	17574	15545	15671
Total liabilities	28218	30809	31605	28322	27407
Stockholders' equity
Common stock		56	54	53	53
Additional paid-in capital	3311	3487	3925	4470	4899
Retained earnings	12698	12959	13155	12599	9644
Accumulated other comprehensive income	-522	-681	-576	-891	-599
Total stockholders' equity	15487	15821	16558	16231	13997
Total liabilities and stockholders' equity	43705	46630	48163	44553	41404

table 1

WAL-MART STORES INC (WMT) CashFlowFlag INCOME STATEMENT
Fiscal year ends in January. USD in millions except per share data.	2011-01	2012-01	2013-01	2014-01	2015-01	TTM
Revenue	421849	446950	469162	476294	485651	485517
Cost of revenue	315287	335127	352488	358069	365086	364855
Gross profit	106562	111823	116674	118225	120565	120662
Operating expenses
Sales, General and administrative	81020	85265	88873	91353	93418	94028
Total operating expenses	81020	85265	88873	91353	93418	94028
Operating income	25542	26558	27801	26872	27147	26634
Interest Expense	2205	2322	2251	2335	2461	2712
Other income (expense)	201	162	187	119	113	108
Income before income taxes	23538	24398	25737	24656	24799	24030
Provision for income taxes	7579	7944	7981	8105	7985	7644
Minority interest	604	688	757	673	736	545
Other income	604	688	757	673	736	545
Net income from continuing operations	15959	16454	17756	16551	16814	16386
Net income from discontinuing ops	1034	-67		144	285	270
Other	-604	-688	-757	-673	-736	-545
Net income	16389	15699	16999	16022	16363	16111
Net income available to common shareholders	16389	15699	16999	16022	16363	16111
Earnings per share
Basic	4.48	4.54	5.04	4.9	5.07	4.99
Diluted	4.47	4.52	5.02	4.88	5.05	4.97
Weighted average shares outstanding
Basic	3656	3460	3374	3269	3230	3230
Diluted	3670	3474	3389	3283	3243	3242
EBITDA	33384	34850	36489	35861	36433	35984

Table 2

WAL-MART STORES INC (WMT) CashFlowFlag BALANCE SHEET
Fiscal year ends in January. USD in millions except per share data.	2011-01	2012-01	2013-01	2014-01	2015-01
Assets
Current assets							NI/Sales	Sales/TA	TA/TE	NI/TA	NI/TE
Cash						WalMart	PM	AT	EM	ROA	ROE
Cash and cash equivalents	7395	6550	7781	7281	9135	2011	0.03885	2.335005	2.6358	0.090716	0.239109
Total cash	7395	6550	7781	7281	9135	2012	0.035125	2.310942	2.711996	0.081171	0.220136
Receivables	5089	5937	6768	6677	6778	2013	0.036233	2.309948	2.660427	0.083696	0.222666
Inventories	36318	40714	43803	44858	45141	2014	0.033639	2.326211	2.685083	0.078251	0.210111
Prepaid expenses	2960	1685	1588	1909	2224	2015	0.033693	2.384078	2.502715	0.080327	0.201034
Other current assets	131	89		460		AVG	0.035508	2.333237	2.639204	0.082832	0.218611
Total current assets	51893	54975	59940	61185	63278	Costco AVG	0.017612	3.426327	2.420836	0.060393	0.147179
Non-current assets
Property, plant and equipment
Land	24386	23499	25612	26184	26261
Fixtures and equipment	40885	41916	43699	45756	47851
Other properties	89218	95523	102413	106738	108522
Property and equipment, at cost	154489	160938	171724	178678	182634
Accumulated Depreciation	-46611	-48614	-55043	-60771	-65979
Property, plant and equipment, net	107878	112324	116681	117907	116655
Goodwill	16763	20651	20497	19510	18102
Other long-term assets	4129	5456	5987	6149	5671
Total non-current assets	128770	138431	143165	143566	140428
Total assets	180663	193406	203105	204751	203706
Liabilities and stockholders' equity
Liabilities
Current liabilities
Short-term debt	5686	6022	12392	11773	6402
Capital leases	336	326	327	309	287
Accounts payable	33557	36608	38080	37415	38410
Taxes payable	157	1164	5062	3520	3613
Accrued liabilities	18701	18154	15957	16239	16560
Other current liabilities	47	26		89
Total current liabilities	58484	62300	71818	69345	65272
Non-current liabilities
Long-term debt	40692	44070	38394	41771	41086
Capital leases	3150	3009	3023	2788	2606
Deferred taxes liabilities	6682	7862	7613	8017	8805
Minority interest	2705	4446	5395	5084	4543
Other long-term liabilities	408	404	519	1491
Total non-current liabilities	53637	59791	54944	59151	57040
Total liabilities	112121	122091	126762	128496	122312
Stockholders' equity
Common stock		342	332	323	323
Additional paid-in capital	3577	3692	3620	2362	2462
Retained earnings	63967	68691	72978	76566	85777
Accumulated other comprehensive income	998	-1410	-587	-2996	-7168
Total stockholders' equity	68542	71315	76343	76255	81394
Total liabilities and stockholders' equity	180663	193406	203105	204751	203706