Here is the requirement:
- Section 1. Accounting Treatment (18 points)
For this section, analyze and explain in detail the accounting treatment of the following areas for Target using the most recent annual report and disclosures.
- Fixed Assets
- Intangible Assets
- Liabilities (long term and short)
- Section 2. Trend Analysis (18 points)
- Using the vertical analysis of the income statements, identify the significant trends
- Using the vertical analysis of the balance sheets, identify the significant trends
- Using the horizontal analysis of the income statements, identify the significant trends
- Using the horizontal analysis of the balance sheets, identify the significant trends
- Section 3. Ratio Trend Analysis (18 points)
- Using the ratio analysis, identify the trends in ratios between the last two years as well as compare to the industry information accessed from the IBIS database.
- Also analyze ratios and figures based on the disclosures in the annual report as evidence to the noticeable trends
- Section 4. Budgeting Analysis (18 points)
- Compare actual amounts from last year to the budget you have created for sales. Give an analysis on if Target exceeded budgeted sales. If so, explain the contributing factors for this. If sales did not exceed what was budgeted, explain the contributing factors.
- Compare actual amounts from last year to the budget you have created for expenses. Give an analysis on if Target exceeded budgeted expenses. If so, explain the contributing factors for this. If expenses did not exceed what was budgeted, explain the contributing factors.
Here are the figures:
% FY 2019 100.00% 78,112 % 100.00% 70.24% 29.76% 20.78% Vertical Analysis - Income Statement Target Corporation INSTRUCTIONS: Change to the year of the report you are analyzing. You may have to insert additional rows based on the actual Target Consolidated statement. FY 2020 Sales (use total revenue) $ 96,561 Cost of sales 66,177 Gross margin $30,384 Selling, general, and administrative expenses 18,615 Depreciation and amortization 2,230 Earnings from continuing operations before interest and taxes (or Operating Income) $ 9,539 Net interest expense (+Net other (income) / expense) $ 993 Earnings from continuing operations before income taxes $ 8,546 Provision for income taxes $ 1,178 Net earnings from continuing operations $ 7,368 Discontinued operations, net of tax Net earnings/(loss) $ 7,368 3.02% 5.96% 0.685338801 54,864 0.314661199 $ 23,248 0.192779694 16,233 0.02309421 2,357 0.098787295 $ 4,658 0.010283655$ 468 0.08850364 $ 4,190 0.012199542 $ 921 0.076304098 $ 3,269 0 $ 12 0.076304098 $ 3,281 0.60% 5.36% 1.18% 4.19% 0.02% 4.20% % 6,02% 21.02% 3.12% 30.16% Vertical Analysis - Balance Sheets Target Corporation INSTRUCTIONS: Change the year of the report you are analyzing. You may have to insert additional rows based on the actual Target Consolidated statement. FY 2020 % FY 2019 ASSETS Cash and cash equivalents 8,511 0.166075$ 2,577 Inventory 10,653 0.207872 $ 8,992 Other current assets 1,592 0.031065 $ 1,333 Total current assets 20,756 0.405011 $ 12,902 Property and equipment 0 Land 6,141 0.119829 $ 6,036 Buildings and equipment 31,557 0.61577 $ 30,603 Fixtures and equipment 5,914 0.1154 $ 6,083 Computer hardware and software 2,765 0.053953 $ 2,692 Construction-in-progress 780 0.01522 $ 533 Accumulated depreciation $ (20,278) -0.39568 $ (19,664) Property and equipment, net $ 26,879 0.524489 $ 26,283 Operating lease assets 2,227 0.043455 $ 2,236 Other noncurrent assets 1,386 0.027045 $ 1,358 Total assets $ 51,248 100.00% $ 42,779 LIABILITIES Accounts payable 12,859 0.250917 $ 9,920 Accrued and other current liabilities 6,122 0.119458 S 4.406 Current portion of long-term debt and other borrowings 1,144 0.022323 $ 161 Total current liabilities 20,1250.392698 $ 14,487 Long-term debt and other borrowings 11,536 0.225101 $ 11,338 Noncurrent operating lease liabilities 2,218 0.04328 $ 2,275 Deferred income taxes 990 0.019318$ 1,122 Other noncurrent liabilities 1,939 0.037836 $ 1,724 Total noncurrent liabilities $ 16,683 0.325535 $ 16,459 Total liabilities $ 36,8080.718233 $ 30,946 SHAREHOLDERS' INVESTMENT Common stock 42 0.000825 42 Additional paid-in capital 6,329 0.123498 $ 6,226 Retained earnings 8,825 0.172202 $ 6,433 Accumulated other comprehensive loss (756 -0.01475 $ (868) Total shareholders' investment $ 14,440 0.281767 $ 11,833 Total liabilities and shareholders' investment $ 51,248 100.00% $ 42,779 0.00% 14.11% 71.54% 14.22% 6.29% 1.25% -45.97% 61.44% 5.23% 3.17% 100.00% 23.19% 10.30% 0.38% 33.86% 26.50% 5.32% 2.62% 4.03% 38.47% 72.34% 0.10% 14.55% 15.04% -2.03% 27.66% 100.00% Horizontal Analysis of the Income Statements Target Corporation INSTRUCTIONS: Change to the year of the report you are analyzing. You may have to insert additional rows based on the actual Target Consolidated statement. FY 2020 FY 2019 $ Change Sales (use total revenue) $ 93,561$ 78,112 $ 15,449 Cost of sales $ 66,177 $ 54,864 $ 11,313 Gross margin $ 27,384 $ 23,248 $ 4,136 Selling, general, and administrative expenses $ 18,615$ 16,233 $ 2,382 Depreciation and amortization $ 2,230$ 2,357 $ (127) Earnings from continuing operations before interest and taxes (or Operating Income) $ 6,539 $ 4,658 $ 1,881 Net interest expense (+Net other (income) / expense) $ 993$ 468 $ 525 Earnings from continuing operations before income taxes $ 5,546 $ 4,190 $ 1,356 Provision for income taxes $ 1,178 $ 921 $ 257 Net earnings from continuing operations $ 4,368 $ 3,269 $ 1,099 Discontinued operations, net of tax $ $ 12 $ (12) Net earnings/(loss) $ 4,368 $ 3,281 $ 1,087 % Change FY 2018 $ Change % Change 19.78% $ 75,356 $ 2,756 3.66% 20.62% $ 53,299 $ 1,565 2.94% 17.79% $ 22,057 $ 1,191 5.40% 14.67% $ 15,723 $ 510 3.24% -5.39% 2,224 $ 133 5.98% 40.38% $ 4,110 $ 548 13.33% 112.18% $ 434 $ 34 7.83% 32.36% $ 3,676 $ 514 13.98% 27.90% $ 746 $ 175 23.46% 33.62% $ 2,930 $ 339 11.57% - 100.00% $ 7 $ 5 71.43% 33.13% $ 2,937 $ 344 11.71% FY 2020 FY 2019 Ratio Analysis Target Corporation INSTRUCTIONS: Change XX to the year of the report you are analyzing. LIQUIDITY Working capital Formula current assets - current liabilities Calculation Current ratio Formula current assets / current liabilities Calculation Quick ratio Formula current assets - inventory / current liabilities Calculation Inventory turnover Formula Cost of goods sold / average inventory Calculation Average days to sell inventory Formula 365 / inventory turnover Calculation SOLVENCY Debt to assets Formula Total liabilities / total assets Calculation Debt to equity Formula total liabilities / total equity Calculation Number of times interest is earned Formula EBIT / Interest expense Calculation Plant assets to long-term liabilities Formula Net plant assets / Long-term liabilities (debt and borrowings) Calculation PROFITABILITY Net margin (return on sales) Formula Net incomeet sales Calculation Asset turnover Formula Net sales / average total assets Calculation Return on investment Formula Net income / average total assets Calculation Return on equity Formula Net income/average total stockholders' equity Calculation Earnings per share Formula Net earnings available for common stock / average number of shares outstanding Calculation Price-earnings Formula Market price per share / earnings per share Calculation Book value per share (common) Formula Stockholders' equity - preferred stock / outstanding common shares Calculation % FY 2019 100.00% 78,112 % 100.00% 70.24% 29.76% 20.78% Vertical Analysis - Income Statement Target Corporation INSTRUCTIONS: Change to the year of the report you are analyzing. You may have to insert additional rows based on the actual Target Consolidated statement. FY 2020 Sales (use total revenue) $ 96,561 Cost of sales 66,177 Gross margin $30,384 Selling, general, and administrative expenses 18,615 Depreciation and amortization 2,230 Earnings from continuing operations before interest and taxes (or Operating Income) $ 9,539 Net interest expense (+Net other (income) / expense) $ 993 Earnings from continuing operations before income taxes $ 8,546 Provision for income taxes $ 1,178 Net earnings from continuing operations $ 7,368 Discontinued operations, net of tax Net earnings/(loss) $ 7,368 3.02% 5.96% 0.685338801 54,864 0.314661199 $ 23,248 0.192779694 16,233 0.02309421 2,357 0.098787295 $ 4,658 0.010283655$ 468 0.08850364 $ 4,190 0.012199542 $ 921 0.076304098 $ 3,269 0 $ 12 0.076304098 $ 3,281 0.60% 5.36% 1.18% 4.19% 0.02% 4.20% % 6,02% 21.02% 3.12% 30.16% Vertical Analysis - Balance Sheets Target Corporation INSTRUCTIONS: Change the year of the report you are analyzing. You may have to insert additional rows based on the actual Target Consolidated statement. FY 2020 % FY 2019 ASSETS Cash and cash equivalents 8,511 0.166075$ 2,577 Inventory 10,653 0.207872 $ 8,992 Other current assets 1,592 0.031065 $ 1,333 Total current assets 20,756 0.405011 $ 12,902 Property and equipment 0 Land 6,141 0.119829 $ 6,036 Buildings and equipment 31,557 0.61577 $ 30,603 Fixtures and equipment 5,914 0.1154 $ 6,083 Computer hardware and software 2,765 0.053953 $ 2,692 Construction-in-progress 780 0.01522 $ 533 Accumulated depreciation $ (20,278) -0.39568 $ (19,664) Property and equipment, net $ 26,879 0.524489 $ 26,283 Operating lease assets 2,227 0.043455 $ 2,236 Other noncurrent assets 1,386 0.027045 $ 1,358 Total assets $ 51,248 100.00% $ 42,779 LIABILITIES Accounts payable 12,859 0.250917 $ 9,920 Accrued and other current liabilities 6,122 0.119458 S 4.406 Current portion of long-term debt and other borrowings 1,144 0.022323 $ 161 Total current liabilities 20,1250.392698 $ 14,487 Long-term debt and other borrowings 11,536 0.225101 $ 11,338 Noncurrent operating lease liabilities 2,218 0.04328 $ 2,275 Deferred income taxes 990 0.019318$ 1,122 Other noncurrent liabilities 1,939 0.037836 $ 1,724 Total noncurrent liabilities $ 16,683 0.325535 $ 16,459 Total liabilities $ 36,8080.718233 $ 30,946 SHAREHOLDERS' INVESTMENT Common stock 42 0.000825 42 Additional paid-in capital 6,329 0.123498 $ 6,226 Retained earnings 8,825 0.172202 $ 6,433 Accumulated other comprehensive loss (756 -0.01475 $ (868) Total shareholders' investment $ 14,440 0.281767 $ 11,833 Total liabilities and shareholders' investment $ 51,248 100.00% $ 42,779 0.00% 14.11% 71.54% 14.22% 6.29% 1.25% -45.97% 61.44% 5.23% 3.17% 100.00% 23.19% 10.30% 0.38% 33.86% 26.50% 5.32% 2.62% 4.03% 38.47% 72.34% 0.10% 14.55% 15.04% -2.03% 27.66% 100.00% Horizontal Analysis of the Income Statements Target Corporation INSTRUCTIONS: Change to the year of the report you are analyzing. You may have to insert additional rows based on the actual Target Consolidated statement. FY 2020 FY 2019 $ Change Sales (use total revenue) $ 93,561$ 78,112 $ 15,449 Cost of sales $ 66,177 $ 54,864 $ 11,313 Gross margin $ 27,384 $ 23,248 $ 4,136 Selling, general, and administrative expenses $ 18,615$ 16,233 $ 2,382 Depreciation and amortization $ 2,230$ 2,357 $ (127) Earnings from continuing operations before interest and taxes (or Operating Income) $ 6,539 $ 4,658 $ 1,881 Net interest expense (+Net other (income) / expense) $ 993$ 468 $ 525 Earnings from continuing operations before income taxes $ 5,546 $ 4,190 $ 1,356 Provision for income taxes $ 1,178 $ 921 $ 257 Net earnings from continuing operations $ 4,368 $ 3,269 $ 1,099 Discontinued operations, net of tax $ $ 12 $ (12) Net earnings/(loss) $ 4,368 $ 3,281 $ 1,087 % Change FY 2018 $ Change % Change 19.78% $ 75,356 $ 2,756 3.66% 20.62% $ 53,299 $ 1,565 2.94% 17.79% $ 22,057 $ 1,191 5.40% 14.67% $ 15,723 $ 510 3.24% -5.39% 2,224 $ 133 5.98% 40.38% $ 4,110 $ 548 13.33% 112.18% $ 434 $ 34 7.83% 32.36% $ 3,676 $ 514 13.98% 27.90% $ 746 $ 175 23.46% 33.62% $ 2,930 $ 339 11.57% - 100.00% $ 7 $ 5 71.43% 33.13% $ 2,937 $ 344 11.71% FY 2020 FY 2019 Ratio Analysis Target Corporation INSTRUCTIONS: Change XX to the year of the report you are analyzing. LIQUIDITY Working capital Formula current assets - current liabilities Calculation Current ratio Formula current assets / current liabilities Calculation Quick ratio Formula current assets - inventory / current liabilities Calculation Inventory turnover Formula Cost of goods sold / average inventory Calculation Average days to sell inventory Formula 365 / inventory turnover Calculation SOLVENCY Debt to assets Formula Total liabilities / total assets Calculation Debt to equity Formula total liabilities / total equity Calculation Number of times interest is earned Formula EBIT / Interest expense Calculation Plant assets to long-term liabilities Formula Net plant assets / Long-term liabilities (debt and borrowings) Calculation PROFITABILITY Net margin (return on sales) Formula Net incomeet sales Calculation Asset turnover Formula Net sales / average total assets Calculation Return on investment Formula Net income / average total assets Calculation Return on equity Formula Net income/average total stockholders' equity Calculation Earnings per share Formula Net earnings available for common stock / average number of shares outstanding Calculation Price-earnings Formula Market price per share / earnings per share Calculation Book value per share (common) Formula Stockholders' equity - preferred stock / outstanding common shares Calculation
