Income Taxes

A.If Congress voted to eliminate corporate taxes, what would be the effect on Target Corporation's income statement and balance sheet? Defend your response.

B. Calculate the income tax rate for Target Corporation. What effect will an increase in income of $2,000,000 have on Target Corporation?

C. What are the effects on the balance sheet and income statement? Justify your response.

D. How much did Target Corporation pay in foreign taxes last year? What percentage of its income is United States vs. foreign?

Income statements

	Period Ending	1/28/2017	1/30/2016
Total Revenue		$69,495,000	$73,785,000
Cost of Revenue		$48,872,000	$51,997,000
Gross Profit		$20,623,000	$21,788,000
Research and Development		$0	$0
Sales, General and Admin.		$13,356,000	$14,665,000
Non-Recurring Items		$0	$0
Other Operating Items		$2,298,000	$2,213,000
Operating Income		$4,969,000	$4,910,000
Additional income/expense items		$0	$620,000
Earnings Before Interest and Tax		$4,969,000	$5,530,000
Interest Expense		$1,004,000	$607,000
Earnings Before Tax		$3,965,000	$4,923,000
Income Tax		$1,296,000	$1,602,000
Minority Interest		$0	$0
Equity Earnings/Loss Unconsolidated Subsidiary		$0	$0
Net Income-Cont. Operations		$2,669,000	$3,321,000
Net Income		$2,737,000	$3,363,000
Net Income Applicable to Common Shareholders		$2,737,000	$3,363,000
Balance Sheet
Current Assets
Cash and Cash Equivalents		$2,512,000	$4,046,000
Short-Term Investments		$0	$0
Net Receivables		$0	$0
Inventory		$8,309,000	$8,601,000
Other Current Assets		$1,169,000	$1,483,000
Total Current Assets		$11,990,000	$14,130,000
Long-Term Assets
Long-Term Investments		$0	$0
Fixed Assets		$24,658,000	$25,217,000
Goodwill		$0	$0
Intangible Assets		$0	$0
Other Assets		$783,000	$915,000
Deferred Asset Charges		$0	$0
Total Assets		$37,431,000	$40,262,000
Current Liabilities
Accounts Payable		$10,989,000	$11,654,000
Short-Term Debt / Current Portion of Long-Term Debt		$1,718,000	$815,000
Other Current Liabilities		$1,000	$153,000
Total Current Liabilities		$12,708,000	$12,622,000
Long-Term Debt		$11,031,000	$11,945,000
Other Liabilities		$1,878,000	$1,915,000
Deferred Liability Charges		$861,000	$823,000
Misc. Stocks		$0	$0
Minority Interest		$0	$0
Total Liabilities		$26,478,000	$27,305,000
Stock-Holders Equity
Common Stocks		$46,000	$50,000
Capital Surplus		$5,661,000	$5,348,000
Retained Earnings		$5,884,000	$8,188,000
Treasury Stock		$0	$0
Other Equity		($638,000)	($629,000)
Total Equity		$10,953,000	$12,957,000
Total Liabilities & Equity		$37,431,000	$40,262,000
Cash Flow
Net Income		$2,737,000	$3,363,000
Cash Flow-Operating Activities
Depreciation		$2,298,000	$2,213,000
Net Income Adjustments		$508,000	($812,000)
Changes in Operating Activities
Accounts Receivable		$0	$0
Changes in Inventories		$293,000	($316,000)
Other Operating Activities		$36,000	$227,000
Liabilities		($543,000)	$579,000
Net Cash Flow-Operating		$5,436,000	$5,958,000
Cash flows-Investing Activities
Capital Expenditures		($1,547,000)	($1,438,000)
Investments		$28,000	$24,000
Other Investing Activities		$46,000	$1,922,000
Net Cash Flows-Investing		($1,473,000)	$508,000
Cash Flows-Financing Activities
Sale and Purchase of Stock		($3,485,000)	($3,183,000)
Net Borrowings		($664,000)	($85,000)
Other Financing Activities		$0	$0
Net Cash Flows-Financing		($5,497,000)	($4,630,000)
Effect of Exchange Rate		$0	$0
Net Cash Flow		($1,534,000)	$1,836,000
Financial Ratios
Liquidity Ratios
Current Ratio		94%	112%
Quick Ratio		29%	44%
Cash Ratio		20%	32%
Profitability Ratio
Gross Margin		30%	30%
Operating Margin		7%	7%
Pre-Tax Margin		6%	7%
Profit Margin		4%	5%

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