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6. An assessment of Target Corporation's market value ratios Aa 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 Target to 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. Target Corporation Selected Income Statement, Balance Sheet, and Related Data1 2009 Income Statement Sales Less: Cost of goods sold 2008 $65,786,000,000 $63,435,000,000 $62,884,000,000 44,157,000,000 18,727,000,000 12,954,000,000 1,609,000,000 4,402,000,000 866,000,000 3,536,000,000 1,322,000,000 88,000,000 $2,214,000,000 465,000,000 45,725,000,000 20,061,000,000 13,469,000,000 860,000,000 5,252,000,000 757,000,000 4,495,000,000 1,575,000,000 $2,920,000,000 609,000,000 44,062,000,000 19,373,000,000 13,078,000,000 1,521,000,000 4,673,000,000 801,000,000 3,872,000,000 1,384,000,000 profit Less: Selling, general, and administrative expenses Less Earnings before interest and taxes (EBIT) Less: Interest expense Earnings before taxes (EBT) Less: Taxes Net income Less: Common dividends paid Dividends per share $2,4 496,000,000 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? Target Corporation Market Value Ratios 1. From 2008 through 2010, Targets market capitalization increased. Specifically, it increased from $23,484,628,877 to $38,177,921,157 between 2008 and 2009 and to 38,264,477,148 in 2010, which of the following statements are correct? Check all that apply Book value per share During the periods 2008 to 2009 and 2009 to 2010, the market price of Target's common shares increased by 64.33% and 6.01%, respectively 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 1.08% and 5.45%, respectively During the periods 2008 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 2010 2009 2008 Market price per share 2010 2009 2008 $54.35 $31.20 EPS 2010 2009 2008 news and These changes in the company's market capitalization should be construed as should be investigated further. One reasonable question that shauld be asked is: For what reason were the 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 shares? (Note: The answer to this question can be found, in part, by reading the company's annual shares, or approximately 6.47% of 2008's outstanding shares, repurchased during the market price of 2010 2009 2008 M/B 2. Similarly, from 2008 through 2010, the company's book value general, and assuming that everything else remains constant, this behavior should have tended to from year to year. In 2010 2009 2008 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 percentage increase in the company's book value
