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Assume that you are a prospective shareholder 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 Data Income Statement Sales Less: Cost of goods sold Gross profit Less: Selling, general, and administrative expenses Less: Other expenses Earnings before interest and taxes (EBIT) Less: Interest expense Earnings before taxes (EBT) Less: Taxes Net income Less: Common dividends paid Oividends per share 2009 2008 $65,786,000,000 $63,435,000,000 $62,884,000,000 45,725,000,000 44,062,000,000 44,157,000,000 20,061,000,000 19,373,000,000 18,727,000,000 13,469,000,000 13,078,000,000 12,954,000,000 ,000 1,609,000,000 5,252,000,000 4,673,000,0004,402,000,000 866,000,000 4,495,000,000 3,872,000,000 3,536,000,000 1,575,000,0001,384,000,0001,322,000,000 $2,920,000,000 $2,488,000,000 $2,214,000,000 465,000,000 $0.62 2010 860,000,000 1,521 ,000 757,000,000 801,000,000 609,000,000 496,000,000 $0.92 $0.67 Now consider the effectiveness of Target's revenue-generating and cost-containing activiies and its profitability ratios. That is, how well do the company's management polidies and activities interact to generate profits and returns to providers of financial capital? To answer these questions, focus primarily on income statement accounts and relate them selectively to either the firm's asset holdings (total assets) or its sources of financing (such as its common equity). For example: Target Corporation Profitability Ratios the effectiveness of Target's revenue-generating and cost-containing activities and its profitability ratios. That is, how well do the company's management policies and activities interact to generate profits and returns to providers of financial capital? To answer these questions, focus primarily on income statement accounts and relate them selectively to either the firm's asset holdings (total assets) or its sources of financing (such as its common Target Corporation Profitability Ratios Gross profit margin 2010 2009 2008 1. The return on assets (ROA) ratio relates the volume of after-tax earnings generated to each dollar of company assets. The trend of Target's ROA ratio, over the period of 2008 to 2010, indicates that management is becoming productive or effective in generating Operating profit margin 2010 2009 2008 In addition, the return on equity (ROE) ratio provides sharehoiders with a summary value that indicates the amount of net income generated by each dollar of stockholders' equity. The trend of Target's ROE ratios indicates that management is shareholders in generating a growing return to Target's Net profit margin Which of the following statements are correct? Check all that apply. 2010 C The trend of Target's Net income account is consistent with the observed behavior of the ROA and 2009 ROE ratios The trend of the Net income account suggests that Target is doing a better job in managing its operating and debt-financing costs. 2008 ROA An examination of the trend of the Total equity account balanices further supports the behavior of 2010 2009 2008 the ROE values 2. In contrast, the basic earnings power (BEP) ratio provides insights into the effectiveness of Target's 2010 2009 2008 management in generating profits using the firm's total assets-before consideration of its comparing companies that employ differing tax treatments and Which of the following statements are correct? Check all that By excluding these expenses from the calculation, the ratio is useful for BEP D 2010 2009 2008 The behavior of Target's Accounts payable and Retained earnings accounts contributed to the trend of the BEP ratio during 2008 to 2010 D The behavior of the Accounts receivable and Other long-term asset accounts contributed to the 2009 comparing companies that employ diffening tax treatments and 008 Which of the following statements are correct? Check all that apply BEP 2010 2009 2008 The behavior of Target's Accounts payable and Retained earnings accounts contributed to the trend of the BEP ratio during 2008 to 2010 The behavior of the Accounts receivable and Other long-term asset accounts contributed to the trend of Target's BEP ratio during 2008 to 2010. The trend of Target's Cost of goods sold account provides a partial explanation for the pattern exhibited by its BEP ratio. on management's performance during the In general, it is reasonable to conclude that the trend of the BEP ratio refects 2008-to-2010 period. with that of the The trend of the BEP ratio indicates that Target's management performance has been ROA and ROE ratios , which is 3. The profit margin ratios-gross, operating, and net-are useful to users of financial information interested in the company's ability to manage (but not necessarily minimize) its costs. Each ratio places a dfferent income statement subtotal (gross profit, EBIT, and net income) in the numerator and users as the its denominator. The pattern of gross profit margins from year to year suggests that Target's costs of goods sold as a percentage of total sales are This trend is verified by which of the following data? Q Target's cost of goods sold, expressed as a percentage of total sales, for 2008, 2009, and 2010 are 30.49%' 30.54%, and 29.78%, Target's cost of goods sold, expressed as a percentage of total sales, for 2008, 2009, and 2010 are 29.78%, 30.54%, and 30.49% 0 Target's cost of goods sold, expressed as a percentage of total sales, for 2008, 2009, and 2010 are 70.22%, 69.46%, and 69S1%, 4. An examination of the income statement data suggests that the growth in the operating and net profit margins is mostly attributable to respectively Is it reasonable to attribute changes in the net profit margin to changes in Target's tax rate? ,because Target pays