The inventory for Target over last three years was 403 in 2022, (3249) in 2021, and (1661) in 2020 (United States Securities and Exchange Commission, 2023). Inventory uses LIFO method, states inventory at lower cost, includes amount paid to supplier and freight costs as well as import costs, is reduced for losses related to mark downs, calculated based on levels and rates and retail prices that are measured, and used cost to retail ratio (United States Securities and Exchange Commission, 2023). Accounts receivables was 835 in 2022 and 631 in 2021 (United States Securities and Exchange Commission, 2023). When account receivables are collected, it will decrease the balance of receivables and increase the cash balance but does not change the amount of current assets. Short-term credits are expected within a year and if not collected are then written off as a bad expense.

Current liability balances include accounts payable which was (2237) in 2022, 2628 in 2021, and 2925 in 2020, prepaid expenses which was 449 in 2022, 421 in 2021, and 977 in 2020, and accrued liabilities which was (624) in 2022, (746) in 2021, and 1931 in 2020 (United States Securities and Exchange Commission, 2023). Accounts payable gives amount of money owed to creditor which decreases cash flow, prepaid expenses if increased will have negative effect and decrease cash flow and working capital, accrued liabilities when increases result in cash inflow and when decreased results in cash outflow.

Cahs flow statement includes operating activities with net earnings of 2780 in 2022, 6946 in 2021, and 4368 in 2020 (United States Securities and Exchange Commission, 2023). Cahs provided from operating activities was 4018 in 2022, 8625 in 2021, and 10525 in 2020 (United States Securities and Exchange Commission, 2023). One way of increasing operating cash flows is the operating cycle. This could be used to increase cash flows by collecting overdue receivables, extending time to pay for supplies, and managing liquidity and profitability more effectively. The cash cycle would be a second way to increase operating cash flows. By collecting outstanding payments quickly, forecasting inventory needs, and paying bills more slowly would shorten cash cycle and make the business healthier (Hayes, 2022).

Target seems to be more focused on investments, selling businesses, and is more dependent on debt. Net income and liabilities are lower, which shows some current obligations are not met. This could be a primary concern for selling products on account of the fact that the company may not make payments very soon. Also, competition from other companies could cause problems with the company providing a good profit for the supplier of a product.

1. Analyze net change in financial activities.

A. Include whether the company obtained new debt or equity financing over the last 3 years?

B. How has the companys debt and equity changed?

C. Has the company paid down debt or equity in the last 3 years?

2. Explain the pros and cons of having a large cash balance.