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Dashboard acct7140:m50-Financial Statement Analysis Module 1 exam1 Question 5 Incomplete answer Points out of 6.00 Analysis and Interpretation of Protability Balance sheets and income statements for Target Corporation follow. Income Statement For Fiscal Years Ended ($ millions) Sales 2006 2005 2004 $ 51,271 $ 45,682 $ 40,928 1,349 1,157 1,097 Total revenues 52,620 46,839 42,025 Cost of sales 34,927 31,445 28,389 Selling, general and administrative expenses 11,185 9,797 8,657 776 737 722 Depreciation and amortization 1,409 1,259 1,098 Earnings before interest and income taxes 4,323 3,601 3,159 463 570 556 Earnings before income taxes 3,860 3,031 2,603 Provisions for income taxes 1,452 1,146 984 $ 2,408 $ 1,885 $ 1,619 Credit card revenues Credit card expenses Net interest expense Net earnings Balance Sheet ($ millions, except footnotes) January 28, January 29, 2006 2005 Assets Cash and cash equivalents $ 1,648 $ 2,245 Credit card receivables 5,666 5,069 Inventory 5,838 5,384 Other current assets 1,253 1,224 Total current assets 14,405 13,922 4,449 3,804 14,174 12,518 Fixtures and equipment 3,219 2,990 Computer hardware and software 2,214 1,998 Construction-in-progress 1,158 962 Accumulated depreciation (6,176) (5,412) Property and equipment, net 19,038 16,860 1,552 1,511 $ 34,995 $ 32,293 $ 6,268 $ 5,779 2,567 1,937 753 504 Total current liabilities 9,588 8,220 Long-term debt 9,119 9,034 851 973 1,232 1,037 73 74 2,121 1,810 12,013 11,148 (2) (3) 14,205 13,029 $ 34,995 $ 32,293 Property and equipment Land Buildings and improvements Other noncurrent assets Total assets Liabilities and shareholders' investment Accounts payable Accrued and other current liabilities Current portion of long-term debt and notes payable Deferred income taxes Other noncurrent liabilities Shareholders' investment Common stock Additional paid-in-capital Retained earnings Accumulated other comprehensive income (loss) Total shareholders' investment Total liabilities and shareholders' equity (a) Compute net operating prot after tax (NOPAT) for 2006. Assume that the combined federal and statutory rate is: 38.3%. (Round your answer to the nearest whole number.) 2006 NOPAT = $ 0 million (b) Compute net operating assets (NOA) for 2006 and 2005. 2006 NOA = $ 0 million 2005 NOA = $ 0 million (c) Compute Target's RNOA, net operating prot margin (NOPM) and net operating asset turnover (NOAT) for 2006. (Do not round until nal answer. Round two decimal places. Do not use NOPM x NOAT to calculate RNOA.) 2006 RNOA = 0 % 2006 NOPM = 0 % 2006 NOAT = 0 (d) Compute net nonoperating obligations (NNO) for 2006 and 2005. 2006 NNO = $ 0 million 2005 NNO = $ 0 million (e) Compute return on equity (ROE) for 2006. (Do not round until nal answer. Round answer two decimal places.) 2006 ROE = 0 % (f) Infer the nonoperating return component of ROE for 2006. (Use answers from above to calculate. Round your answer to two decimal places.) 2006 nonoperating return = 0 % (g) Which of the following statements reects the best inference we can draw from the dierence between Target's ROE and RNOA? ROE>RNOA implies that Target's equity has grown faster than its NOA. ROE>RNOA implies that Target has taken on too much nancial leverage. ROE>RNOA implies that Target is able to borrow money to fund operating assets that yield a return greater than its cost of debt; the excess accrues to the benet of Target's stockholders. ROE>RNOA implies that Target has increased its nancial leverage during the period. Please answer all parts of the