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Two-Year-Ahead Forecasting of Financial Statement Following are the financial statements of Target Corporation from its FY2015 annual report. Target Corporation Consolidated Statements of Operations 12
Two-Year-Ahead Forecasting of Financial Statement Following are the financial statements of Target Corporation from its FY2015 annual report. Target Corporation Consolidated Statements of Operations 12 Months Ended $millions Jan. 30, 2016 Jan. 31, 2015Feb. 01, 2014 Sales 74,785 72,618 71,279 Cost of sales 52,723 51,278 50,039 Gross margin 22,062 21,340 21,240 Selling, general and administrative expenses 14,882 14,676 14,465 Depreciation and amortization 2,213 2,129 1,996 Gain on sale (620) (319) Earnings from continuing operations before interest expense & income taxes 5,587 4,535 5,170 Net interest expense 607 882 1,049 Earnings from continuing operations before income taxes 4,980 3,653 4,121 Provision for income taxes 1,619 1,204 1,427 Net earnings from continuing operations 3,361 2,694 2,449 Discontinued operations, net of tax 42 (723) (4,085) 3,403 (1,636) 1,971 Net earnings (loss) Assets Cash and cash equivalents, inc. short-term investments of $3,008 and $1,520 $4,046 $2,210 Inventory 8,601 8,282 Assets of discontinued operations 1,058 322 Other current assets 1,161 2,074 Total current assets 14,130 13,624 Property and equipment, net 25,417 25,952 Noncurrent assets of discontinued operations 75 717 Other noncurrent assets 879 840 $40,462 $41,172 Total assets Liabilities and Shareholders' investment Accounts payable $7,418 $7,759 Accrued expenses and other current liabilities 4,236 3,783 Current portion of LT debt and other borrowings 91 815 Liabilities of discontinued operations 153 103 Total current liabilities 12,622 11,736 Long-term debt and other borrowings 11,945 12,634 Deferred income taxes 823 1,160 Noncurrent liabilities of discontinued operations 18 193 Other noncurrent liabilities 1,897 1,452 Total noncurrent liabilities 14,683 15,439 Shareholders' investment 50 53 Common stock Additional paid-in-capital 5,348 4,899 Retained earnings 8,388 9,644 Accumulated other comprehensive loss Pension and other benefit liabilities (588) (561) Currency translation adjustment and cash flow hedges (41) (38) Total shareholders' investment 13,157 13,997 $40,462 $41,172 Total liabilities and shareholders' investment We forecast Target's income statement using the following forecast assumptions for both years: Sales (growth rate) Cost of sales/Sales 70.5% Selling, general and administrative expenses/Sales 19.9% Depreciation and amortization (% of prior year PPE, net) 8.4% Net interest expense No change Provisions for income taxes/Pretax income 32.5% f $350 million. Assume Target disposes of the net assets from discontinued operations (assets less liabilities)in FY2016 for proceeds Instructions: Forecast Target's fiscal year ended 2016 and 2017 income statements Use the same forecasting assumptions for both years. Round forecasts to $ millions. Use rounded figures for subsequent forecast calculations. Do not use negative signs with your answers in the income statement. Hint: Forecasted FY2016 gain on sale is computed as proceeds from the disposal of net assets from discontinued operations minus net assets from discontinued operations ($350 million $226 million). Forecast $0 for gain on sale in FY2017. Target Corporation Consolidated Statements of Operations $ millions FY2016 Est. FY2017 Est. Sales 77,776 80,887 Cost of sales 54,832 57,025 Gross margin 22,944 23,862 Selling, general and administrative expenses 15,477 16,097 1,956 x Depreciation and amortization 2,135 0 Gain on sale 124 Earnings from continuing operations before interest and tax 5,456 5,636 Net interest expense. 607 607 0 X Earnings from continuing operations before tax 4,849 Provisions for income taxes 1,576 1,639 * Net earnings $ $ 3,273 3,404 Target Corporation Consolidated Statements of Financial Position $ millions FY2016 Est. FY2017 Est. Assets 41,172 $ Cash and cash equivalents, inc. short-term investments $ X 0 X Inventory 0 X Other current assets 0 X Total current assets 0 X 0 X 0 X Property and equipment, net 0 X 0 X Other noncurrent assets 0 X 0X$ 0 X Total assetS Liabilities and Shareholders' investment Accounts payable 0 X 0X$ $ 0 X 0 X Accrued expenses and other current liabilities 0 X Current portion of LT debt and other borrowings 0 X Total current liabilities 0 X 0 X 0 X Long-term debt and other borrowings 0 X Deferred income taxes 823 0 X 0 % Other noncurrent liabilities 0 X 0 X 0 X Total noncurrent liabilities Shareholders' investment Common stock 50 50 Additional paid-in capital 5,348 5,348 Retained earnings 0 X 11,453 0 X Accumulated other comprehensive loss 588 Total shareholders' investment 0 X 13,157 0 x $ 0 X Total liabilities and shareholders' investment Two-Year-Ahead Forecasting of Financial Statement Following are the financial statements of Target Corporation from its FY2015 annual report. Target Corporation Consolidated Statements of Operations 12 Months Ended $millions Jan. 30, 2016 Jan. 31, 2015Feb. 01, 2014 Sales 74,785 72,618 71,279 Cost of sales 52,723 51,278 50,039 Gross margin 22,062 21,340 21,240 Selling, general and administrative expenses 14,882 14,676 14,465 Depreciation and amortization 2,213 2,129 1,996 Gain on sale (620) (319) Earnings from continuing operations before interest expense & income taxes 5,587 4,535 5,170 Net interest expense 607 882 1,049 Earnings from continuing operations before income taxes 4,980 3,653 4,121 Provision for income taxes 1,619 1,204 1,427 Net earnings from continuing operations 3,361 2,694 2,449 Discontinued operations, net of tax 42 (723) (4,085) 3,403 (1,636) 1,971 Net earnings (loss) Assets Cash and cash equivalents, inc. short-term investments of $3,008 and $1,520 $4,046 $2,210 Inventory 8,601 8,282 Assets of discontinued operations 1,058 322 Other current assets 1,161 2,074 Total current assets 14,130 13,624 Property and equipment, net 25,417 25,952 Noncurrent assets of discontinued operations 75 717 Other noncurrent assets 879 840 $40,462 $41,172 Total assets Liabilities and Shareholders' investment Accounts payable $7,418 $7,759 Accrued expenses and other current liabilities 4,236 3,783 Current portion of LT debt and other borrowings 91 815 Liabilities of discontinued operations 153 103 Total current liabilities 12,622 11,736 Long-term debt and other borrowings 11,945 12,634 Deferred income taxes 823 1,160 Noncurrent liabilities of discontinued operations 18 193 Other noncurrent liabilities 1,897 1,452 Total noncurrent liabilities 14,683 15,439 Shareholders' investment 50 53 Common stock Additional paid-in-capital 5,348 4,899 Retained earnings 8,388 9,644 Accumulated other comprehensive loss Pension and other benefit liabilities (588) (561) Currency translation adjustment and cash flow hedges (41) (38) Total shareholders' investment 13,157 13,997 $40,462 $41,172 Total liabilities and shareholders' investment We forecast Target's income statement using the following forecast assumptions for both years: Sales (growth rate) Cost of sales/Sales 70.5% Selling, general and administrative expenses/Sales 19.9% Depreciation and amortization (% of prior year PPE, net) 8.4% Net interest expense No change Provisions for income taxes/Pretax income 32.5% f $350 million. Assume Target disposes of the net assets from discontinued operations (assets less liabilities)in FY2016 for proceeds Instructions: Forecast Target's fiscal year ended 2016 and 2017 income statements Use the same forecasting assumptions for both years. Round forecasts to $ millions. Use rounded figures for subsequent forecast calculations. Do not use negative signs with your answers in the income statement. Hint: Forecasted FY2016 gain on sale is computed as proceeds from the disposal of net assets from discontinued operations minus net assets from discontinued operations ($350 million $226 million). Forecast $0 for gain on sale in FY2017. Target Corporation Consolidated Statements of Operations $ millions FY2016 Est. FY2017 Est. Sales 77,776 80,887 Cost of sales 54,832 57,025 Gross margin 22,944 23,862 Selling, general and administrative expenses 15,477 16,097 1,956 x Depreciation and amortization 2,135 0 Gain on sale 124 Earnings from continuing operations before interest and tax 5,456 5,636 Net interest expense. 607 607 0 X Earnings from continuing operations before tax 4,849 Provisions for income taxes 1,576 1,639 * Net earnings $ $ 3,273 3,404 Target Corporation Consolidated Statements of Financial Position $ millions FY2016 Est. FY2017 Est. Assets 41,172 $ Cash and cash equivalents, inc. short-term investments $ X 0 X Inventory 0 X Other current assets 0 X Total current assets 0 X 0 X 0 X Property and equipment, net 0 X 0 X Other noncurrent assets 0 X 0X$ 0 X Total assetS Liabilities and Shareholders' investment Accounts payable 0 X 0X$ $ 0 X 0 X Accrued expenses and other current liabilities 0 X Current portion of LT debt and other borrowings 0 X Total current liabilities 0 X 0 X 0 X Long-term debt and other borrowings 0 X Deferred income taxes 823 0 X 0 % Other noncurrent liabilities 0 X 0 X 0 X Total noncurrent liabilities Shareholders' investment Common stock 50 50 Additional paid-in capital 5,348 5,348 Retained earnings 0 X 11,453 0 X Accumulated other comprehensive loss 588 Total shareholders' investment 0 X 13,157 0 x $ 0 X Total liabilities and shareholders' investment
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