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 Sales Cost of sales Gross margin Selling, general and administrative expenses Depreciation and amortization Gain on sale Earnings from continuing operations before interest expense & income taxes Net interest expense Earnings from continuing operations before income taxes Provision for income taxes Net earnings from continuing operations Discontinued operations, net of tax Net earnings (loss) Jan. 30, 2016 Jan. 31, 2015 Feb. 01, 2014 71,279 50,039 21,240 14,465 1,996 (319) 5,170 1,049 4,121 1 ,427 2,694 (723) 1,971 74,785 52,723 22,062 14,882 2,213 (620) 5,587 607 4,980 1,619 3,361 42 72,618 51,278 21,340 14,676 2,129 4,535 882 3,653 1,204 2,449 (4,085) (1,636) 3,403 Target Corporation Consolidated Statements of Financial Position $million:s Assets Cash and cash equivalents, inc. short-term investments of $3,008 and $1,520 Inventory Assets of discontinued operations Other current assets Total current assets Property and equipment, net Noncurrent assets of discontinued operations Other noncurrent assets Jan. 30, 2016 Jan. 31, 2015 $4,046 8,601 322 1,161 14,130 25,417 75 840 $40,462 $2,210 8,282 1,058 2,074 13,624 25,952 879 Total assets $41,172 Liabilities and Shareholders' investment Accounts payable Accrued expenses and other current liabilities Current portion of LT debt and other borrowings Liabilities of discontinued operations Total current liabilities Long-term debt and other borrowings Deferred income taxes Noncurrent liabilities of discontinued operation:s Other noncurrent liabilities $7,418 4,236 815 153 12,622 11,945 823 18 1,897 $7,759 3,783 91 103 11,736 12,634 1,160 193 1,452 14,683 Total noncurrent liabilities Shareholders' investment Common stock Additional paid-in-capital Retained earnings Accumulated other comprehensive loss 15,439 50 5,348 8,388 53 4,899 9,644 Pension and other benefit liabilities (588) (41) 13,157 $40,462 (561) (38) 13,997 $41,172 Currency translation adjustment and cash flow hedges Total shareholders' investment 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 Selling, general and administrative expenses/Sales Depreciation and amortization (% of prior year PPE, net) Net interest expense Provisions for income taxes/Pretax income Assume Target disposes of the net assets from discontinued operations (assets less liabilities) in FY2016 for proceeds of $350 4% 705% 19.9% 8.4% No change 32.5% million 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 Cost of sales Gross margin Selling, general and administrative expenses Depreciation and amortization Gain on sale Earnings from continuing operations before interest and tax Net interest expense Earnings from continuing operations before tax Provisions for income taxes Net earnings We forecast Target's financials using the following forecast assumptions for both year: Inventory/Sales Other current assets/Sales Other noncurrent assets/Sales Accounts payable/Sales Accrued and other current liabilities/Sales Deferred income taxes/Sales Other noncurrent liabilities/Sales CAPEX/Sales Dividends/Net income Common stock Additional paid-in capital Accumulated other comprehensive loss Current Maturities L-T Debt for 2016 Current Maturities L-T Debt for 2017 Current Maturities L-T Debt for 2018 Assume Target buys back common stock at $2,000 million in FY2016 and retires the stock (Hint: Retained earnings are reduced by the cost of the stock buy back.) No stock buybacks happen in FY2017. 1.6% 1.1% 10.1% 5.7% 1.1% 26% 1.90% 40.5% No change No change No change $751 $2,251 $201 Instructions: Forecast Target's fiscal year ended 2016 and 2017 balance sheets. 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. Target Corporation Consolidated Statements of Financial Position $ millions FY2016 Est. FY2017 Est. Assets Cash and cash equivalents, inc. short-term investments 0 X $ Inventory Other current assets Total current assets Property and equipment, net Other noncurrent assets 0 X $ Total assets Liabilities and Shareholders' investment Accounts payable Accrued expenses and other current liabilities Current portion of LT debt and other borrowings 0 X Total current liabilities 0 X Long-term debt and other borrowings Deferred income taxes 0 Other noncurrent liabilities 0 Total noncurrent liabilities Shareholders' investment Common stock 0 X Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total shareholders' investment 0 Total liabilities and shareholders' investment Check 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 Sales Cost of sales Gross margin Selling, general and administrative expenses Depreciation and amortization Gain on sale Earnings from continuing operations before interest expense & income taxes Net interest expense Earnings from continuing operations before income taxes Provision for income taxes Net earnings from continuing operations Discontinued operations, net of tax Net earnings (loss) Jan. 30, 2016 Jan. 31, 2015 Feb. 01, 2014 71,279 50,039 21,240 14,465 1,996 (319) 5,170 1,049 4,121 1 ,427 2,694 (723) 1,971 74,785 52,723 22,062 14,882 2,213 (620) 5,587 607 4,980 1,619 3,361 42 72,618 51,278 21,340 14,676 2,129 4,535 882 3,653 1,204 2,449 (4,085) (1,636) 3,403 Target Corporation Consolidated Statements of Financial Position $million:s Assets Cash and cash equivalents, inc. short-term investments of $3,008 and $1,520 Inventory Assets of discontinued operations Other current assets Total current assets Property and equipment, net Noncurrent assets of discontinued operations Other noncurrent assets Jan. 30, 2016 Jan. 31, 2015 $4,046 8,601 322 1,161 14,130 25,417 75 840 $40,462 $2,210 8,282 1,058 2,074 13,624 25,952 879 Total assets $41,172 Liabilities and Shareholders' investment Accounts payable Accrued expenses and other current liabilities Current portion of LT debt and other borrowings Liabilities of discontinued operations Total current liabilities Long-term debt and other borrowings Deferred income taxes Noncurrent liabilities of discontinued operation:s Other noncurrent liabilities $7,418 4,236 815 153 12,622 11,945 823 18 1,897 $7,759 3,783 91 103 11,736 12,634 1,160 193 1,452 14,683 Total noncurrent liabilities Shareholders' investment Common stock Additional paid-in-capital Retained earnings Accumulated other comprehensive loss 15,439 50 5,348 8,388 53 4,899 9,644 Pension and other benefit liabilities (588) (41) 13,157 $40,462 (561) (38) 13,997 $41,172 Currency translation adjustment and cash flow hedges Total shareholders' investment 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 Selling, general and administrative expenses/Sales Depreciation and amortization (% of prior year PPE, net) Net interest expense Provisions for income taxes/Pretax income Assume Target disposes of the net assets from discontinued operations (assets less liabilities) in FY2016 for proceeds of $350 4% 705% 19.9% 8.4% No change 32.5% million 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 Cost of sales Gross margin Selling, general and administrative expenses Depreciation and amortization Gain on sale Earnings from continuing operations before interest and tax Net interest expense Earnings from continuing operations before tax Provisions for income taxes Net earnings We forecast Target's financials using the following forecast assumptions for both year: Inventory/Sales Other current assets/Sales Other noncurrent assets/Sales Accounts payable/Sales Accrued and other current liabilities/Sales Deferred income taxes/Sales Other noncurrent liabilities/Sales CAPEX/Sales Dividends/Net income Common stock Additional paid-in capital Accumulated other comprehensive loss Current Maturities L-T Debt for 2016 Current Maturities L-T Debt for 2017 Current Maturities L-T Debt for 2018 Assume Target buys back common stock at $2,000 million in FY2016 and retires the stock (Hint: Retained earnings are reduced by the cost of the stock buy back.) No stock buybacks happen in FY2017. 1.6% 1.1% 10.1% 5.7% 1.1% 26% 1.90% 40.5% No change No change No change $751 $2,251 $201 Instructions: Forecast Target's fiscal year ended 2016 and 2017 balance sheets. 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. Target Corporation Consolidated Statements of Financial Position $ millions FY2016 Est. FY2017 Est. Assets Cash and cash equivalents, inc. short-term investments 0 X $ Inventory Other current assets Total current assets Property and equipment, net Other noncurrent assets 0 X $ Total assets Liabilities and Shareholders' investment Accounts payable Accrued expenses and other current liabilities Current portion of LT debt and other borrowings 0 X Total current liabilities 0 X Long-term debt and other borrowings Deferred income taxes 0 Other noncurrent liabilities 0 Total noncurrent liabilities Shareholders' investment Common stock 0 X Additional paid-in capital Retained earnings Accumulated other comprehensive loss Total shareholders' investment 0 Total liabilities and shareholders' investment Check