Target Corporation prepares its financial statements according to U.S. GAAP. Target's financial statements and disclosure notes for the year ended January 30, 2016, are available in Connect. This material is also available under the Investor Relations link at the company's website (www.target.com).
Required:
1. Target's cash flows from its operations over the previous three years has significantly exceeded its net income. Without regard to Target specifically, explain the difference between net income and the cash flows from operating activities.
2. Why did Target add $2,213 million in the determination of cash flows from operating activities for depreciation and amortization for the year ended January 30, 2016?
3. A contributor to the difference in Target's net income and cash flows from operating activities and net income in each of the three years presented is a sizable increase in the amount Target owes its suppliers. If Target had used the direct rather than the indirect method of reporting operating activities, how would this reduction in accounts payable have affected cash from operating activities?
4. Cash outflows for financing activities during each of the three years presented exceeded cash inflows from financing activities. In fact, investing activities also produced net cash outflows in two of the three years. How is that possible? What is the major contributor from year to year in the amount of cash used in financing activities? What are the next two highest contributors to that difference?
5. Some transactions that don't increase or decrease cash must be reported in conjunction with a statement of cash flows. What activity of this type did Target report during each of the three years presented? What are two other such activities that some companies might report?