Target corporation financial statements 2016

Accounting 240

Fall 2018

Course Project

100 points

Obtain Target Corporation’s 2016 annual report (it was issued January 2017) at http://investors.target.com and the Target Corporation 10K at

https://corporate.target.com/annual-reports/2016

and use these sources to answer the questions below.

Part 1.

a. What was Target’s net income for 2016 (the year ended January 28, 2017)?

b. Did Target’s net income increase or decrease from 2015 to 2016? By how much?

c. What was Target’s accounting equation for 2016?

d. Which of the following had the largest percentage change from 2015 to 2016: sales, cost of sales, or selling, general, and administrative expenses? Show all computations.

Part 2.

a. Which accounts on Target’s balance sheet are accrual type accounts?

b. Compare Target’s net income to its cash provided by operating activities for the fiscal year ended February 1, 2017 (2016). Which is larger?

c. First, compare Target’s 2015 net income to its 2016 net income. Next, compare Target’s 2015 cash provided by operating activities to its 2016 cash provided by operating activities. Which changed the most from 2015 to 2016, net income or cash provided by operating activities?

Part 3.

a. What was Target’s debt-to-assets ratio for its fiscal year ended January 28, 2017 (2016) and 2015?

b. What was Target’s return-on-assets ratio for 2016 and 2015?

c. What was Target’s return-on-equity ratio for 2016 and 2015?

d. Why was Target’s return-on-equity ratio higher than its return-on-assets ratio for 2016 and 2015?

Part 4.

a. What was Target’s gross margin percentage for the fiscal year ended January 28, 2017 (2016) and 2015?

b. What was Target’s return on sales percentage for 2016 and 2015?

c. Target’s return on sales percentage for 2016 was lower than it was in 2015. Ignoring taxes, how much higher would Target’s 2016 net income have been if its return on sales percentage in 2016 had been the same as for 2015?

Part 5.

a. What was Target’s inventory turnover ratio and average days to sell inventory for the fiscal year ended January 28, 2017 (2016) and 2015?

b. Is the company’s management of inventory getting better or worse?

c. What cost flow method(s) did Target use to account for inventory?

Part 6.

a. Who are the independent auditors for Target?

b. What type of opinion did the independent auditors issue on Target’s financial statements?

c. On what date does it appear the independent auditors completed their work related to Target’s financial statements for the fiscal year ended January 28, 2017 (2016)?

d. Does the auditors’ report give any information about how the audit was conducted? If so, what does it suggest was done?

e. Does the auditor’s report tell the reader that the audit was concerned with materiality rather than absolute accuracy in the financial statement?

Part 7.

Anyone who shopped at Target knows that many of its customers use a credit card to pay its purchases. There is even a Target brand credit card. However, Target did not report any accounts receivables or credit card receivables on its January 28, 2017 (2016), balance sheet. Using this information, answer the following questions:

a. Review Target’s Form 10-K and determine where Target is reporting is credit card receivables.

b. How long does it usually take Target to collect its credit card receivables?

c. How much credit card receivables did Target have as of January 28, 2017, and January 30, 2016, respectively?

d. In “Item 1. Business” section of its Form 10-K, Target discloses that it has a financial interest in the credit card that bears its name. Discuss this relationship.

Hint: It will be easier to answer these questions if you do a word search on Target’s 10-K rather than trying to find the answers by reading through the report.

Part 8.

a. What method of depreciation does Target use?

b. What types of intangible assets does Target have?

c. What are the estimated lives that Target uses for the various types of long-term assets?

d. As of January 28, 2017 (2016 fiscal year), what is the original cost of Target’s land, buildings and improvements, and fixtures and equipment?

e. What was Target’s depreciation expense and amortization expense for 2016?

Part 9.

a. What was Target’s current ratio for its fiscal year ended January 28, 2017 (2016) and 2015?

b. Did the current ratio get stronger or weaker from 2015 to 2016? Explain briefly why this happened.

c. Target’s balance sheet reports “Accrued and other current liabilities.” What is included in this category? (See notes to the financial statements.)

Part 10.

a. What was the average interest rate on Target’s long-term debt in the fiscal year ended January 28, 2017 (2016)?

b. Target has an “unsecured revolving credit facility” (i.e. a line of credit). What is the total amount of credit available under this facility? How much of its total amount available had Target used as of January 28, 2017?

c. Target’s balance sheet shows a line titled “Other noncurrent liabilities.” What are the types of debt included in this category?

Part 11.

a. What is the par value per share of Target’s stock?

b. How many shares of Target’s common stock were outstanding as of January 28, 2017?

c. Target’s annual report provides some details about the company’s executive officers. How many are identified? What is their minimum, maximum, and average age? How many are females?

d. Target’s balance sheet does not show a balance for treasury stock. Does this mean the company has no repurchased any of its stock? Explain.

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