2 A liquidity assessment of Target Corporation Inc Aa Aa A F

2. A liquidity assessment of Target Corporation Inc. Aa Aa A Financial Ratio Analysis of Target Corporation A Liquidity Assessment Assume that you are a prospective lending bank of Target Corporation (TGT), a retailer of \"everyday essentials and fashionable, differentiated merchandise at discounted prices,\" and are interested in the company\'s historical and current financial activities and performance. Use the following financial data for Target to complete and conduct your financial ratio analysis. Then answer the questions that follow. Remember, the results of a ratio analysis often identify issues requiring additional investigation. Target Corporation Selected Income Statement, Balance Sheet, and Related Data Income Statement Sales Less: Cost of goods sold Gross profit Less: Selling, general, and administrative expenses Less: Other expenses Earnings before interest and taxes (EBIT) Less: Interest expense Earnings before taxes (EBT) Less: Taxes Net income Less: Common dividends paid Dividends per share 2010 2009 2008 $65,786,000,000 $63,435,000,000 $62,884,000,000 45,725,000,000 44,062,000,000 44,157,000,000 20,061,000,000 19,373,000,000 18,727,000,000 3,469,000,00013,078,000,000 12,954,000,000 1,609,000,000 ,252,000,000 4,673,000,000 4,402,000,000 866,000,000 4,495,000,000 3,872,000,0003,536,000,000 575,000,0001384,000,0001322,000,000 $2,920,000,000$2,488,000,000 $2,214,000,000 465,000,000 $0.62 860,000,000 1,521,000,000 757,000,000 801,000,000 609,000,000 496,000,000 $0.67 $0.92

Solution

1) Option (a) and (b) are correct.

Because creditors prefer the high current and quick ratios as the higher ratios indicate that the repaying ability of the debtor. From the liquidity table, it is clear that the option (b) is true. Option (c) is wrong as the sales are increasing.

2) Option (a), (d) and (e) are correct.

Current ratio increase is due to either increase in current assets or decrese in current liabilities. Quick ratio decrese can be due to increase in inventory as inventory has to be subtracted from the current assets.