Writing Assignment 1_ACC3110

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Pasadena City College *

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MISC

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Finance

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Feb 20, 2024

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pdf

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Uploaded by MasterSnake1489

Writing Assignment 1 Find Target's financial statements and disclosure notes for the year ended February 3,2018 (which is 2017 fiscal year) at the Investor Relations link at the company's website (https://www.sec.gov/Archives/edgar/data/27419/000002741918000010/tgt-20180203x10k.htm). 1. By what name does Target label its balance sheet? Target labels its balance sheet as “Consolidated Statements of Financial Position.” 2. What amounts did Target report for the following items for the year ended February 3, 2018? a. current assets - 12,564 million b. long-term assets - 26,435 million c. total assets - 38,999 million d. current liabilities - 13,201 million e. long-term liabilities - 14,089 million f. total liabilities - 27,290 million g. total shareholders' equity - 11,709 million 3. What was Target's largest current asset and largest current liability? Target’s largest current asset was Inventory; the largest current liability was Accounts payable. 4. Compute Target's current ratio and debt to equity ratio? Current Ratio = Current Asset/Current Liability Current Ratio = 12,564/13,201 = 0.9517 Debt to Equity Ratio = Total Liabilities/Total Shareholders’ Equity Debt to Equity Ratio = 27,290/11,709 = 2.3306 5. Assuming Target's industry had an average current ratio of 1.0 and an average debt to equity ratio of 2.5, comment on Target's liquidity and long-term solvency using your answer for above question 4. Target's current ratio is 0.95, indicating that the company has $0.95 in current assets for every $1 in current liabilities. A current ratio signals that the company may face challenges in meeting its short-term liabilities with its existing short-term assets. Target's debt-to-equity ratio stands at 2.33, suggesting that for every dollar of equity, the

company has $2.33 in debt. Comparing this ratio to the industry average (2.5) shows that Target has a relatively lower reliance on debt, which can be viewed positively. Because lower debt-to-equity ratio generally implies a lower level of financial risk and a more conservative capital structure. 6. By what name does Target label its income statement? Target labels its income statement as “Consolidated Statements of Operations.” 7. What amounts did Target report for the following items for the year ended February 3, 2018? a. sales - 71,879 million b. gross margin - 20,754 million c. earnings from continuing operations before income taxes - 3,646 million d. net earnings from continuing operations - 2,928 million e. net earnings - 2,934 million 8. Does Target report any items as part of its comprehensive income? If so, what are they? Yes, there are two items that are part of its comprehensive income/loss: pension and other benefit liabilities, and currency translation adjustment and cash flow hedges. 9. Does Target prepare the statement of cash flows using the direct method or the indirect method? Target prepared the statement of cash flows using the indirect method because it starts with net income from the income statement and shows the adjustments made to net earnings, such as non-cash expenses (like depreciation and amortization). 10. Which is higher, net earnings or operating cash flows? Which line item is the biggest reason for the difference? explain why. The operating cash flows are higher than the net earnings. The biggest reason for the difference lies in non-cash expenses such as depreciation and amortization, which are added to the operating cash flow calculation, leading to an increase in operational cash flow.

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