The Target corporation company mainly offers merchandise at discount price to the customer from various stores located in Minnesota. The company focuses to deliver a good shopping experience to their customer, supported by their supply chain and technology. Our ability to deliver a preferred shopping experience to our guests is supported by our supply chain (Irvine Lapsley, 2016). Company operated in single segment designed to enable the customer to buy products seamless in store though various digital channels.
Solution-a
Operating margin = EBIT/Sales
Operating margin = $4,969/$69,495
Operating margin = 64.71%
Profit margin = Net income/Sales
Profit margin = $2,737/$69,495
Profit margin = 3.94%
Return on assets (ROA) = Net income/Total assets
Return on assets (ROA) = $2,737/$40,262
Return on assets (ROA) = 6.80%
Return on equity (ROE) = Net income/Total common equity
Return on equity (ROE) = $2,737/$12,957
Return on equity (ROE) = 0.22
Debt ratio = (Total Assets – Total Owner’s Equity)/Total assets
Debt ratio = ($40,262 – $12,975)/$40,262
Debt ratio = 0.68
Equity Multiplier = Total Assets /Total Owner’s Equity
Equity Multiplier = $40,262/$12,957
Equity Multiplier = 3.11
Current ratio = Current Asset/ Current liabilities
Current ratio = $14,130/$12,622
Current ratio = 1.12
Quick ratio = (Current assets – Inventory)/Current liabilities
Quick ratio = ($14,130 – $8,601)/$12,622
Quick ratio = 0.44
Asset Turnover=Sales/Average Total Assets
Asset Turnover= $69,495/$38,846.5
Asset Turnover = 1.79
Inventory turnover = Cost of sales/ Average Inventory
Inventory turnover = $48,872/ ($8,309 + $8,601)/2
Inventory turnover = 5.78
Receivables turnover = Total revenue/ Average receivables
Receivables turnover = $69,495/ ($749 + $779)/2
Receivables turnover = 90.96
Price/earnings (P/E) ratio = Price per share/Earnings per share
Price/earnings (P/E) ratio = $82.28/4.62
Price/earnings (P/E) ratio = 17.81
DuPont system
ROE = Profit Margin*Total asset turnover*Equity multiplier
ROE = 3.94%*1.79*3.11
ROE = 21.93%
Solution-b
Return on Equity Analysis
The return on equity is important profitability ratio that reflects the company ability to generate the profit from its shareholders.
The above ratio analysis shows the return on equity 0.22, this reflects that for every dollar of the shareholder equity earned $0.22.
The current ratio shows the company ability to pay their short term liability. If the current ratio of the company is 2 then company short term ability is good (M Y Khan, P. K Jain, 2014). The ratio analysis shows the current ratio 1.12.
Quick Ratio Analysis
The quick ratio helps in calculating the company ability to pay their current liabilities with the help of quick assets. The ratio analysis shows the quick ratio 0.44.
Inventory Turnover Analysis
The inventory turnover ratio shows the ability of the company in terms of managing their inventory. The ratio analysis shows the inventory turnover ratio 5.78.
Debt Ratio Analysis
The debt ratio shows the percentage of finance, company getting from their investors. The ratio analysis shows the inventory turnover ratio 0.68.
The receivable ratio shows the how efficient a firm using their assets. The above calculation of receivable ratio reflects that the company able to use their assets in effective manner.
Solution-c
The ratio averages for your industry to evaluate Target’s performance are as follows.
|
|
Target Corporation |
Industry |
|
Gross margin |
29.26% |
30.48% |
|
Operating margin |
6.46% |
7.05% |
|
Pretax margin |
5.50% |
5.80% |
|
Net Profit margin |
3.79% |
3.85% |
|
P/E Ratio |
16.39 |
24.59 |
|
Return on Equity |
23.85% |
19.88% |
|
Return on Assets |
6.68% |
6.97% |
|
Quick Ratio |
0.27 |
0.41 |
|
Current Ratio |
0.96 |
1.46 |
|
Asset Turnover |
1.76 |
1.75 |
|
Inventory Turnover |
4.78 |
5.55 |
Solution-d
The profit margin of the company is considered to be above average in comparison to the objectives. The target corporation also looking for achieves the goals of last financial year. However company is well positioned when compared to the average margin for the industry, an indication that they could either be having greater revenue or less expense (J. Van Horne, Prof John M Wachowicz JR, 2015). The company return on equity is encouraging this is an indication that the company is wise. The expenditures are greatly reduced. When it comes to the debt management, the company has undertaken a policy of 17% leverage. They seem to have taken the course that most of the other companies in the industry have taken.
The times interest earned are very appealing for the company in question. This is a clear indication that the company does not take loans that it is not able to service which is an encouraging trait. As much as there is no industry average, there is other companies that are not able to service their debts and they are disadvantaged in that they are not able to cater well for the company.
Solution-e
|
Solvency Analysis |
Kroger |
Costco |
Wal-Mart |
Whole foods |
|
Leverage Ratio |
7.13 |
2.20 |
2.41 |
2.43 |
|
Debt Ratio |
58 |
19.80 |
51.5 |
36 |
|
Long-Term Debt to Equity |
126.99 |
19.77 |
67 |
48.56 |
|
Activity Analysis |
Kroger |
Costco |
Wal-Mart |
Whole foods |
|
Asset Turnover |
.30 |
3.40 |
2.44 |
2.30 |
|
Accounts Receivable Turnover |
90.70 |
101.43 |
251.1 |
|
|
Inventory Turnover |
12.30 |
9 |
8.6 |
|
DuPont ROE |
NPM |
TAT |
EM |
ROE |
|
Kroger |
5.53% |
.30 |
2.37 |
.0393 |
|
Costco |
1.67% |
3.4 |
1.20 |
.0681 |
|
Wal-Mart |
3.54% |
2.4 |
1.53 |
.13 |
|
Whole foods |
3.81% |
1.5 |
2.10 |
.12 |
Solution-f
Having carried out a research on the market in general, the technology industry is one of the fastest growing in the economies of different countries worldwide. This is due to the increased globalization and use of technology. The company can benefit a lot from concentrating only on the technology industry. The insight and competition is enough to foster growth (M Y Khan, P. K Jain, 2014). The food and beverage industry does not put technology into great use. That could give them an added advantage.
The company has disregarded influence from the external environment which is not good at all, causing it to lag behind in terms of innovation and implementation of many of the new legislation and development of new products. In terms of deviation, the industry is actually performing worse than the individual company. The marketability of the company, as deducted from an online survey of the customers, needs to be worked on through means such as advertisement as it is greatly faltering.
Solution-g
References:
Irvine Lapsley. (2016). Financial Accountability & Management: Wiley
Van Horne, Prof John M Wachowicz JR. (2015). Fundamentals of Financial Management: Prentice Hall
M Y Khan, P. K Jain. (2014). Financial Management: McGraw-Hill Education
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