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Target Corporation Financial Analysis

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ACC111 – Accounting
Karl Sauer
Target Corporation Financial analysis

In this essay I will review and offer financial regarding the financial statements of Target Corporation, we will perform a horizontal analysis of Target Corporation’s financial ratio’s starting with the company’s working capital and current ratios from 2004 to 2006.

1. Liquidity Ratios:

Target’s liquidity ratios during this time period remain fairly consistent, from 2004 to 2006 the company current ratio average 1.59, its quick ratio averaged .98 and its working capital was positive averaging $5,052,000,000 each year. Typically current ratios above 1 are considered good, especially when combined with a strong positive working capital.

In Chart No. 2 below, I compared Target’s liquidity ratios against two of its top competitors; Wal-Mart and Costco, across the board Target’s liquidity ratios were higher than their competitors by 45% to 60%.

2. Productivity Ratios:
Productivity rations such as Asset Turnover, Inventory turnover and days stock in inventory show the investor just how well the company is able to use it assets to generate sales and managed its inventory levels.

From Chart No. 3 we can see that the trend for the company’s productivity ratios has been up from 2004 to 2006, and while that is a very positive trend for the company’s asset turnover and inventory turnover ratios, it is a negative trend for the management of their inventory. Also the day’s stock of the company’s inventory has increased from 29 days in 2004 to 58 days in 2006, an increase of almost 100%, and there might be an operational reason for it but at the moment all we can say is we need to follow-up to see why it occurred.

In Chart No. 4 below we compared Target Corp. to their competitors and how this trend impacts the company; Target Corp. has the lowest inventory turnover…...

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