1.

Introduction

TGT is a discount retailing company in the USA and has brands stores including apparel,
electronics, home products, grocery, and health sections. Target is a big chain of department
stores with a focus area in Minnesota, the United States of America and boasts of several
hundreds of outlets with an expansion in online markets. Target is one of the market leaders and
it highly valuable company with good financial background, that is why it is interesting to
analyze it in the aspect of acquisition.

As the basis for this report, we will focus on Target’s most recent filing with the Securities and
Exchange Commission (SEC) in the form of a 10-K Annual Report contain extensive financial
information such as the income statement and balance sheet, and statement of cash flows. There
will be primary concentration on accounts receivable, inventories and different financial ratios
for evaluating the efficiency of the Target Corporation.

2. Financial Statement Analysis

A. Income Statement Analysis

Target’s Income Statement presents the company’s total revenues, its expenses and whether or
not it was profitable in the past fiscal year.

 Revenue: The company posted total revenues of about over $111 billion in the fiscal
year that ended in January 2024 from a figure of about $106 billion in the earlier year.
In this regard, the increase was pursued by a greater demand for consumer goods
despite the other macroeconomic factors.
 Cost of Goods Sold (COGS): Some of the important financial ratios included by
Target were as follows, COGS of the company was $85 billion, which led to gross
profit of the company was approximately $26 billion. Gross profit margin was
somewhat higher at 23.4% than in the prior year 23.2%. This shows that Target
Corporation has been able to control its cost over the years bearing in mind that the
cost of raw materials and human resource is ever changing.
 Operating Income: Overall operating income stood at $7 billion, which a nominal
downgrade from the $7.5 billion was overall operating income the company posted in
the previous financial year. Which can be explained by the growth of operating
expenses, primarily due to the expansion of the distribution and logistics networks
necessary for the Target’s growing online sales.
 Net Income: Full-year net income stood at $5.2 billion, down from $5.5 billion as in
the same period the previous year. This a drop as regards the interest expenses as well
as taxes that affected overall profits..

B. Balance Sheet Analysis

The Balance Sheet provides information in detail of Target’s financial situation by end of the
fiscal year.
The key areas of focus are:

• Total Assets: According to Target data, total assets for the enterprise as of January 2024
amounted to $49 billion; in January 2023, it was $47.5 billion. The rise was mainly
attributed to inventory and PPE where inventories and PPE recorded increases of
$20.5mn and $17.8mn, respectively.
• Accounts Receivable: Accounts receivable increased to $2.1 billion from $1.8 in the last
year. This increase could also be as a result of Target extending credit temperatures to
some of its customers resulting to higher sales but correspondingly exposing the company
to higher risks of credit defaults. The increase in receivables could also be indicative that
the company takes longer time in order to collect from its debtors.
• Inventory: Overall inventory rose to $5.3 billion from $4.9 billion in the prior year. This
is usually the case with retailers especially as they head into the festivities; besides, it also
speaks volumes about issues of stock management as the world encounters new and
unreiyed complications in supply chains.
• Total Liabilities: Target had $37 billion in total liabilities in the year, up from $35
billion in the prior year. This has been due to an increase in the long term borrowings and
leasing.
• Shareholders’ Equity: Target had shareholders equity at $12 billion, its equity to debt
ratio suggests its in moderate financial leverage.

C. Statement of Cash Flows

The Statement of Cash Flows reports the cash inflow and outflow during the fiscal year. Key
observations:

• Operating Cash Flow: The operational cash flow stood at $7.8 billion depicting that
Target was having fine operating cash flow management from continuing operations.
Nevertheless, the operating cash flow declined a little to $7billion than the previous year
of $8 billion owing to higher cock requirements such as inventories.
• Investing Cash Flow: The amount of capital expenditure incurred by Target was $ 4
billion predominantly to open up new stores and to improve the distribution network.
New land and property were purchased for future expansion of the company’s facilities
as well.
• Financing Cash Flow: From the value analysis, target has been able to apply $2 billion
towards the payments of debts and dividends to shareholders, as a sign of its worth in
delivering value to investors as it controls for the debts.

3. Key Financial Ratios

Here are some key ratios calculated from Target’s financial data:

 Current Ratio:
 This means that Target has enough amounts of cash and otherassets readily convertible in
to cash to meets its amounts due within the next twelve months and it has a good liquidity
status.

 Quick Ratio:

The quick ratio is less than 1 and so it means Target can have problems in meeting
current obligations without employing inventory. This is often the case in the retail
industry but ought to be noticed.

 Inventory Turnover:

This puts Target in a good position of operational efficiency because the retailers adjust
their inventories approximately 16.67 times per year.

 Days Sales Outstanding (DSO):

Target approaches a near-optimal receivables collection as its average DSO of 6.9 days—shows
that the company collects the receivables promptly.

4. Conclusion

The performance of Target Corporation at the period ending in the fiscal year of January 2024
reveals increasing revenues, but resized operating profits because of cost rise. Positive changes
that can be seen include the operational cash flow and inventory turnover ratio While there are
risks that the increase in accounts receivable and inventory may pose some form of risk to the
company below the balance sheet line, particular attention needs to be exercised to ensure the
company does not go belly up due to lack of liquidity. Another favorable impression is founded
on relatively high current ratio and proven ability to control the inventory.

In terms of acquisition then, although Target boasts a healthy balance sheet, a slight dip in
profitability and a rising long-term debt are areas to keep in mind. Sustaining cost discipline,
inventory and receivables management will remain the key strategy drivers for building and
sustaining profits.
References

 HAUGSTAD, K. (2017). VALUATION OF TARGET CORP. END-OF-DEGREE

PROJECT.
 Ajmal, S. (2019). Research Project in Finance: Target Corporation.
 Monteiro, C. V. (2023). Target Corporation, Inc. Equity Valuation (Master's thesis,
Universidade Catolica Portuguesa (Portugal)).
 Teles, J. D. (2022). Equity valuation: Target Corporation (Doctoral dissertation).
 Chart, S. (2003). Target Corporation Stock Analysis.