Aalysis and Interpretation of Profitability
Balance sheets and income statements for Target Corporation follow.
| Sales |
$ 51,271 |
$ 45,682 |
$ 40,928 |
| Credit card revenues |
1,349 |
1,157 |
1,097 |
| Total revenues |
52,620 |
46,839 |
42,025 |
| Cost of sales |
34,927 |
31,445 |
28,389 |
| Selling, general and administrative expenses |
11,185 |
9,797 |
8,657 |
| Credit card expenses |
776 |
737 |
722 |
| Depreciation and amortization |
1,409 |
1,259 |
1,098 |
| Earnings before interest and income taxes |
4,323 |
3,601 |
3,159 |
| Net interest expense |
463 |
570 |
556 |
| Earnings before income taxes |
3,860 |
3,031 |
2,603 |
| Provisions for income taxes |
1,452 |
1,146 |
984 |
| Net earnings |
$ 2,408 |
$ 1,885 |
$ 1,619 |
| Assets |
| Cash and cash equivalents |
$ 1,648 |
$ 2,245 |
| Credit card receivables |
5,666 |
5,069 |
| Inventory |
5,838 |
5,384 |
| Other current assets |
1,253 |
1,224 |
| Total current assets |
14,405 |
13,922 |
| Property and equipment |
| Land |
4,449 |
3,804 |
| Buildings and improvements |
14,174 |
12,518 |
| Fixtures and equipment |
3,219 |
2,990 |
| Computer hardware and software |
2,214 |
1,998 |
| Construction-in-progress |
1,158 |
962 |
| Accumulated depreciation |
(6,176) |
(5,412) |
| Property and equipment, net |
19,038 |
16,860 |
| Other noncurrent assets |
1,552 |
1,511 |
| Total assets |
$ 34,995 |
$ 32,293 |
| Liabilities and shareholders' investment |
| Accounts payable |
$ 6,268 |
$ 5,779 |
| Accrued and other current liabilities |
2,567 |
1,937 |
| Current portion of long-term debt and notes payable |
753 |
504 |
| Total current liabilities |
9,588 |
8,220 |
| Long-term debt |
9,119 |
9,034 |
| Deferred income taxes |
851 |
973 |
| Other noncurrent liabilities |
1,232 |
1,037 |
| Shareholders' investment |
| Common stock |
73 |
74 |
| Additional paid-in-capital |
2,121 |
1,810 |
| Retained earnings |
12,013 |
11,148 |
| Accumulated other comprehensive income (loss) |
(2) |
(3) |
| Total shareholders' investment |
14,205 |
13,029 |
| Total liabilities and shareholders' equity |
$ 34,995 |
$ 32,293 |
(a) Apply the basic DuPont model and compute the component measures for profit margin, asset turnover, and financial leverage. (Do not round until your final answer. Round your answers to two decimal places.)
(b) Compute ROE using financial information provided in the balance sheet and income statement. Do not use ROE = PM x AT x FL. (Do not round until your final answer. Round your answer to two decimal places.)
(c) Compute adjusted ROA. Assume a tax rate of: 38.3%. (Do not round until your final answer. Round your answer to two decimal places.)