Return to Target’s 2010 annual report. For instructions on how to access the report online, see the Continuing Financial Statement Analysis Problem in Chapter 2. On page 33 of the annual report, you’ll find Target’s income statement for the year ending January 29, 2011 (called the Consolidated Statement of Operations). On page 34 you’ll find Target’s balance sheet as of January 29, 2011 (called the Consolidated Statement of Financial Position). Now answer the following questions:
1. Look at Target’s balance sheet. How much cash and cash equivalents does Target have as of January 29, 2011 and January 30, 2010? Did the cash and cash equivalents increase or decrease?
2. Look at footnote 9 of the financial statements. Footnote 9 can be found on page 41 in Target’s 2010 annual report. What does it tell you about Target’s cash equivalents?
3. Look at Target’s balance sheet. How much accounts receivable (credit card receivables), net of allowance for doubtful accounts (bad debt allowance), does Target have as of January 29, 2011 and January 30, 2010?
4. Look at footnote 10 of the financial statements. Footnote 10 can be found starting on page 42 of the financial statement in Target’s 201 0 annual report. What does it tell you about the receivables?
5. Using Target’s balance sheet, compute Target’s current and quick ratio for the years ending January 29, 2011 and January 30, 2010. Has it changed? What do these ratios tell you about Target’s management of liquidity?
6. Use Target’s balance sheet and income statement to compute Target’s accounts receivable turnover and receivable collection period for 201 0. What do these ratios tell you about Target’s management of receivables? (Assume all sales are on credit and ignore credit card revenues.)
7. Looking back over your answers to questions 1 through 6, how do you think Target is performing? What do you think about Target’s management of cash and receivables?