Target Corp. is a major U.S. retailer that historically has carried inventory balances in excess of 15
Question:
Target Corp. is a major U.S. retailer that historically has carried inventory balances in excess of 15 percent of its total assets, and in a typical year the cost of its sold inventory approximates 70 percent of total sales. In the operating section of its 2014 statement of cash flows, Target deducted the $512 million increase in its inventory balance and added the $777 million increase in its accounts payable balance to net earnings in the calculation of cash fl ow provided by operations.
REQUIRED:
a. Why were these adjustments reported on the statement of cash flows?
b. Assuming that most of the accounts payable are owed to its inventory suppliers, what does the difference between these two amounts indicate about how Target’s operating cash flows were managed during 2014?
Accounts payable (AP) are bills to be paid as part of the normal course of business.This is a standard accounting term, one of the most common liabilities, which normally appears in the balance sheet listing of liabilities. Businesses receive...
Step by Step Answer:
a When an asset such as inventory increases it means that more cash was invested in inventory thus ...View the full answer
