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Target Company the second largest retailer after Wal-Mart in USA. The company is headquartered in Minnesota and was founded in 1902. Target is publicly traded company, listed on NYSE, and it is a component of S & P 500. The company has more than 1934 stores in USA. Target company is a holding company that owns many subsidiaries including, Target Financial Services (which deals with issuing target credit cards), Target Sourcing Services (which assists in importing merchandise to the store), and Target Commercial Interiors (which offers furniture and design services) (Danbolt, 2014). By the end of the financial year 2013, the company had employed 366000 employees. The customers’ data of the company was breached in 2013, affecting more than 110 million customers in the USA.
Financial ratio analysis is paramount management tool which indicators organizational performance and pinpoints the weaknesses and strengths of the company (Edmister, 2012). There are leverage, liquidity, profitability, and operational efficiency ratios.
This indicates the company’s utilization of the borrowed money. They include debt to equity and interest coverage. The debt to equity and interest coverage ratios of the Target Company in the financial year 2014 is 1.96 and 7.7 respectively as indicated below (Target, 2015):
This shows that the company relies more on debt than equity. However, the interest coverage ratio shows that it has high ability of meeting its interest expenses and charges.
This indicates the ability of a company of meeting its short-term obligations when they fall due. They include current and quick ratios. The quick and current ratios for the Target Company in 2014 are 0.45 and 1.2 respectively as indicated below. The figures indicate that the company has sufficient liquidity to cater for its short-term obligations (Target Company, 2015).
This indicates the performance of the company, and it is mainly carried along the years. These ratios include return on assets and net profit margin (Edmister, 2012). The net profit margin and the return on assets ratios in 2014 for the Target Company were -0.02 and -0.04 as shown below. This indicates that the company generated – $ 0.02 and – $ 0.04 for every unit of sales and invested assets respectively (Target, 2015).
These ratios indicate efficiency of the entity in utilizing assets and managing liabilities. They include inventory turnover and accounts payable turnover. The Target Company inventory turnover and accounts payable turnover for 2014 were 5.83 and 6.61 (Target, 2015).
This shows that the inventory the inventory was turned into sales 5.8 times while accounts payable turned over 6.61 times in 2014.
Investment represents creation of an asset with expectation of the returns such as dividend, capital appreciation, interest earning, or rent (Edmister, 2012) The Target Company had investments worth $ 27317 million, which was a decrease from $ 32990 million of the year 2013. The investment comprises of long-term investment worth $ 654 million and net property plant and equipment, which are worth $ 25958 million. Much of the investment funds come from the debt and the retained earnings in the year 2013. According to the company, the move to increase its investments was motivated by the growth strategy of the company in which its seeks to maximize its shareholders’ wealth.
The cash flow statement in the amount of money, which flow into and out of the company (Edmister, 2012). The Target Company had a net free cash flow of $ 1515 million in the year 2014. This means that the Target Company can be able to meet its expenses and operations without necessarily during the outside fund. The ability of the target company to have a high free cash flow indicates that the company has a high potential for growth, and thus the shareholders can consider investing in it. Target Company had net cash from operations of $ 1139 million. Companies with a positive operation cash flow are more preferred by investors. The company spent on net $ 1926 million in the investing activities, which indicates that it is growing. The company had $ -998 million from financing activities that included the dividend payment.
Target Company had sufficient liquidity in 2014, despite recording a loss. The Company recorded a loss due to a high cost of sales, assets depreciation, and poor performance from discounted operation (Danbolt, 2014). The poor performance of the Canadian and other subsidiaries stores made the company announce it will close 133 stores in Canada.
Danbolt, J. (2014). Target Company Cross‐border Effects in Acquisitions into the UK. European Financial Management, 10(1), 83-108.
Edmister, R. O. (2012). An empirical test of financial ratio analysis for small business failure prediction. Journal of Financial and Quantitative analysis,7(02), 1477-1493.
Target Company (2015). Financial report for the financial year 2015. Target Company Minnesota USA.