For a business to grow and enhance its performance, business owners and managers need to effectively and speedily transform their planning, reporting, and analysis processes. This is a critical requirement for companies of all sizes as it uncovers trends and gives insights on improving decision making. Companies can achieve better performance by first automating routine tasks to reduce planning cycles. Additionally, this can be attained by identifying the most profitable products, as well as customers and sales channels. It is also crucial for organizations to test multiple business scenarios and assess the financial impact of alternative courses of actions so that they can finally react with agility to the dynamic market conditions. Concurrently, effective decision making and strategic planning would be attained.
The paper compares and contrasts the business performance of Target Corporation and United Health Group as of the years 2016 to 2017, to determine the financial stability of the businesses. Target Corporation is the leading companies in Minnesota clocking in with 323,000 staffs. The company is focused exclusively on the production of dry grocery, edited food assortment, perishables, dairy, and frozen items. The commodities are availed to customers in the organization's physical stores as well as via online channels . Target Corporation was established by George Dayton in the year 1902 and has experienced a number of rebranding over the years to suit the owners and apple to the consumers.
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The corporation has three main retail divisions; Target stores, Melvyn’s, and Mashall fields. Furthermore, it has distinguished its self from other competitors by offering upscale fashion and products at reasonable prices (Chen et al. 2018) . Target Corporation is followed by the United Health Group which has a total of 230,000 employees. The company was started by Richard T Burke in the year 1977; it is the largest healthcare company offering healthcare products and insurance services. TGT Company Financials, (2018) claims that the corporation is dedicated to helping people live healthier lives through its diversified family of business, enabling technology, healthcare information, and intelligence, clinical care management, as well as coordination, to meet the demand of health systems .
Both the cash flow statements of the United Health Group and that of Target Corporation indicated an increase in the cash flows from the operating activities of 2016 to 2017. The cash flow provides the capital position of the company. It is one thing the investors look at as it shows the net change in money at hand for a company compared to the previous period as at 2017 the company had $13.32 million from its operations. The financial activates indicate the flow of capital between United Health Group owners and the creditors. The operating activity liquid flow includes transactions, adjustments, and changes in value that are not defined as investing. This allowed the organization to rear capital and repay bondholders while comparing it with Target Corporation who had $ 2.64 billion at hand for its operational activities which gained the company 6.92 billion. There were $-3.72 billion between the company owners and creditors.
According to the United Health Group Incorporated, (2017), the company’s revenue covers its premiums product and service. In the year 2017, the company obtained an income of $ 201.2 billion from $ 184.8 billion in the year 2016 which was an increment of 9 per cent . Target Corporation does not have any material debt, no material contract assets, as well as contract liabilities. The company’s revenue and operating earnings have amplified as each segment reported indicate an increase in income as a result of growth fostered by care delivery, behavioural services, health financial services and growth in revenue management services. Moreover, business process services, technology-based services, as well as client and consumer expansion. Whereas the revenue of Target corporation is acquired primarily through digital channel sales which all record each customer delivery. The commission earned on sales generated from the different departments as at 2017 in the company was forty-four million dollars.
In terms of investments, the Target Corporation’s annual report in 2017 indicates that the rate of return assumption was 7.5% for domestic equity securities, 8.0% for international equity, 4.7% for long-duration debt, 8.0% for balanced funds and 9.0% for other investments (United Health Group Inc., 2018). On the other hand, the UnitedHealth group made significant investments in fixed income funds, employee savings plan in line with investments, venture capital funds, and dividend-paying stocks. In 2017 the company’s total expenditures summed up to $ 594 million in equity. Due to this, the company annual cash dividend rate increased to $ 3.00 per share. The total shareholder which was an increase in stock price and the dividends paid was 40 per cent in the year 2017.
The core similarity between the two companies is that their cash flows for the year 2017 increased significantly as compared to the previous year. In the case of the United Health Group, the rise in cash flow was driven by the increased earned revenues and higher net earnings, which also resulted from the effect of the health insurance industry tax as well as the great discounts offered to many ACA compliant products. Other changes increased customer funds. According to Target Reports First Quarter (2018). However, in Target Corporation, the operating cash flow provided by continuing operations increased from $ 5,329 to $ 6,849 in the 2017 financial year. Cash equivalents were held by entities located outside the United States. The company’s investment policy is designed to preserve the principal and liquidity of the short-term savings and allows investment in large money market funds.
The current receivables from Target Corporation come from vendor income which is earned but not yet received. The debtors are calculated based on the agreement in place and the company performance at the time it is accepted. As at 2017, the vendor income receivable was $385 million, and that of the United Health Group comes from pharmacy care services and business agreements with pharmaceutical manufacturers, some of which provide rebates based on the utility of the manufacturer’s products by the company’s clients. In 2017, the receivable consolidated in the balance sheet amounted to $ 4.0 billion, which indicate that the two companies are progressing well.
Long-term solvency ratios like the debt ratio of United Health Group is relatively high. In the 2017first quarter , the company had assumed a debt of $ 926 million. Particularly, the organization’s long-term debt obligation was $ 607 million and $ 209 million which were classified as current debt. Whereas, in Target Corporation the debt ratio dropped from $ 12,749 million in the year 2016 to $ 11,587 million in 2017. The deficit was inclusive of the long-term debt and current portion.
According to Target Corporation (TGT), (2018). market risk entails how capital investments are made. If Target Corporation’s remodelling of existing stores through the development of new ones, as well as improving technology and chain supply infrastructures does not achieve appropriate returns, the company’s competitive position and financial condition may be adversely affected. In order for Target Corporation to attain profits, the business depends on the managers’ ability to make the right decisions. While this is the case for Target Corporation, the United Health group makes use of its market exposure by diversifying investments across different fixed income market sectors. The unrealized gains or losses on investments are reported in comprehensive income ( Luo et al., 2015) . The 2017 financial report shows the impact of hypothetical changes in market interest rate across the entire yield curve by 1 per cent point or 2 per cent point.
The following is a summary of the various ratios for the two companies;
Liquidity ratios United Health group Target Corporation
Current ratio = Current assets 137,157 = 1.5 38,999 = 3.4
Current liabilities 91,495 11,587
Quick ratio = Current assets – inventory 13,715 – 2,289 = 0.1 38,999 -11,709 = 2.4
Current liabilities 91495 11,587
Cash ratio = Cash 9,968 = 0.1 14,248 = 1.2
Current liabilities 91,495 11,587
Long-term solvency ratios
Debt ratio = Total debt 25,772 = 0.1 11,587 = 0.3
Total assets 13, 7157 38,999
Asset Management Ratios
Inventory turnover = Cost of goods sold 16,142 = 0.6 3,528 = 0.2
Inventory 28,444 22,152
Receivables turnover = Sales 48,723 = 1.6 71,879 = 5.0
Accounts receivable 30,896 14248
Profitability Ratios
Profit Margin = Net income adopted as calculated 4.5 6.0
Sales
Return on Assets = Net Income 2,172 =0.01 2,934 = 0.08
Total Assets 137,157 38,999
Return on Equity = Net Income 2,172 = 0.05 2,934 = 0.1
Total equity 43,995 20,754
The above ratios were recorded, processed and summarized from the various data acquired on the discussed businesses herein.
In summation, the two companies have experienced consistent financial growth. The United Health group, for instance, has increased its gross domestic product by eighteen per cent in the last few years. The high levels of customer satisfaction, effective pricing services, as well as the variable range of quality goods and services offered are the primary driver for their stable financial statuses. Target Corporation financial statement taken as a whole presents a fairly good year in all material respects. Concurrently, these organizations have augmented their competitive advantage and remained relevant in the production of their goods and services to their clients.
References
Chen, C. W., Collins, D. W., Kravet, T. D., & Mergenthaler, R. D. (2018). Financial statement comparability and the efficiency of acquisition decisions. Contemporary Accounting Research , 35 (1), 164-202.
Luo, X., Wang, H., Raithel, S., & Zheng, Q. (2015). Corporate social performance, analyst stock recommendations, and firm future returns. Strategic Management Journal , 36 (1), 123- 136.
Target Corporation (TGT), (2018). Retrieved from https://finance.yahoo.com/quote/TGT/financials?ltr=1
Target Reports First Quarter (2018). Earnings and Affirms Full-year Guidance. Retrieved from https://corporate.target.com/press/releases/2018/05/target-reports-first-quarter-2018- earnings-and-aff
TGT Company Financials, (2018). Retrieved from https://www.nasdaq.com/symbol/tgt/financials?query=income-statement
United Health Group Incorporated, (2017). Retrieved from https://finance.yahoo.com/quote/UNH/financials?ltr=1
United Health Group Inc., (2018). Annual Financials for United Health Group Inc. Retrieved from https://www.marketwatch.com/investing/stock/unh/financials
United Health Group Inc.(2018). Income statements. Retrieved from https://www.reuters.com/finance/stocks/income-statement/UNH.N
