Company Profile: Target corporation
Ticker symbol: TGT
Year Established: 1902
Employee: 323,000
CEO: Brian Cornell
NAICS code: 452910 (Plunkett Research Online, 2017)
Located in Minneapolis, USA, Target Corporation lies in the general merchandise stores industry in the United States of America (Target Corporation, 2017). Some of the other companies in the same industry are Wal-Mart Stores Inc., Sam’s club, and Costco Wholesale Corporation. It is imperative to compare the industrial performance with that of Target Corporation. This is done to place the company at a certain position in its industry. Thirteen companies in the general merchandise stores industry were averaged and compared to Target Corporation to determine its financial profitability, and its liquidity and solvency.
Financial performance is the backbone of a company’s existence in the market. In financial profitability, the following were the aspects of comparison to the industry averages. In 2016, Target Corporation’s revenue summed to US$ 73,784,999,936, against an industrial average of US$56,772,998,105 (Plunkett Research Online, 2017) . This indicates that the corporation is above average in revenue. In the same year, the gross profit of Target Corporation stood at US$21,788,000,256 compared to the industrial average’s US$13,284,526,367 (Plunkett Research Online, 2017) . The corporation was, again, ahead of the average. In 2016, the basic earnings per share of Target Corporation were at US$5.35 each, while the industry averages were US$1.70 (Plunkett Research Online, 2017) . This further indicates that the corporation is way ahead of the industrial averages. By analyzing and comparing the aspects of financial profitability for Target Corporation against its industrial averages, it is point blank that the corporation is a great performer in the general merchandise industry.
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The following is the analysis of liquidity and solvency of Target Corporation against the industrial averages for the year 2016. In liquidity, the current liquidity ratio will be determined by dividing the current assets by the current liabilities.
|
Liquidity ratio |
|
|
2016 |
|
|
Target corporation |
Industry averages |
|
Current assets=US$14,129,999,872 Current liabilities=US$12,622,000,128 |
Current assets=US$8,977,588,286 Current liabilities=US$9,134,934,064 |
|
Liquidity ratio=current assets÷ current liabilities Therefore, Liquidity ratio= $14,129,999,872÷$12,622,000,128 =1.12 |
Liquidity ratio=current assets÷ current liabilities Therefore, Liquidity ratio=$8,977,588,286÷$9,134,934,064 =0.98 |
Target Corporation has a higher degree of liquidity compared to the industry averages. This indicates adequacy in the case of Target Corporation, and inadequate degree of liquidity in the industry average (Peavler, 2017) .
Regarding solvency, the debt to assets will be calculated by dividing the total debt by the total assets of the company.
|
Solvency ratio |
|
|
2016 |
|
|
Target corporation |
Industry average |
|
Total debt=$815,000,000+$11,944,999,936 =$12,759,999,936 Total assets=$40,262,000,640 |
Total debt= $814,283,321+$4,467,637,025 =$5,281,920,346 Total assets=$24,877,573,066 |
|
Debt to assets=total debt÷ total assets Therefore Debt to assets ratio=$12,759,999,936÷$40,262,000,640 =0.32 |
Debt to assets=total debt÷ total assets Therefore Debt to assets ratio=$5,281,920,346÷24,877,573,066 =0.21 |
Target Corporation has a higher solvency ratio compared to industry averages. This means that around 30% of the assets in Target Corporation have been financed by debt, while 20% of the industrial average assets have been financed by debt.
A review of the financial statements of a country can reveal the trends the company is taking. A three-year financial statements review for Target Corporation will enable the positive and negative trends to be reported to the management. The following table has the aspects of the financial statements for the last three years.
|
Year Aspect |
2015 |
2016 |
2017 |
Trend |
|
Revenue |
$72,618,000,000 |
$ 73,785,000,000 |
$69,495,000,000 |
Positive then Negative |
|
Gross profit |
$21,340,000,256 |
$21,788,000,256 |
$20,622,999,552 |
Negative |
|
Earnings per share |
$-2.58 |
$5.35 |
$4.74 |
Positive then negative |
|
Liquidity ratio |
1.2 |
1.12 |
0.94 |
Negative |
|
Solvency ratio |
0.31 |
0.32 |
0.34 |
Positive |
The following is a graphical representation of the revenue at Target Corporation in three years.
There is a noted decrease in financial performance in aspects such as revenue, gross profit, and the earnings per share. Target Corporation’s management needs to note the trend and come up with relevant strategies to reverse the downward trend. This will ensure that the company maintains its high financial performance. The degree of liquidity in the corporation is decreasing. At the current rate, 94 cents of every asset covers $1 of liabilities (Peavler, 2017) . There is need to reverse the trend. The solvency ratio is increasing. This means that more assets are being acquired by the company by obtention of debts.
References
Peavler, R. (2017, February 14). Analysis of Liquidity Position Using Financial Ratios. The Balance . Retrieved from https://www.thebalance.com/liquidity-position-analysis-with-ratios-393233
Peavler, R. (2017, September 10). The Debt to Asset Ratio - Its Importance and Calculation. The Balance . Retrieved from https://www.thebalance.com/debt-to-asset-ratio-393193
Plunkett Research Online. (2017). Company Profile: Target Corporation. Retrieved December 11, 2017, from http://www.plunkettresearchonline.com
Target Corporation. (2017). Target: Expect More. Pay Less . Retrieved December 11, 2017, from https://intl.Target.com/
