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    Financial Statements of The Target Corporation

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    Refer to Target Corporation's financial statements (http://www.targetcorp.com/targetcorp_group/investor-relations/investor-relations.jhtml) .

    Target Corporation is currently seeking additional capital to expand its operations. Two companies have shown interest in providing additional capital.

    Company #1 is interested in investing in the organization and, therefore, would like to have part ownership through the sale of new stock.
    Company #2 is interested in providing a loan to the Target Corporation.
    Both organizations need to know more about the financial stability of Target.

    As an employee of Target, your supervisor needs you to write a memo in which you explain what information from the Target Corporation's financial statements will be highlighted when representatives of Target meet with each of these companies. In your memo, be sure to explain which information will be highlighted to Company #1 and which information will be highlighted to Company #2 and why. Explain any differences in the information that you have chosen to highlight.

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    Solution Preview

    Company who wants to invest into Target will be interested in knowing about the profitability of the organization and the return that the Target is giving to its shareholders. The following ratios will help in knowing the profitability and about the Return on its investments:

    Profitability ratios try to measure how profitable the firm is. Note that their success in this endeavor depends on how accurately the financial statements reflect reality. They include the profit margin on sales, basic earning power, return on total assets (ROA) and return on common equity (ROE).
    ? Profit Margin on Sales = Net Income available to Common Shareholders / Sales
    Gross Margin on Sales = Gross Operating margin / Sales

    Investment ratios

    ? Return on Assets = Net Income available to Common Shareholders / Total Assets
    ? Return on Equity = Net Income available to Common Shareholders / Common Equity
    The profitability ratios, indicates ...

    Solution Summary

    This solution uses Target Corporation's financial statements to explain the ratios to determine the profitability of the corporation to its shareholders such as profitability ratio, investment ratio, debt management ratios and liquidity position. A ratio analysis, income statement, balance sheet and cashflow statement are also included.