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    Target Corporation and ratios

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    Describe in simple terms waht each calculated number means to Target.
    Current Ratio, Average collection period, Inventory turnover ratio, Cash Ratio and Net Profit margin.

    Please help with this problem, what does each of the above listed items mean to Target. I am beyond confused.

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    Solution Preview

    Current Ratio:

    An indication of a company's ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. Current ratio is equal to current assets divided by current liabilities. If the current assets of a company are more than twice the current liabilities, then that company is generally considered to have good short-term financial strength. If current liablities exceed current assets, then the company may have problems meeting its short-term obligations.

    source: http://www.investorwords.com/1258/current_ratio.html

    For target corporation, current ratio depicts the ability of Target corporation to meet its short term obligation to various parties such as its suppliers who supply various merchandise to its stores.

    Average collection period:

    The average time period for which receivables are outstanding. Equal to accounts receivable divided by average daily sales. also called collection ratio.

    source: http://www.investorwords.com/349/average_collection_period.html

    The average ...

    Solution Summary

    Describe in simple terms what each calculated number means to Target.