Question

Analysis and Interpretation of Profitability Balance sheets and income statements for Target Corporation follow. Income Statement For Fiscal Years Ended (5 millions) 2007 2006 2005 Sales $ 57,878 $ 51,271 $ 45,682 Credit card revenues 1,612 1,349 1,157 Total revenues 59,490 52,620 46,839 Cost of sales 39,399 34,927 31,445 Selling, general and administrative expenses 12,819 11,185 9,797 Credit card expenses 707 776 737 Depreciation and amortization 1,496 1,409 1,259 Earnings before interest and income taxes 5,069 4,323 3,601 Net interest expense 572 463 Earnings before income taxes 4,497 3,860 3,031 Provisions for income taxes 1,710 1,452 1,146 Net earnings $ 2,787 $2,408 $ 1,885 570 Balance Sheet ($ millions, except footnotes) February 3, 2007 January 28, 2006 Assets Cash and cash equivalents $ 813 $ 1,648 Credit card receivables 6,194 5,666 Inventory 6,254 5,838

Answer 1

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As per the HomeworkLib policy, only the first four questions should be ansered. Kindly take note of it.

Part A

2007 NOPAT = Operating income -Tax on operating profit

Tax on operating profit = Tax Expense + Tax Shield= Tax Expense + (Pretax net nonoperating expense × Statutory tax rate)

=5069-(1710+(572*39%)) = $3136

Part B

NOA = Operating Assets – Operating Liabilities

NOA = (total assets – cash and equivalents) – (total assets -Total stockholders’ equity - Short-term borrowings and current portion of long-term debt - Long-term debt)

2007 NOA = (37349-813)-(37349-15633-1362-8675) = $24857

2006 NOA = (34995-1648)-(34995-14205-753-9119) = $22429

Part C

2007 RNOA = NOPAT/Average NOA = 3136/((24857+22429)/2) = 13.26%

2007 NOPM = NOPAT/Sales = 3136/59490 = 5.27%

2007 NOAT = Sales/ Average NOA = 59490/((24857+22429)/2) = 2.52

Part D

NNO = Nonoperating Liabilities + Noncontrolling Interest – Nonoperating Assets

2007 NNO = (1362+8675) + 0 – (813) = $9224

2006 NNO = (753+9119) +0 – (1648) = $8224