Financial analysis

Name: Date:

Target Corporation Case

Answers and Analysis

Target Corporation (Target) operates large general merchandise and food discount stores in all of the

United States, with the exception of Alaska Hawaii, and Vermont. The company also has its own credit

card operations and operates a fully integrated online business, target.com. Although the online portion of

target’s business is small relative to the overall size of target, sales are growing at a more rapid pace in the

online business compared to the in-store sales. The company’s philosophy is to offer their customers a

delightful shopping experience and their team members a preferred place to work, and to invest in the

communities in which target conducts business to improve quality of life. Selected information from the

2007 form 10-k of Target Corporation is on pages 228-237.

Required:

1. Analyze the firm’s financial statements and supplementary information. Your analysis should include

the preparation of common-size financial statements, key financial ratios, and an evaluation of

short-term liquidity, operating efficiency, capital structure and long-term solvency, profitability, and

market measures.

2. Identify the strengths and weaknesses of the company.

3. What is your opinion of the investment potential and the creditworthiness of Target Corporation?

Company Overview:

Target Corporation (Target or ‘the company’) operates large format general merchandise and food

discount stores in the US, which include Target and Super Target stores. The company offers both

everyday essentials and fashionable merchandise. Target is headquartered in Minneapolis, Minnesota

and employs 366,000 people. The company recorded revenues of $63,367 million in the fiscal year

ended January 2008, an increase of 6.5% over 2007. The operating profit of the company was $5,272

million in the fiscal year 2008, an increase of 4% over 2007. The net profit was $2,849 million in the

fiscal year 2008, an increase of 2.2% over 2007.

Target Corporation

Consolidated Balance Sheets and common-size Balance Sheets

(In millions, except share and per share date)

Period End Date

2008

02/02/2008

2007

02/03/2007

Assets

Cash and Short Term Investments 2,450.00 12.96% 813 5.53%

Cash & Equivalents 599 3.17% 813 5.53%

Short Term Investments 1,851.00 9.79% 0 0.00%

Total Receivables, Net 8,651.00 45.76% 6,757.00 45.95%

Accounts Receivable – Trade, Net 8,054.00 42.60% 6,194.00 42.12%

Accounts Receivable – Trade, Gross 8,624.00 45.62% 6,711.00 45.63%

Provision for Doubtful Accounts -570 -3.01% -517 -3.52%

Receivables – Other 597 3.16% 563 3.83%

Total Inventory 6,780.00 35.86% 6,254.00 42.53%

Prepaid Expenses 0 0.00% 0 0.00%

Other Current Assets, Total 1,025.00 5.42% 882 6.00%

Total Current Assets 18,906.00 100.00% 14,706.00 100.00%

Property/Plant/Equipment, Total – Net 24,095.00 127.45% 21,431.00 145.73%

Goodwill, Net 60 0.32% 60 0.41%

Intangibles, Net 148 0.78% 152 1.03%

Long Term Investments 0 0.00% 0 0.00%

Note Receivable – Long Term 0 0.00% 0 0.00%

Other Long Term Assets, Total 1,351.00 7.15% 1,000.00 6.80%

Other Assets, Total 0 0.00% 0 0.00%

Total Assets 44,560.00 235.69% 37,349.00 253.97%

Liabilities and Shareholders’ Equity

Accounts Payable 6,721.00 35.55% 6,575.00 44.71%

Payable/Accrued 0 0.00% 0 0.00%

Accrued Expenses 2,109.00 11.16% 2,004.00 13.63%

Notes Payable/Short Term Debt 0 0.00% 0 0.00%

Current Port. of LT Debt/Capital Leases 1,964.00 10.39% 1,362.00 9.26%

Other Current Liabilities, Total 988 5.23% 1,176.00 8.00%

Total Current Liabilities 11,782.00 62.32% 11,117.00 75.59%

Total Long Term Debt 15,126.00 80.01% 8,675.00 58.99%

Long Term Debt 15,126.00 80.01% 8,528.00 57.99%

Capital Lease Obligations 0 0.00% 147 1.00%

Deferred Income Tax 470 2.49% 577 3.92%

Other Liabilities, Total 1,875.00 9.92% 1,347.00 9.16%

Total Liabilities 29,253.00 154.73% 21,716.00 147.67%

Common Stock 68 0.36% 72 0.49%

Additional Paid-In Capital 2,656.00 14.05% 2,387.00 16.23%

Retained Earnings (Accumulated Deficit) 12,761.00 67.50% 13,417.00 91.23%

Other Equity, Total -178 -0.94% -243 -1.65%

Total Equity 15,307.00 80.96% 15,633.00 106.30%

Total Liabilities & Shareholders’ Equity 44,560.00 235.69% 37,349.00 253.97%

Target Corporation

Income statements and common-size Income statements

(In millions, except share and per share date)

Period End Date

2008

02/02/2008

2007

02/03/2007

2006

01/28/2006

Revenue 63,367.00 100.00% 59,490.00 100.00% 52,620.00 100.00%

Total Revenue 63,367.00 100.00% 59,490.00 100.00% 52,620.00 100.00%

Cost of Revenue, Total 43,766.00 69.07% 41,073.00 69.04% 35,703.00 67.85%

Gross Profit 19,601.00 30.93% 18,417.00 30.96% 16,917.00 32.15%

Selling/General/Administrative

Expenses, Total

12,670.00 19.99% 11,852.00 19.92% 11,185.00 21.26%

Research & Development 0 0.00% 0 0.00% 0 0.00%

Depreciation/Amortization 1,659.00 2.62% 1,496.00 2.51% 1,409.00 2.68%

Interest Expense (Income), Net

Operating

0 0.00% 0 0.00% 0 0.00%

Unusual Expense (Income) 0 0.00% 0 0.00% 0 0.00%

Other Operating Expenses, Total 0 0.00% 0 0.00% 0 0.00%

Operating Income 4,625.00 7.30% 4,497.00 7.56% 3,860.00 7.34%

Interest Income (Expense), Net

Non-Operating

0 0.00% 0 0.00% 0 0.00%

Gain (Loss) on Sale of Assets 0 0.00% 0 0.00% 0 0.00%

Other, Net 0 0.00% 0 0.00% 0 0.00%

Income Before Tax 4,625.00 7.30% 4,497.00 7.56% 3,860.00 7.34%

Income Tax – Total 1,776.00 2.80% 1,710.00 2.87% 1,452.00 2.76%

Income After Tax 2,849.00 4.50% 2,787.00 4.68% 2,408.00 4.58%

Minority Interest 0 0.00% 0 0.00% 0 0.00%

Equity In Affiliates 0 0.00% 0 0.00% 0 0.00%

U.S. GAAP Adjustment 0 0.00% 0 0.00% 0 0.00%

Net Income Before Extra. Items 2,849.00 4.50% 2,787.00 4.68% 2,408.00 4.58%

Total Extraordinary Items 0 0.00% 0 0.00% 0 0.00%

Discontinued Operations 0 0.00% 0 0.00% 0 0.00%

Net Income 2,849.00 4.50% 2,787.00 4.68% 2,408.00 4.58%

Target Corporation

Statements of cash flows

(In millions, except share and per share date)

Period End Date

2008

02/02/2008

2007

02/03/2007

2006

01/28/2006

Net Income/Starting Line 2,849.00 2,787.00 2,408.00

Depreciation/Depletion 1,659.00 1,496.00 1,409.00

Amortization 0 0 0

Deferred Taxes -70 -201 -122

Non-Cash Items 634 497 579

Discontinued Operations 0 0 0

Unusual Items 28 53 70

Other Non-Cash Items 606 444 509

Changes in Working Capital -947 283 177

Accounts Receivable -602 -226 -244

Inventories -525 -431 -454

Other Assets -38 -25 -52

Accounts Payable 111 435 489

Accrued Expenses 62 389 351

Taxes Payable 0 41 70

Other Liabilities 124 100 0

Other Operating Cash Flow -79 0 17

Cash from Operating Activities 4,125.00 4,862.00 4,451.00

Capital Expenditures -4,369.00 -3,928.00 -3,388.00

Purchase of Fixed Assets -4,369.00 -3,928.00 -3,388.00

Other Investing Cash Flow Items, Total -1,826.00 -765 -761

Sale of Fixed Assets 95 62 58

Other Investing Cash Flow -1,921.00 -827 -819

Cash from Investing Activities -6,195.00 -4,693.00 -4,149.00

Financing Cash Flow Items -375 -5 58

Other Financing Cash Flow -375 -5 58

Total Cash Dividends Paid -442 -380 -318

Issuance (Retirement) of Stock, Net -2,267.00 -720 -1,025.00

Issuance (Retirement) of Debt, Net 6,791.00 101 386

Cash from Financing Activities 3,707.00 -1,004.00 -899

Foreign Exchange Effects 0 0 0

Net Change in Cash 1,637.00 -835 -597

Net Cash – Beginning Balance 813 1,648.00 2,245.00

Net Cash – Ending Balance 2,450.00 813 1,648.00

Target Corporation

Key financial ratios

Fiscal Year 2008 2007 2006

Fiscal Year End Date 3/31/09 3/31/08 3/31/07

Tests of profitability:

1.Return on equity (ROE): Net Income / Average Stockholders’ Equity 0.15 0.18 0.19

2.Return on assets (ROA): Net Income + Interest Expense (net of tax) /

Average Total assets 0.07 0.09 0.09

3.Financial leverage percentage: Return on Equity – Return on assets 0.08 0.10 0.09

4.Earnings per share (EPS): Net Income / Average Number of Share of

Common Stock Outstanding 2.82 3.39 3.21

5.Quality of income: Cash Flows From Operating Activities / Net

Income 2.00 1.45 1.74

6.Profit margin: Net Income / Net Sales Revenue 0.03 0.04 0.05

7.Fixed asset turnover ratio: Net Sales Revenue / Average Net Fixed

Assets 2.52 2.63 2.78

8.Asset turnover ratio: Net Sales Revenue / Average Total Assets 1.47 1.55 1.64

Tests of Liquidity:

8.Cash ratio: Cash + Cash Equivalents / Current Liabilities 0.05 0.05 0.07

9.Current ratio: Current Assets / Current Liabilities 1.66 1.60 1.32

10.Quick Ratio: Quick Assets (cash, short-term investments, accounts

receivable(net of the allowance or doubtful accounts)) / Current

Liabilities 0.95 0.94 0.68

11.Receivable turnover ratio: Net Credit Sales / Average Inventory 9.63 9.72 9.84

12.Average Age of Receivables: Days In a Year / Receivable Turnover

Ratio 37.89 37.54 37.10

13.Inventory turnover ratio: Cost of Goods Sold / Average Inventory 6.79 6.72 6.79

14.Average Day’s Supply in inventory: Days In a Year / Inventory

Turnover Ratio 53.77 54.35 53.73

15.Payable Turnover Ratio: Cost of Goods Sold / Average Accounts

Payable 7.01 6.58 6.14

16.Average Age of Payables: Days In a Year / Payable Turnover Ratio 52.07 55.44 57.07

Tests of Solvency:

17.Times interest earned: Net Income + interest Expense + Income

Taxes Expense / Interest Expense 3.96 6.92 7.53

18.Cash coverage ratio: Cash Flows from Operating Activities (before

interest and tax paid) / Interest Paid 4.96 6.18 8.14

19.Debt-to-equity ratio: Total Liabilities / Stockholder’s Equity 2.22 1.91 1.39

Market Tests:

20. Price/earnings ratio: Current Market Price per Share / Earnings per

Share 18.67 18.13 16.92

21.Dividend yield ratio: Dividends per Share / Market Price per Share 0.01 0.01 0.01

1. Analyze the firm’s financial statements and supplementary information. Your analysis should

include the preparation of common-size financial statements, key financial ratios, and an

evaluation of short-term liquidity, operating efficiency, capital structure and long-term solvency,

profitability, and market measures. (The financial statement analysis template can be accessed

and used at www.prenhall.com/fraser.)

1.1. Evaluation of profitability and operating efficiency:

1.1.1. Return on equity:

Return on equity reflects the simple fact that investors expect to earn more money if they invest more

money. Target earned 0.19 in 2006, 0.18 in 2007, and 0.15 in 2008 on the owners’ investment.

Comparing 2006 to 2008, the data shows that Target’s performance in 2008 as measured by its ROE has

declined compared to 2006. This comparison suggests that they have been inefficient.

1.1.2. Return on Assets:

Return on assets compares income to the total assets used to earn the income. The return on assets for

Target was 0.09 in 2006, 0.09 in 2007, and 0.07 in 2008 this decrease indicates that Target utilized its

assets inefficiently.

1.1.3. Financial leverage percentage:

Financial leverage percentage measures the advantage or disadvantage that occurs when a company’s

return on equity differs from its return on assets. Target’s financial leverage ratio was 0.09 in 2006, 0.10

in 2007, and 0.08 in 2008. The financial leverage ratio increased by .01 from 2006 to 2007, which

indicated that it utilized more debt in its capital structure but from 2007 to 2008 it decreased by .02,

which indicates that it utilized less debt in its capital structure.

1.1.4. Profit margin:

The profit margin measures the percentage of each sales dollar. From 2006 to 2008, each dollar of

Target sales generated 5 cents of profit in 2006, 4 cents of profit in 2007, and 3 cents of profit in 2008.

This data indicates that the operating efficiency of Target became weak.

1.1.5. Fixed asset turnover ratio:

From 2006 to 2008 Target’s fixed asset turnover ratio was 2.78 in 2006, 2.63 in 2007, and 2.52 in

2008. This means that Target had no ability to effectively utilize its fixed assets to generate revenue.

For each dollar Target invested in property, plant, and equipment, the company was able to earn $2.78 in

2006, $2.63 in 2007, and $2.52 in 2008 in sales revenue.

1.1.6. Asset turnover ratio:

From 2006 to 2008 Target’s asset turnover ratio was 1.64 in 2006, 1.55 in 2007, and 1.47 in 2008.

This also means that Target wasn’t able to operate more effectively.

1.2. Evaluation of Liquidity:

1.2.1. Cash Ratio:

From 2006 to 2008, Target’s cash ratio was 7% in 2006, 5% in 2007 and 5% in 2008. The average

cash ratio during 2006 to 2008 was 5.67% that means Target has on hand 5.67 cents of cash for each $1.

In the meanwhile, Target’s statement of cash flows showed that the company generated a large amount of

cash from its operating activities. From 2006 to 2008, Target’s cash from operating activities was $4451

millions, $4862 millions and $4125 millions. Although the number of Target’s cash from operating

activities dropped seriously from $4862 millions in 2007 to $4125 millions in 2008, Target still had a

strong ability to generate cash form operating activities to cover the currently liabilities.

1.2.2. Current Ratio:

The current ratio measures the cushion of working capital that companies maintain to allow for the

inevitable unevenness in the flow of funds through the working capital accounts. From 2006 to 2008,

Target’s current ratio was 1.32 in 2006, 1.60 in 2007 and 1.66 in 2008. The average current ratio during

2006 to 2008 was 1.53 that means Target had $1.53 in current assets for each $1 in current liabilities. This

ratio is very strong that gave Target a strong ability to generate cash.

1.2.3. Quick Ratio:

The quick ratio is a measure of the safety margin hat is available to meet a company’s current

liabilities. From 2006 to 2008, Target has 0.68 cents in cash and near-cash assets for every $1 in current

liabilities in 2006, 0.94 cents in cash and near-cash assets for every $1 in current liabilities in 2007, 0.95

cents in cash and near-cash assets for every $1 in current liabilities in 2008. The average Quick ratio

during 2006 to 2008 was 0.86 that means Target has 0.86 cents in cash and near-cash assets for every $1

in current liabilities. Target has a safety and good margin in the amount of cash Target generates from its

operating activities.

1.2.4. Inventory Turnover Ratio:

Inventory turnover is a measure of both liquidity and operating efficiency. From 2006 to 2008,

Target’s inventory was acquired and sold to customers 6.79 times during the year 2006, 6.72 times during

the year 2007, and 6.79 times during the year of 2008. During 2006 to 2008, on average, Target’s

inventory was acquired and sold to customers 6.77 times. According to the data we know that Target’s

inventory turnover ratio kept stable in recent years. We can see this result through the data of average

day’s supply in Inventory. From 2006 to 2008, Target’s average day’s supply in inventory was 53.73 days

in 2006, 54.35 days in 2007, and 53.77 days in 2008.

1.2.5. Using ratio to analyze the operating cycle:

Fiscal Year 2008 2007 2006

Fiscal Year End Date 3/31/08 3/31/07 3/31/06

9.Average Age of Payables: Days In a Year / Payable

Turnover Ratio 52.07 55.44 57.07

7.Average Day’s Supply in inventory: Days In a Year /

Inventory Turnover Ratio 91.66 91.89 90.83

5.Average Age of Receivables: Days In a Year / Receivable

Turnover Ratio 39.59 36.45 33.76

The component parts of the operating cycle help us understand the cash needs of the company. In

2006, Target, on average, pays for its inventory 57.07 days after it receives it. It takes, on average, 90.83

days for it to sell and for the company to collect cash from the customer. In 2007, Target, on average, pays

for its inventory 55.44 days after it receives it. It takes, on average, 91.89 days for it to sell and for the

company to collect cash from the customer. In 2008, Target, on average, pays for its inventory 52.07 days

after it receives it. It takes, on average, 91.66 days for it to sell and for the company to collect cash from

the customer. Therefore, Target must invest cash in its operating activities for nearly 33.76 days in 2006,

36.45 days in 2007, and 39.59 days in 2008 between the times it pays its vendors and the time it collects

from its customers. In conclusion, in recent years, Target had enough liquidity, but the liquidity became

weak, so for the management of Nissan should be aware on his liquidity strategy to keep their enough

liquidity and management efficiency.

1.3. Evaluation of capital structure and long-term solvency:

1.3.1. Times interest earned ratio:

The times interest earned ratio compares the income a company generated in a period to its interest

obligation for the same period. From 2006 to 2008, Target generated $7.53 in income for each $1 of

interest expense in 2006, $6.92 in income for each $1 of interest expense in 2007 and$3.96 in income for

each $1 of interest expense in 2008 The ratios were decreasing annually that indicates the secure position

for creditors became weak, and the creditors risk became higher.

1.3.2. Cash coverage ratio:

Target’s cash coverage ratio shows that the company generated $8.14 in cash for every $1 of interest

paid in 2006, $6.18 in cash for every $1 of interest paid in 2007 and $4.96 in cash for every $1 of interest

paid in 2008, which are not very strong coverage and the coverage ability became weak.

1.3.3. debt-to-equity ratio:

From 2006 to 2008, for each $1 of stockholder’s equity, Target had $1.39 worth of liabilities, $1.91

worth of liabilities and $2.22 worth of liabilities that means Target were using more debt to operate.

1.4. Evaluation of market measures:

1.4.1. price/Earnings Ratio:

Recently, when the price of Target stock was $54.40 per share in 2006, $61.53 per share in 2007 and

$52.61 per share in 2008, EPS for Target was $3.21 in 2006, $3.39 in 2007, and $2.82 in 2008. This

indicates that Target’s stock was selling at a price that was 16.92 times its earnings per share in 2006,

18.13 times its earnings per share in 2007 and 18.67 times its earnings per share in 2008. The P/E ratio

reflects the stock market’s assessment of a company’s future performance. Target’s P/E ratio suggests that

the market believes that Target has the growth potential in recent years.

1.4.2. Dividend yield ratio:

Target paid dividends of 0.01 cents per share when the market price of its stock was $54.40 per share

in 2006, $61.53 per share in 2007 and $52.61 per share in 2008.

2. Identify the strengths and weaknesses of the company.

(www.datamonitor.com)

2.2. Strengths:

2.2.1. Robust return on assets and equity:

Target’s return on average assets (ROA) and return on average equity (ROE) remained high in 2006

at 1.67% and 23.7%, respectively. The company’s ROA and ROE are significantly higher than its

competitors. For instance, Associated Banc-Corp’s ROE declined from 17.2% in 2004 to 13.9% in 2006,

and ROA declined from 1.6% in 2004 to 1.5% in 2006. Target’s higher return compared to its competitors

gives it a competitive advantage in attracting customers and equity and debt investors.

(www.datamonitor.com)

2.2.2. Strong credit quality:

Target’s credit quality remains strong. Target’s net charge-offs for 2006 were 0.17%, which is a low

level. The allowance for loan and lease losses at December 31, 2006 was $58.5 million or 0.52% of loans

and leases outstanding. At December 31, 2006, non-performing assets totaled $65.6 million, up by $18.3

million from the previous year end. Approximately 60% of non-performing assets are secured by

residential real estate. Target’s secured lending strategy reduces losses by providing a secondary source of

repayment in the event of a customer default. The company’s strong asset quality reduces earnings

volatility for investors. (www.datamonitor.com)

2.2.3. Strong core banking and regulatory capital position:

In 2006, Target registered a strong growth in its core banking (deposits and loans & leases) and

maintained a good regulatory capital position. In 2006, the company’s loans & leases rose to $11.33

billion, a rise of 11% over 2005. Target’s deposits grew to $9.77 billion in 2006, up by 7% over 2005. In

summary, the company’s core banking grew to $21 billion, a rise of 9.1% over 2005. Despite the growth

in core banking activities, the company’s regulatory capital position remained strong. Target’s tier 1

capital rose to $914 million in 2006 as compared to $864 million in 2005. The company’s total risk based

capital rose to $1,173 million in 2006 from $1,049.6 million in 2005. Consequently, the company’s

capital adequacy ratio rose to 11.10% in 2006 from 10.68% in 2005. The company’s strong core banking

and capital position implies that it is able to balance growth and solvency. (www.datamonitor.com)

2.3. Weaknesses:

2.3.1. High long-term borrowings:

Target’s long-term borrowings were $3,374.4 million during fiscal year 2006, a year on year increase

of 34.4%. The company’s long-term borrowings equaled 245.3% of its revenues in the fiscal year 2006.

The ratio of long term borrowings to revenues rose to 2.45 in 2006 from 2.07 in 2005. This indicates that

the company’s dependence on long term borrowings has increased. The company’s long-term debt to

equity ratio also increased to 3.27 in 2006, up from 2.51 in 2005. This is much higher than some of its

peers. The company’s high indebtedness limits its ability to undertake further financing going forward.

Moreover, it exposes the company to significant financial risks.(www.datamonitor.com)

2.3.2. Declining ATM revenue and low growth in fees and services charges:

Target’s ATM revenue has been declining since the fiscal year 2004. ATM revenue declined to $37.7

million in 2006, as compared to $40.73 million in 2005. During 2003-2006, ATM revenue shrunk to

$37.7 million in 2006, from $42.9 million in 2004, at a negative CAGR of 6.2%. The company’s revenue

from fees and services charges increased in 2006 by 2.9% to $270.2 million. However, during 2004-2006,

revenue from fees and services charges shrunk by a CAGR of 1.8%. The company’s fee income was

negatively affected by the change in behavior of checking account customers. Customers now prefer

Automated Clearing House transactions and debit card transactions instead of checks. In addition, the

accounts of certain customers were closed since they abused their debit card spending, which negatively

affected the company’s fees and service charges. Declining ATM revenues and low growth in fees and

services charges indicate that the company is yet to control customer defection. (www.datamonitor.com)

2.3.3. Limited geographical spread:

Target Financial operates only in the US. The company’s principal subsidiary, Target National Bank,

operates in Minnesota, Illinois, Michigan, Wisconsin, Colorado and Indiana. The company’s limited

geographic spread limits its customer base. In 2007, the US economy, especially the financial services

industry, was badly affected by sub prime crisis. The average cost of inter bank borrowing went up in

2007. The cost of borrowing is expected to remain high in 2008 as well. The company’s high reliance on

long term borrowings and the US economy could lead to lower business growth and profits in the coming

quarters. (www.datamonitor.com)

3. What are your opinion of the investment potential and the creditworthiness of Target

Corporation?

The company’s growth can be seen in multiple areas such as revenue growth since the same quarter

one-year prior revenues slightly increased by .2% and good cash flow from operations and reasonable

valuation levels, since the net operating cash flow has increased by 35% when compared with last year.

However, we can find weakness including feeble growth in the company’s earning per share,

generally poor debt management and poor profit margins, since target’s earning per share has declined by

6.8% in the most recent quarter compared to the same quarter a year ago, the debt-to-equity ratio of 1.33

is relatively high when compared with the industry average

suggesting a need for better debt level management. Along

with the unfavorable debt-to-equity ratio, TGT

maintains a poor quick ratio of .86, which illustrates the

inability to avoid short-term cash problems.

At Target’s current price of $39.30, investors are

placing a positive value of $17 on its future investments. This view is consistent with the company’s most

recent performance that reflected a growth rate of 8.0% per year, and a return on equity of 13.6% versus a

cost of equity of 12.2%. In addition, this view is consistent with PTR’s forecasts. As explained

previously, PTR expects TGT to grow at a rate of 6.0% per year and to earn a return on equity of 16.7%

versus a cost of equity of 12.2%. PTR’s 2011 Price Target of $36 is based on these forecasts and reflects

an estimated value of existing assets of $29 and a value of future investments of $8.

According to the data analysis above we don’t think invest money to Target is a good choice. The

management of Target was becoming inefficient in recent years, and the debt of Target was becoming

higher. It means higher risk to both investors and creditors. The management of Target should change this

situation to operate more efficiently in their business. From our research we can determine that even

though sales increased the net income decreased representing a decrease to the bottom line. This goes to

further prove our standpoint on not investing on Target Corporation because of all the risk factors stated

through out this research paper.