In this essay I will be reviewing Target’s financial statements for the fiscal year 2015 that ended on January 30, 2016. It will discuss Target’s inventory method, net purchases, and inventory turnover.
The inventory method used by Target is the last-in, first-out (LIFO) method.This inventory method is when the ending inventory is the oldest costs for the period. Target values its inventory by including cost to suppliers, freight costs, import costs, operating costs, estimated losses, and many other expenses. They calculate the inventory costs by using the cost-to-retail ratio and inventory retail value. The LIFO method is popularly used by retail companies because they will have to constantly buy products to stay in business. LIFO makes the most sense because it uses the most recent prices of the products so you can estimate how much it will cost to replace the products sold. This is important when prices are fluctuating and rising as it estimates the cost based on the price now, not the price you actually bought them for. …show more content…
The beginning inventory was 8,282 million, the ending inventory was 8,601 million, and the cost of sales was 51,997. So plug these into the formula 8,282 + purchases - 8,601 = 51,997. This means net purchases equals 52,316 million. I think Target has a lot of strengths in terms of the products it sells. They sell a wide variety of products that are unique to Target. Their brand is widely recognized and provides a different experience than other retail stores. I think one of their weaknesses is they do not have many stores. They only have stores in the US and when they tried to expand it failed and they had to close a lot of
The inventory method used by Target is the last-in, first-out (LIFO) method.This inventory method is when the ending inventory is the oldest costs for the period. Target values its inventory by including cost to suppliers, freight costs, import costs, operating costs, estimated losses, and many other expenses. They calculate the inventory costs by using the cost-to-retail ratio and inventory retail value. The LIFO method is popularly used by retail companies because they will have to constantly buy products to stay in business. LIFO makes the most sense because it uses the most recent prices of the products so you can estimate how much it will cost to replace the products sold. This is important when prices are fluctuating and rising as it estimates the cost based on the price now, not the price you actually bought them for. …show more content…
The beginning inventory was 8,282 million, the ending inventory was 8,601 million, and the cost of sales was 51,997. So plug these into the formula 8,282 + purchases - 8,601 = 51,997. This means net purchases equals 52,316 million. I think Target has a lot of strengths in terms of the products it sells. They sell a wide variety of products that are unique to Target. Their brand is widely recognized and provides a different experience than other retail stores. I think one of their weaknesses is they do not have many stores. They only have stores in the US and when they tried to expand it failed and they had to close a lot of