Due to Target Corporation’s financial statements, it has been concluded that they are in substandard standing. This verdict was reached through the analyzation of the following ratios in comparison to the industry average: return on equity, current ratio, fixed asset ratio,sales to working capital, cost of sales/inventory, cost of sales to payable , and EBIT. After reflecting on the analysis of these ratios and the industry average, it is in our professional opinion that we advise to avoid investing in Target due to their lack of proper investment.
The return on equity ratio indicates the percentage of profit which is generated from stockholder’s equity. Target’s return on equity is 26%. Compared to Walmart (return on equity 18%), Target has …show more content…
Target has the current ratio of 1.12 for 2015 and 1.16 for 2014; however, the industry average is 2.1. Because the company’s ratio is above one, we are certain they are capable of paying off their liabilities. One of the more troubling ratios is the fixed asset ratio that helps us understand how well the company’s operating performance is. For Target Corporation, they had a FA ratio of 2.93 (2015) and 2.80 (2016). Not only is there a decrease to be found, but they are doing poorly compared to the industry’s average of 33.9. The reason behind a lower FA ratio is the non current asset from discontinued …show more content…
The industry average for inventory turnover is 14.3; however, Target’s inventory turnover for 2015 is 6.05 and for 2014 is 6.19. The lower ratio shows that Target has excessive inventory compared to its sales. Similarly, the accounts payable turnover ratio how usual the company pays its accounts payable amount. The industry average for inventory turnover is 16.6; however, Target’s inventory turnover for 2015 is 7.01 and for 2014 is 6.61. It shows that Target took longer to pay off its suppliers on 2014. Although, Target’s payable turnover is less than industry average but it has been improved on
The return on equity ratio indicates the percentage of profit which is generated from stockholder’s equity. Target’s return on equity is 26%. Compared to Walmart (return on equity 18%), Target has …show more content…
Target has the current ratio of 1.12 for 2015 and 1.16 for 2014; however, the industry average is 2.1. Because the company’s ratio is above one, we are certain they are capable of paying off their liabilities. One of the more troubling ratios is the fixed asset ratio that helps us understand how well the company’s operating performance is. For Target Corporation, they had a FA ratio of 2.93 (2015) and 2.80 (2016). Not only is there a decrease to be found, but they are doing poorly compared to the industry’s average of 33.9. The reason behind a lower FA ratio is the non current asset from discontinued …show more content…
The industry average for inventory turnover is 14.3; however, Target’s inventory turnover for 2015 is 6.05 and for 2014 is 6.19. The lower ratio shows that Target has excessive inventory compared to its sales. Similarly, the accounts payable turnover ratio how usual the company pays its accounts payable amount. The industry average for inventory turnover is 16.6; however, Target’s inventory turnover for 2015 is 7.01 and for 2014 is 6.61. It shows that Target took longer to pay off its suppliers on 2014. Although, Target’s payable turnover is less than industry average but it has been improved on