Acct 2400 Financial Statements Assignment – Part 2 Spring 2019
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Name:
This assignment is due at the beginning of class on Tue. May 7 …
late submissions (even within the class period on the due date) will be assessed a late penalty.
This Part 2 of the financial statements exercise is worth 55 points
Note: This cover page must be printed
with the rest of the packet and submitted as the first
page of the completed exercise.
Print your name (legibly) on this cover sheet.
Instructions:
We have been analyzing the recent annual financial statements and disclosure notes for Target
Corporation and another company you chose. This is a graded assignment worth a total 60
points. This is a continuation of activities from Part 1 of this assignment (printing and turning in
a company’s financial statements). This Part 2 will count for 55 points.
In addition to discussions in class, a summary of the commonly-used ratios is included at the end
of this document. The concepts are summarized in chapter 13 of the online textbook (chapter 13
is not included in the paper version of the textbook). The videos explaining these analysis
concepts are also published on Connect.
The Excel spreadsheet provided with the assignment contains four ta
ed worksheets. You are
to complete the yellow-shaded areas as described in questions below. Each sheet contains a
sample formula or two to get you started.
Your submission must contain (stapled together):
1) This cover sheet with your name printed (legibly), and a completed copy of the rest of
this document.
2) Printed copies of all four ta
ed worksheets of the completed Excel spreadsheet.
3) If you did not submit an acceptable copy of the annual financial statements for your
company in part 1 (if you didn’t get all 5 points), you must also attach the financial
statements from your chosen company to be eligible for credit for questions related to
your chosen company. As required for Part 1 of this assignment, you must include the
appropriate annual financial statements as explained for Part 1 of this assignment (and
only the financial statements—not a lot of extra pages).
Acct 2400 Financial Statements Assignment – Part 2 Spring 2019
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1. What is the name of the company you chose to analyze in addition to Target?
Target’s Report of Independent Public Accounting Firm
2. What is the name of Target’s independent audit firm?
3. What type of opinion did the independent auditors issue on Target’s financial statements
(unqualified, qualified, adverse or disclaimer)? What does this opinion mean?
Income Statement
Note: we didn’t talk about it in class, but a “discontinued operation” as Target reports is when a
company closes, sells, or spins off a significant operation like Target did with its Canada
operation over the last few years.
4. In the Excel spreadsheet provided with the assignment for Target, in the [Inc St-Vert] sheet,
complete preparing a “common-size” income statement (vertical analysis) for all three fiscal
years. In common-size income statements, net sales revenue is 100 percent and every other
number is a percentage of sales.
5. Calculate the following values:
Target
(fiscal 2017, ended Feb. 3, 2018)
Your Chosen Company
(most recent year available)
Gross margin percentage
Net margin percentage
6. Which company (Target or your chosen company) had better profitability performance?
Income Statement – Horizontal Analysis
7. In the Excel spreadsheet provided with the assignment for Target, in the [Inc St-Horiz] sheet,
complete computing annual changes for each line item on the income statement.
8. Describe the trend in Target’s revenues. Be specific (e.g., slight/steady/drastic increase or
decrease each year, or fluctuating with an initial modest/significant increase or decrease,
followed by a modest/significant increase or decrease, etc.) to precisely describe the
company’s situation.
9. Describe the trend in Target’s cost of sales (cost of goods sold)—again, be specific.
Acct 2400 Financial Statements Assignment – Part 2 Spring 2019
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10. Describe the trend in Target’s selling, general & administrative expenses (operating
expenses)—again, be specific.
11. Describe the trend in Target’s net income—again, be specific.
12. Examine the percentage changes in these items from 2016 to 2017 for Target. Summarize
what is causing the changes in net income from fiscal year 2016 to 2017 based on the
percentages computed above. Do you expect the trend to continue?
13. For your chosen company, examine the percentage changes in these same items (revenue,
cost of goods sold, and operating expenses) from 2016 to XXXXXXXXXXSummarize what is causing
the changes in net income from fiscal year 2016 to 2017 for your company. Do you expect
the trend to continue?
Balance Sheet – Vertical (Common Size) Analysis
14. In the Excel spreadsheet provided with the assignment for Target, in the [Bal Sht-Vert] sheet,
complete preparing common-size balance sheets for the years ended Feb. 3, 2018 and Jan.
28, XXXXXXXXXXIn a common-size balance sheet, total assets is 100 percent and every other
number is a percentage of total assets.
15. Answer the following questions:
Balance Sheet Vertical
(Common Size) Analysis
Target
(as of Feb. 3, 2018)
Your Chosen Company
(most recent date available)
What percent of total assets
are cu
ent assets?
Which cu
ent asset has the
largest balance?
What percent of total assets
are long-term assets?
Which long-term asset has
the largest balance?
What percent of total assets
are cu
ent liabilities?
Which cu
ent liability has
the largest balance?
What percent of total assets
are long-term liabilities?
Which long-term liability has
the largest balance?
Ratio of stockholders’ equity
to total assets
Acct 2400 Financial Statements Assignment – Part 2 Spring 2019
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16. Does Target finance its assets mostly with debt or equity?
Balance Sheet – Horizontal Analysis
17. In the Excel spreadsheet provided with the assignment for Target, in the [Bal Sht-Horiz]
sheet, complete computing annual changes for each line item on the balance sheet.
18. Calculate the following values:
Balance Sheet Horizontal
Analysis
Target
(Feb. 3, 2018 and Jan. 28, 2017)
Your Chosen Company
(most recent dates available)
What was the dollar-amount
of change in Inventory?
What was the percentage
change in Inventory?
What was the direction of the
change (increase or decrease)
Which asset line item had the
largest dollar increase?
Which asset line item had the
largest percentage change?
Which liability line item had
largest dollar increase?
Which liability line item had
the largest percentage change?
What was the total dollar
amount and direction of
change in stockholders’ equity
Was this change in equity
more from earnings, issuing
stock, or something else?
Statement of Cash Flows and Statement of Stockholders’ Equity
19. Answer the following questions:
Statements of Cash Flows
and Stockholders’ Equity
Target
(fiscal 2017, ended Feb. 3, 2018)
Your Chosen Company
(most recent year available)
What is the total amount and
direction of change in the
cash balance during the year?
Largest individual cash
inflow line item description
2nd-largest individual cash
inflow line item description
Largest individual cash
outflow line item description
2nd-largest individual cash
outflow line item description
Acct 2400 Financial Statements Assignment – Part 2 Spring 2019
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Statements of Cash Flows
and Stockholders’ Equity
Target
(fiscal 2017, ended Feb. 3, 2018)
Your Chosen Company
(most recent year available)
Amount of dividends
declared during the yea
Which financial statement
did you find this on?
Amount of dividends paid
during the yea
Which financial statement
did you find this on?
20. Briefly explain why the dividends declared amount may not be the same as dividends paid.
Acct 2400 Financial Statements Assignment – Part 2 Spring 2019
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Summary of Common Financial Statement Analysis Ratios
Liquidity
Ratios
1. Working capital Cu
ent assets − Cu
ent liabilities
2. Cu
ent ratio Cu
ent assets ÷ Cu
ent liabilities
3. Quick (acid-test) ratio (Cu
ent assets − Inventory − Prepaids) ÷
Cu
ent liabilities
4. Accounts receivable turnover Net credit sales ÷ Average receivables
5. Average days to collect receivables 365 ÷ Accounts receivable turnover
6. Inventory turnover Cost of goods sold ÷ Average inventory
7. Average days to sell inventory 365 ÷ Inventory turnover
Solvency
Ratios
8. Debt-to-assets ratio Total liabilities ÷ Total assets
9. Debt-to-equity ratio Total liabilities ÷ Total stockholders’ equity
10. Times interest is earned Earnings before interest and taxes ÷ Interest expense
11. Plant assets to long-term liabilities Net plant assets ÷ Long-term liabilities
Profitability
Ratios
12. Gross margin Gross margin (gross profit) ÷ Net sales
13. Net margin Net income ÷ Net sales
14. Asset turnover Net sales ÷ Average total assets
15. Return on assets Net income ÷ Average total assets
16. Return on equity Net income ÷ Average total stockholders’ equity
Stock
Market
Ratios
17. Earnings per share Net earnings available for common stock ÷
Average outstanding common shares
18. Price-earnings ratio Market price per share ÷ Earnings per share
19. Market capitalization Market price per share x Outstanding common shares
20. Book value per share (Stockholders’ equity − Prefe
ed rights) ÷
Outstanding common shares
21. Dividend yield Dividends per share ÷ Market price per share
Note: Many ratios compare a period total (like "net sales") to a period-end balance (like "total assets")--in
this case it is preferable to use an average of beginning and ending balances in the denominator.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Fe
uary 3, 2018