Analysis of Target Corporation's Financial Statements

Case Study: Target Corporation
Name
Institution
Course
Professor
Due Date
Case Study: Target Corporation
Target Corporation is a merchandise retailer that was established in 1902 that operates mainly in physical stores and digital channels. The main merchandise categories that the company operates in include beauty & household essentials, apparel & accessories, food & beverage, home furnishings & décor, and hardlines (Target, 2023). Of these, beauty & household essentials contributed the largest to the company’s revenues at 28 percent in the financial year 2022. An analysis of the company’s financial statement can provide more information about the financial health of the company.
Vertical Analysis
A vertical analysis of the consolidated statement of operation reveals that the cost of sales was 75.36 percent of the total revenue generated. The operating income was 3.53 percent, with the earning before income taxes adding up to 3.13 percent of the total sales. An analysis of the statement of financial position indicates that total current assets make up 33.46 percent of the company’s total assets. The total current assets are 36.56 percent of the total assets. An analysis of the consolidated statement of comprehensive income shows that 3.88 percent of comprehensive income was spent on pension benefit liabilities. The currency translation adjustment contributed 8,48 percent of the company’s comprehensive income. An analysis of the revenue statement indicates that apparel and accessories contributed 16.17 percent of the company’s revenue, beauty, and household essentials make up 27.10 percent of the company’s revenues, food and beverage makes up 21 percent of the company’s revenue, hardlines contribute to 16.26 percent of the company’s revenue, home furnishings, and décor contributes to 17.84 percent of the company’s revenues, and other revenues contribute to 1.4 percent of the company’s revenue (Target, 2023).
Horizontal Analysis
The horizontal analysis of the consolidated statement of income reveals that the company experienced a 2.94 percent increase in annual revenue from FY 2021 to FY 2022. The reported growth from FY 2019 to FY 2021 was 19.78 percent, while the growth from FY 2020 to FY 2021 was 13.3 percent. The annual gross profit reported in FY 2022 was 13.37 percent lower than the one reported in FY 2021. Analysis of the statement of financial position indicates that the company reported a 0.88 decline in total assets from FY 2021 to FY 2022. The company reported an 18.16 percent increase in long-term debt in FY 2022 compared to FY 2021. The total liabilities also increased by 2.73 percent in FY 2022. The horizontal analysis showed that the company's current ratio decreased from 0.992 to 0.9152 from FY 2021 to FY 2022. Gross margin increased from 29.28 percent to 24.64 percent from FY 2021 to FY 2022. The return on assets decreased from 12.91 to 5.21, with the return on investment decreasing from 26.33 to 10.21.
Ratio Analysis Comparisons
With regards to liquidity ratio, Target's current ratio of 0.8206 is lower than Walmart's 0.9152 and the industry average of 1.29. The lower ratio indicates that T...