1. Pick a public firm. 2. Analyze the firm’s financial statements and supplementary information. Your analysis should include the preparation of common-size financial statements, key financial ratios,

This data indicates that the operating efficiency of Targ et 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 rati o 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, Targ et’s cash from operating activities was $4451 millions , $4862 m illions and $4125 m illions . Although the number of Target’s cash from operating activities dropped seriously from $4862 m illions in 2007 to $4125 m illions in 2008, Target still had a strong abi lity 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 liabilitie s. 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 c ash 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 Quic k 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. Inven tory 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 durin g 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 Y ear 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 o perating 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 in terest 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 exp ense 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 cove rage 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 coverag e 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 asses sment 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 stoc k 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 asse ts (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 20 06, 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.c om ) 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 out standing. 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 an d 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 remai ned 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 ro se 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 re venues 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 s ome 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. Dec lining 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 f ees 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 c hecks. 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 tha t 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 a verage 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 quar ters. (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 slightl y 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 pe r 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 wit h 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 pric e 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 bas ed 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 ine fficient 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 determ ine 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 pape r.