Leases A. Describe the particular leases of Target Corporation based on the liab
ID: 2614064 • Letter: L
Question
Leases
A. Describe the particular leases of Target Corporation based on the liability section of Target Corporation's balance sheet.
B. What impact have the leases had on Target Corporation's financial statements for the most recent year?
Target's income statement and cash flow statement are as follow:
Income statements
Period Ending
1/28/2017
1/30/2016
Total Revenue
$69,495,000
$73,785,000
Cost of Revenue
$48,872,000
$51,997,000
Gross Profit
$20,623,000
$21,788,000
Research and Development
$0
$0
Sales, General and Admin.
$13,356,000
$14,665,000
Non-Recurring Items
$0
$0
Other Operating Items
$2,298,000
$2,213,000
Operating Income
$4,969,000
$4,910,000
Additional income/expense items
$0
$620,000
Earnings Before Interest and Tax
$4,969,000
$5,530,000
Interest Expense
$1,004,000
$607,000
Earnings Before Tax
$3,965,000
$4,923,000
Income Tax
$1,296,000
$1,602,000
Minority Interest
$0
$0
Equity Earnings/Loss Unconsolidated Subsidiary
$0
$0
Net Income-Cont. Operations
$2,669,000
$3,321,000
Net Income
$2,737,000
$3,363,000
Net Income Applicable to Common Shareholders
$2,737,000
$3,363,000
Balance Sheet
Current Assets
Cash and Cash Equivalents
$2,512,000
$4,046,000
Short-Term Investments
$0
$0
Net Receivables
$0
$0
Inventory
$8,309,000
$8,601,000
Other Current Assets
$1,169,000
$1,483,000
Total Current Assets
$11,990,000
$14,130,000
Long-Term Assets
Long-Term Investments
$0
$0
Fixed Assets
$24,658,000
$25,217,000
Goodwill
$0
$0
Intangible Assets
$0
$0
Other Assets
$783,000
$915,000
Deferred Asset Charges
$0
$0
Total Assets
$37,431,000
$40,262,000
Current Liabilities
Accounts Payable
$10,989,000
$11,654,000
Short-Term Debt / Current Portion of Long-Term Debt
$1,718,000
$815,000
Other Current Liabilities
$1,000
$153,000
Total Current Liabilities
$12,708,000
$12,622,000
Long-Term Debt
$11,031,000
$11,945,000
Other Liabilities
$1,878,000
$1,915,000
Deferred Liability Charges
$861,000
$823,000
Misc. Stocks
$0
$0
Minority Interest
$0
$0
Total Liabilities
$26,478,000
$27,305,000
Stock-Holders Equity
Common Stocks
$46,000
$50,000
Capital Surplus
$5,661,000
$5,348,000
Retained Earnings
$5,884,000
$8,188,000
Treasury Stock
$0
$0
Other Equity
($638,000)
($629,000)
Total Equity
$10,953,000
$12,957,000
Total Liabilities & Equity
$37,431,000
$40,262,000
Cash Flow
Net Income
$2,737,000
$3,363,000
Cash Flow-Operating Activities
Depreciation
$2,298,000
$2,213,000
Net Income Adjustments
$508,000
($812,000)
Changes in Operating Activities
Accounts Receivable
$0
$0
Changes in Inventories
$293,000
($316,000)
Other Operating Activities
$36,000
$227,000
Liabilities
($543,000)
$579,000
Net Cash Flow-Operating
$5,436,000
$5,958,000
Cash flows-Investing Activities
Capital Expenditures
($1,547,000)
($1,438,000)
Investments
$28,000
$24,000
Other Investing Activities
$46,000
$1,922,000
Net Cash Flows-Investing
($1,473,000)
$508,000
Cash Flows-Financing Activities
Sale and Purchase of Stock
($3,485,000)
($3,183,000)
Net Borrowings
($664,000)
($85,000)
Other Financing Activities
$0
$0
Net Cash Flows-Financing
($5,497,000)
($4,630,000)
Effect of Exchange Rate
$0
$0
Net Cash Flow
($1,534,000)
$1,836,000
Financial Ratios
Liquidity Ratios
Current Ratio
94%
112%
Quick Ratio
29%
44%
Cash Ratio
20%
32%
Profitability Ratio
Gross Margin
30%
30%
Operating Margin
7%
7%
Pre-Tax Margin
6%
7%
Profit Margin
4%
5%
(www.nasdaq.com)
Income statements
Period Ending
1/28/2017
1/30/2016
Total Revenue
$69,495,000
$73,785,000
Cost of Revenue
$48,872,000
$51,997,000
Gross Profit
$20,623,000
$21,788,000
Research and Development
$0
$0
Sales, General and Admin.
$13,356,000
$14,665,000
Non-Recurring Items
$0
$0
Other Operating Items
$2,298,000
$2,213,000
Operating Income
$4,969,000
$4,910,000
Additional income/expense items
$0
$620,000
Earnings Before Interest and Tax
$4,969,000
$5,530,000
Interest Expense
$1,004,000
$607,000
Earnings Before Tax
$3,965,000
$4,923,000
Income Tax
$1,296,000
$1,602,000
Minority Interest
$0
$0
Equity Earnings/Loss Unconsolidated Subsidiary
$0
$0
Net Income-Cont. Operations
$2,669,000
$3,321,000
Net Income
$2,737,000
$3,363,000
Net Income Applicable to Common Shareholders
$2,737,000
$3,363,000
Balance Sheet
Current Assets
Cash and Cash Equivalents
$2,512,000
$4,046,000
Short-Term Investments
$0
$0
Net Receivables
$0
$0
Inventory
$8,309,000
$8,601,000
Other Current Assets
$1,169,000
$1,483,000
Total Current Assets
$11,990,000
$14,130,000
Long-Term Assets
Long-Term Investments
$0
$0
Fixed Assets
$24,658,000
$25,217,000
Goodwill
$0
$0
Intangible Assets
$0
$0
Other Assets
$783,000
$915,000
Deferred Asset Charges
$0
$0
Total Assets
$37,431,000
$40,262,000
Current Liabilities
Accounts Payable
$10,989,000
$11,654,000
Short-Term Debt / Current Portion of Long-Term Debt
$1,718,000
$815,000
Other Current Liabilities
$1,000
$153,000
Total Current Liabilities
$12,708,000
$12,622,000
Long-Term Debt
$11,031,000
$11,945,000
Other Liabilities
$1,878,000
$1,915,000
Deferred Liability Charges
$861,000
$823,000
Misc. Stocks
$0
$0
Minority Interest
$0
$0
Total Liabilities
$26,478,000
$27,305,000
Stock-Holders Equity
Common Stocks
$46,000
$50,000
Capital Surplus
$5,661,000
$5,348,000
Retained Earnings
$5,884,000
$8,188,000
Treasury Stock
$0
$0
Other Equity
($638,000)
($629,000)
Total Equity
$10,953,000
$12,957,000
Total Liabilities & Equity
$37,431,000
$40,262,000
Cash Flow
Net Income
$2,737,000
$3,363,000
Cash Flow-Operating Activities
Depreciation
$2,298,000
$2,213,000
Net Income Adjustments
$508,000
($812,000)
Changes in Operating Activities
Accounts Receivable
$0
$0
Changes in Inventories
$293,000
($316,000)
Other Operating Activities
$36,000
$227,000
Liabilities
($543,000)
$579,000
Net Cash Flow-Operating
$5,436,000
$5,958,000
Cash flows-Investing Activities
Capital Expenditures
($1,547,000)
($1,438,000)
Investments
$28,000
$24,000
Other Investing Activities
$46,000
$1,922,000
Net Cash Flows-Investing
($1,473,000)
$508,000
Cash Flows-Financing Activities
Sale and Purchase of Stock
($3,485,000)
($3,183,000)
Net Borrowings
($664,000)
($85,000)
Other Financing Activities
$0
$0
Net Cash Flows-Financing
($5,497,000)
($4,630,000)
Effect of Exchange Rate
$0
$0
Net Cash Flow
($1,534,000)
$1,836,000
Financial Ratios
Liquidity Ratios
Current Ratio
94%
112%
Quick Ratio
29%
44%
Cash Ratio
20%
32%
Profitability Ratio
Gross Margin
30%
30%
Operating Margin
7%
7%
Pre-Tax Margin
6%
7%
Profit Margin
4%
5%
(www.nasdaq.com)
Explanation / Answer
The target corporation is having capital leases in his books this can be seen from the increase in liabilities, depreciation and interest expense in 2017. Due to leases the companies liquidity ratios that is current ratio,quick ratio has fallen in 2017. The cash margin ratio has also fallen due to payment of higher interest and there has been marginal drop in pre-tax and post tax profit margin
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