Target Financial Analysis Paper - 913 Words

What percent of the total assets were these capital investments? A calculation is used to assess Target and Walmart efficiency that allocating the capital under its control to profitable investments. The return on invested capital gives a sense of how well a company is using their money to generate returns. However, Target sales increased to 4% in 2015 to 2016 but then declined significantly in 2016 to 2017. Target earnings from continuing operations before interest expense and income taxes increased by 5% in 2015 to 2016 but then slightly declined to 1.5% in 2016 to 2017 not reaching the 2015 level. Therefore, Target earnings from continuing operations before income taxes increased to 3.5% in 2015 to 2016 but then slightly declined to†¦show more content†¦The debt carries an obligation of payment to creditors while equity provides an opportunity for profits for shareholders. Therefore, all revenues from Target and Walmart operation must go to pay creditors first; shareholders retain whatever remains after accounting for all expenses, in cluding the cost of operations, taxes, etc. Since shareholders face more risk than creditors, shareholders generally expect a return on their capital that is higher than the returns that creditors expect on their capital. However, Walmart and Target cost of capital is thus a mixture of returns to creditors and returns to equity provider (Trainer, 2017). On the other hand, for Target and Walmart, the cost of debt is largely influenced by their credit ratings, which are determined by independent agencies, such as Standard Poor’s, Moodf’s, and Fitch Group. These ratings are analogous to the company FICO score. The cost of equity is determined by market forces in competitive industries by the interactions between Walmart and Target have varying levels of risk appetite who seek profit opportunities and those who provide opportunities for investment at varying levels of risks (Trainer, 2017). Estimate the cost of capital for financing (Hint: Interest expense and total debt – Ascertain the return on equity to provide measures for the interest rate and the return to stockholders. Interest expense is the amount reported by a company or individual asShow MoreRelatedFinancial Analysis Paper for Target2219 Words   |  9 PagesFinancial Analysis Paper Zeyuan Liu Company Profile Target Corporation was founded in 1902 and is headquartered in Minneapolis, Minnesota. Target Corporation operates general merchandise and food discount stores in the United States. It operates as two reportable segments: Retail and Credit Card. 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