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9-1 Final Project Submission.docx - ACC-610 Final Project...

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ACC-610 Final ProjectFinal SubmissionSouthern New Hampshire University
Conceptual FrameworkAccording to Financial Accounting Standards Board (FASB), the Conceptual Framework“identifies the goals and purposes of financial reporting and the fundamentals are the underlyingconcepts that help achieve those objectives (“The Conceptual Framework”, n.d.). This usuallymeans the financial reports are more creditable when there is direction and structure. Theaccounting requirements then help both those who prepare the financial statements and the oneswho use the statements more easily use the statements. The Conceptual Framework also providesconsistency within the company’s financial reports since they are based on a body of accountingrequirements.Creditors will want to look at a company’s balance sheet before they loan the companymoney. The balance sheet shows the company’s financial flexibility, liquidity, solvency, andmore. In addition, creditors will want to review the company’s contractual obligations. Target’scontractual obligations are listed on page 27 of their 2018 Annual Report. This page alsoincludes disclosure that creditors will want to review regarding said obligations. For example,the first disclosure states that the long-term debt amount only includes principal payments andrefers the reader to Note 16 for further information. Another disclosure that would be beneficialto credits is the disclosure for tax contingencies (e). This disclosure states that estimated taxcontingencies of $334 million is not included on the table because they were not able to makereasonable estimates of the period of cash settlement. This information could be beneficial forcreditors as it shows more risk for the company that is not included on the table of ContractualObligations.Investors will also find the disclosures (on page 27) related to contractual obligationsvery informative as it further explains where Target stands with their obligations. In addition,
Item 7A on page 31 will be of interest to investors. Item 7A discusses the reason for interest ratechanges. It also explains that they record their general liability and workers’ compensationliabilities at NPV, which makes the liabilities fluctuate when the interest rate changes (“2018Target Annual Report”, 2019, p. 31). These disclosures will give insight to the company’s riskexposures and the current status of their liabilities.Analysis of Financial StatementsFinancial RatiosThe current ratio is found by dividing the current assets by current liabilities. The currentratio in 2018 is 84% and the current ratio in 2017 is 96%. It is a good sign for Target that thecompany has a high current ratio. Companies with high liquidity ratios are usually able to paytheir financial obligations when needed. The next ratio I looked at was the quick ratio. This ratiois very similar to the current ratio as it takes current assets divided by current liabilities.

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Term
Spring
Professor
N/A
Tags
Balance Sheet, Test, Generally Accepted Accounting Principles

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