Onstruction in progress mulated depreciation perty

Info icon This preview shows pages 10–12. Sign up to view the full content.

View Full Document Right Arrow Icon
.... onstruction-in-progress .................................... ....... ~mulated depreciation ............. ....... ..................... perty and equipment, net . noncurrent assets . - - assets . .es and shareholders' investment nts payable . eel and other current liabilities . _""=Ured debt and other borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .. ourse debt collateralized by credit card receivables . current liabilities . _~red debt and other borrowings ........................... ....... ourse debt collateralized by credit card receivables ..... ............. income taxes . noncurrent liabilities . -~ noncurrent liabilities . olders' investment mon stock ........................... ........................ . ional paid-in-capital . =$ained earnings ....................................... .......... . mulated other comprehensive loss . shareholders' investment . - - labilities and shareholders' investment. . Jan. 29,2011 Jan. 30, 2010 $ 1,712 $ 2,200 6,153 6,966 7,596 7,179 1,752 2,079 17,213 18,424 5,928 5,793 23,081 22,152 4,939 4,743 2,533 2,575 567 502 (11,555) (10,485) 25,493 25,280 999 829 --- --- $43,705 $44,533 $6,625 $6,511 3,326 3,120 119 796 900 --- 10,070 11,327 11,653 10,643 3,954 4,475 934 835 1,607 1,906 18,148 17,859 59 62 3,311 2,919 12,698 12,947 (581) (581) 15,487 15,347 --- --- $43,705 $44,533 = assume that Target's "other" assets and liabilities are operating. We can sometimes make - r distinction if footnotes to financial statements provide additional information. For now, e that these "other" items reported in balance sheets pertain to operations.
Image of page 10

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
3-11 Module 3 I Profitability Analysis and Interpretation Target ($ millions) Jan. 29, 2011 Jan. 30, 2010 $ 6,153 $ 6,966 7,596 7,179 1,752 2,079 25,493 25,280 999 829 -- --- 41,993 42,333 6,625 6,511 3,326 3,120 934 835 1,607 1,906 --- 12,492 12,372 $29,501 $29,961 Using Target's highlighted balance sheet above, we compute net operating assets for 2011 and 2010 as follows (recall that Net operating assets (NOA) = Total operating assets - Total operating liabilities). Operating assets Credit card receivables '.' . Inventory ' .... "..•... ' , . Other current assets. . . . . . . . . . . . . . . . • .......... ........... Property and equipment, net " ....... ...................... Other noncurrent assets . Total operating assets . Operating liabilities Accounts payable ................................. ...... .... Accrued and other current liabilities . Deferred income taxes . Other noncurrent liabilities . Total operating liabilities . Net operating assets (NOA) ................ •• ...... " . . . . . . . .. . . To determine average NOA, we take a simple average of two consecutive years' numbers. Thus, return on net operating assets (RNOA) for Target for 2011 is computed as follows ($ millions). RNOA = NOPAT Average NOA = $3,397 ($29,501 + $29,961)/2 = 11.43% Target's 2011 RNOA is 11.43%. By comparison, Walmart's (its main competitor) RNOA is 15.63% (this computation is shown in Mid-Module Review 2), and the average for all publicly traded companies is about 8% for the past decade. Recall that RNOA is related to ROE as follows: ROE = Operating return + Nonoperating return, where RNOA is the operating return. Thus, we can ask how do Target's RNOA and ROE compare? To answer this we need Target's 2011 ROE, which is computed as follows ($ millions). Net income ROE = = Average stockholders' equity $2,920 ($15,487 + $15,347)/2 = 18.94% In relative terms, Target's operating return (RNOA) is 60% 01.43%/18.94%) of its total ROE, which is slightly less than the average publicly traded company's percent of near 69%. Its nonop- erating return of 7.5% (18.94% - 11.43%) makes up the remaining 40% of ROE. Exhibit 3.3 provides a summary of key terms introduced to this point and their definitions.
Image of page 11
Image of page 12
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern