Question

Choose a company and look at their financial statements. Using the information on the Financial Statements compute a minimum of four ratios of your choice. For each of the ratios you've calculated explain what these ratios tell about the company?

Answer 1

Company - Target

Year End - February 3, 2018

Source- Annual FIling (Form 10K)

Ratio	Formula	Numbers	Answer	Explanation
Current Ratio	Current Assets / Current Liabilities	12,564 / 13,201	0.95	The company's current ratio is 0.95 : 1. This means that if all the current liabilities were to paid off immediately, the company would struggle since the current assets only cover 95% of it. The company has liquidity issues
Profit Margin	Net Earnings / Sales	2,934 / 71,879	4.08%	The company earned 4.08% from its sales after deducting all its costs including depreciation. The margin on its goods is only 4%. The company can achieve higher profit by achieving higher sales since margin is not very high
Return on assets	Net Earnings / Average Assets	2,934 / (38,999 + 37,431)/2	7.68%	The company made 7.68% returns on its average assets. Out of the total investments, the company was able to generate decent returns
Inventory Turnover	Cost of Sales / Average Inventory	51,125 / (8,657 + 8,309) / 2	6.03	This ratio shows how many times the company was able to sell off its entire inventory. In this case it seems that the company sold off its entire inventory over SIX times. It is a good number. Also since it is a retailer, such movements are important because of nature of goods