Question

Use the Target Corporation’s Form 10-K to answer the following questions related to Target’s 2015 fiscal year (year ended January 30, 2016). Target’s Form 10-K is available on the company’s website ir through the SEC’s EDGAR database. Appendix A provides instructions for using the EDGAR database.

Required

1. What percentage of Target’s total revenues end up as net earning?
2. What percentage of Target’s sales to go to pay for the costs of the goods being sold?
3. What cost does Target include in its Cost of Sales account?
4. When does Target recognize revenue from the sale of gift cards?

Information

The guide provides you with information that will make you better in case analysis, information synthesis, evaluation, and presentation. This will enhance your understanding of the issues discussed in the case and enable you to answer questions fully and in an informed manner that is logical and systematic.

Also included in the folder is a paper from the Harvard Business School titled: An Introduction to Cases. This paper provides an in depth look at the use of case method to enhance your learning experience. You are encouraged to read the two papers before beginning case analysis for this course or any other course.

For case studies, the write-up must at least answer the following questions:

What are the main problems or issues of the case?

What alternatives have been attempted to resolve the problems or issues?

What recommendations can be made to resolve the case?

Relevance of the issues raised in the case to real life business problems and applications

Other questions raised by the instructor

( 750- 1000 words)

Answer 1

• Step 1 of 4

  (Dollar amounts are in millions)

  a.  Net earnings ÷ Total revenues =    %

       $2,488    ÷    $65,357               = 3.8%

• Step 2 of 4

  b.  Cost of sales ÷ Sales        =    %

       $44,062      ÷   $63,435    = 69.5%

• Step 3 of 4

  c.  According to footnote 3, “Cost of Sales and Selling, General and Administrative Expenses,” Cost of sales includes:

  Total cost of products sold including

  •  Freight expenses associated with moving merchandise from our vendors to our distribution centers and our retail stores, and among our distribution and retail facilities

  • Vendor income that is not reimbursement of specific, incremental and identifiable costs

  Inventory shrink

  Markdowns

  Outbound shipping and handling expenses associated with sales to our guests

  Terms cash discount

  Distribution center costs, including compensation and benefits costs

• Step 4 of 4

  d.  According to footnote 2, “Revenue from gift card sales is recognized upon gift card redemption. Our gift cards do not have expiration dates.”