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This project involves understanding and analyzing the financial statements of Target and its peer
Walmart. This project can be completed individually or with partners. Consult your professor or
the TA if you have any questions. Chapter 13 of Libby, Libby and Hodge is also a great resource
for you to answer any ratio related questions.
Please answer one question at a time in your report. Your report must be typewritten (word-
processed) and 1.5-lines spaced. To ensure consistency, you must use a 12-point font and a 1”
margin throughout (left, right, top and bottom). You must include all necessary calculation
process/steps whenever applicable and cite any knowledge or information that is not your own. Use as many sources as needed- not limited to 3 sources. Please indicate number of the question to each answer.
Prompt:
1. What expenses does Target subtract from Total revenue (net sales) in the computation of Operating Income? Go to the Notes to Financial Statements section of the 10-K and check out the details of “Cost of Sales” and “Selling, General and Administrative Expenses.” What does each account include?
2. What method does Target use to determine the cost of its inventory? FIFO, LIFO, Average Cost or something else? What about Walmart? Briefly explain the differences between FIFO, LIFO and Average Cost.
3. What does Target include in its Property and Equipment? What depreciation method does Target use for its property and equipment? What about Walmart? If Target switches its depreciation method to double-declining balance at the beginning of next year, what impact would it have on next year’s net income?
4. Has Target issued preferred stock? What about Walmart? Briefly explain the differences between common stock and preferred stock.
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