Q5
A common analysis of Target demonstrates that cash has dropped precipitously, from around 5% of total assets in 2009 to 1.7% in 2011. In comparison with Walmart this is quite poor. Though Walmart’s cash reserves fell as well, the fall was not nearly as severe as cash managed to stay above 3%. The trend analysis looks even less favourable for Target, as 2011 cash reserves were at 36% percent of what they were in 2009 overall. Walmart’s only fell to around 83% of its 2009 level. Target’s low cash reserves in 2011 are most likely a result of its Canadian expansion, retirement of debt, dividends, and its share repurchase program.
Walmart’s fall is not as concerning as Target’s because it was paired with a large increase in receivables and inventory. Though an increase in receivables is often not a good sign, it is better than Target, which saw a sizeable drop of 15% in receivables for 2011when compared with the base year. Target’s overall asset growth was less than Walmart’s and mostly came from increases in property and equipment and other non-current assets.
Analyzed as a percentage of total liabilities and shareholder’s equity, Walmart’s liabilities and equity are fairly constant, with each variable only fluctuating by a couple of percent each year. In contrast, Target has shifted towards current liabilities, mostly because it took on much more unsecured debt and other borrowings for it Canadian expansion. The largest drop in non-current liabilities came out of nonrecourse debt collateralized by credit card receivables. Target was paying down this debt because it intends to sell credit card receivables. Target’s liabilities as a whole stayed fairly constant, but did increase. A
