Target's 2012 Financial Statement

Financial statements are an important part of any business. They provide an overview of a companies’ financial health and standings by accurately analyzing an organization’s balance sheet, income, cash flow, and equity statements. Furthermore, the accuracy of these documents permits companies to make important decisions concerning future investments, planning and forecasting. For this essay, I will break down Target’s 2016 financial statement to research their inventory method and why it fits their business model. Additionally, I will determine their net purchases by using the cost of goods formula and finally I will calculate their inventory turnover and days sales inventory in comparison to Kohl’s corporation.
To start off, the inventory method used by Target is last-in, first-out (LIFO) method. According to Horngrens accounting (2018), under the

To begin, we need to determine Target’s average inventory by taking their beginning inventory, adding the ending inventory, and dividing both by two. Once again, our beginning inventory was $8,309 (millions), ending inventory $8,601 (millions), and once divided by two we get an average inventory of $8,455 (millions). Next, to get to our magic number we will take Target’s costs of goods sold and divide by the average inventory. The cost of goods sold is $51,997 (millions) divided by the average inventory of $8,455, which provides a final number of 6.1 in inventory turnover. Finally, to determine the days’ sales in inventory, we take our 6.1 inventory turnover and divide by sales in a year which is 365 for a final number of 59.8 days. When compared to Kohl’s inventory turnover of 3.12 and days sales in inventory of 117, Target is the winner. There is a ton of determining factors when considering investing in a company. However, reviewing their inventory flow and process provides a glimpse into how the company is running and