Target's Liquidity Ratios

The first part we will be analyzing is the company’s liquidity ratios. Liquidity ratios show a company’s ability to pay debt obligations. For 2015 and 2016 Targets current ratios were greater than 1 meaning that if the company was to liquidate they would be able to pay 100% of their current liabilities with their current assets. In 2017 the current ratio went down to .94 which means they have more current liabilities than current assets. The Acid Test ratio shows if a company has enough quick assets to cover its current liabilities. Targets Acid Test ratio went from up from 2015 to 2016 and back down to a .20 for 2017. Having such a low ratio can mean that the company is struggling to sustain sales, or they are paying bills too quickly. Days' sales in inventory has slowly increased from 2015 to 2017 meaning that it is now taking them longer to sell inventory. Even though the changes in liquidity have been for the worse from year to year the changes in the numbers are not substantial.
In efficiency we will look at inventory and total asset turnover. In inventory

This is determined by calculating the following ratios: Debt ratio, Equity ratio, Debt-to-equity ratio, and times interest earned. The debt ratio and the debt-to-equity ratio have a rising trend which is not a good trend for this these specific ratios. The debt-to-equity ratio went from 1.94 in 2015 to 2.42 in 2017. So, in 2017 for every 1 in equity, they used 2.42 in debt. In every being analyzed target has financed more of its assets with liabilities instead of equity and therefore the equity ratio has a declining trend. The times interest earned ratio has changed substantially over three-year period. It went from 5.14 up to 9.11 and back down to 4.95. Considering that investors look for a higher times interest earned ratio this is a negative change for Target because its ability to pay for interest on debts has been lowered by 4.16