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Given Targets financial data, answer the questions that follow: How much and what percentage of the companys assets are financed with borrowed money, and can the company afford to repay these contractual obligations?

To answer these questions, evaluate each debt management ratio and the trend of the component account balances. (Note: Round your answers to two decimal places.) (FIll in the blank options are bolded and italicized)

Over the period of 2008 to 2010, Targets use of debt capital, in dollar terms, (increased, decreased) consistently from year to year, as did the companys debt ratio.

To identify the accounts that contributed to these behaviors, consider the fluctuations in the asset and liability accounts over the three-year period. Therefore, from 2008 to 2010, the accounts that contributed to the previously identified change in the debt ratio include which of the following? Check all that apply.

Payables, which changed by $288,000,000

Accruals, which changed by $413,000,000

Other current assets, which changed by $83,000,000

Long-term liabilities, which changed by $1,734,000,000

Inventory, which changed by $891,000,000

Net fixed assets, which changed by $263,000,000

Other long-term assets, which changed by $137,000,000

Receivables, which changed by $1,931,000,000

Other current liabilities, which changed by $1,143,000

Cash and marketable securities, which changed by $848,000,000

The reciprocal of the (equity ratio, debt ratio), called the (expenditure multiplier, equity multiple, equity multiplier), indicates the dollars of total assets financed per dollar of equity financing. This value is one component of the (Duvalier, Rockefeller, DuPont, Davids) equation, which is used to disaggregate the companys return on equity (ROE) into three important drivers of financial performance: the companys (sales-generating ability, profitability), asset utilization efficiency, and use of (tax-deductible expenses, financial leverage).

The data indicates that as Targets debt ratio decreases, its equity multiplier (increases, decreases).

Which of the following statements are correct? Check all that apply.

The behavior of the debt ratio at least partially explains the observed behavior of Targets Other Current liabilities account between 2008 and 2010.

The behavior of the debt ratio at least partially explains the 7.16% reduction in the Total Debt account between 2008 and 2010.

The 37.66% increase in Targets EBIT, between 2008 and 2010, contributes to the observed behavior of the times-interest-earned (TIE) ratio.

The 12.94% increase in the Total Equity account, between 2008 and 2010, partially explains the observed behavior of the equity ratio and the equity multiplier.

One contributing factor to the observed behavior of the TIE ratio is the trend in Targets interest expense.

Assume that you are an existing supplier of Target Corporation (TGT), a retailer of "everyday essentials and fashionable, differentiated merchandise at discounted prices," and are interested in the company's historical and current financial activities and performance. Use the following financial data for Target to complete and conduct your financial ratio analysis. Then answer the questions that follow. Remember, the results of a ratio analysis often identify issues requiring additional investigation. 2009 $63,435,000,000 44,062,000,000 2008 $62,884,000,000 44,157,000,000 19,373,000,000 13,078,000,000 1,521,000,000 4,673,000,000 801,000,000 18,727,000,000 12,954,000,000 1,609,000,000 4,402,000,000 866,000,000 3,872,000,000 1,384,000,000 3,536,000,000 1,322,000,000 $2,488,000,000 496,000,000 $0.67 $2,214,000,000 465,000,000 $0.62 Target Corporation Selected Income Statement, Balance Sheet, and Related Data: Income Statement 2010 Sales $65,786,000,000 Less: Cost of goods sold 45,725,000,000 Gross profit 20,061,000,000 Less: Selling, general, and administrative expenses 13,469,000,000 Less: Other expenses 860,000,000 Earnings before interest and taxes (EBIT) 5,252,000,000 Less: Interest expense 757,000,000 Earnings before taxes (EBT) 4,495,000,000 Less: Taxes 1,575,000,000 Net income $2,920,000,000 Less: Common dividends paid 609,000,000 Dividends per share $0.87 Balance Sheet Data Assets: 2010 Cash and marketable securities $1,712,000,000 Receivables 6,153,000,000 Inventory 7,596,000,000 Other current assets 1,752,000,000 Total current assets 17,213,000,000 Net fixed assets 25,493,000,000 Other long-term assets 999,000,000 Total assets $43,705,000,000 Liabilities and Equity: Accounts payable $6,625,000,000 Accruals 3,326,000,000 Other current liabilities 119,000,000 Total current liabilities 10,070,000,000 Long-term liabilities 18,148,000,000 Total debt 28,218,000,000 Common stock 59,000,000 Additional paid-in capital 3,311,000,000 Retained earnings 12,117,000,000 Total equity 15,487,000,000 Total debt and equity $43,705,000,000 Other Relevant Data Common shares outstanding 704,038,218 Total dividends paid 609,000,000 Market price per share $54.35 2009 $2,200,000,000 6,966,000,000 7,179,000,000 2,079,000,000 2008 $864,000,000 8,084,000,000 6,705,000,000 1,835,000,000 18,424,000,000 25,280,000,000 829,000,000 $44,533,000,000 17,488,000,000 25,756,000,000 862,000,000 $44,106,000,000 $6,511,000,000 3,120,000,000 1,696,000,000 11,327,000,000 17,859,000,000 29,185,000,000 62,000,000 2,919,000,000 12,366,000,000 15,347,000,000 $6,337,000,000 2,913,000,000 1,262,000,000 10,512,000,000 19,882,000,000 30,394,000,000 63,000,000 2,762,000,000 10,887,000,000 13,712,000,000 $44,533,000,000 $44,106,000,000 744,644,454 752,712,464 496,000,000 $51.27 465,000,000 $31.20 Fill out the following table of Debt Management Ratios. (Note: Round all intermediate and final calculations to two decimal places.) % % % % Target Corporation Debt Management Ratios Debt ratio 2010 2009 2008 Equity ratio 2010 2009 2008 Equity multiplier 2010 2009 2008 TIE ratio 2010 % % III III 2009 2008

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