Trend Analysis and Common-Size Financial

Statements: The Basic Building Blocks of Applied

Financial Analysis

Financial Statement Analysis

ACC 411
Winter 2017

Professor Charles E. Wasley

Simon School
University of Rochester

Professor Charles E. Wasley 1

Learning Objectives

1) To appreciate how trend analysis and common-size

financial statements facilitate analysis of a firms past and
current operating performance and financial position, and also
how they facilitate making comparisons across firms.

2) To appreciate how trend analysis and common-size

financial statements facilitate forecasting a firms future
performance. That is, to appreciate the role they play in
forecasting and valuation.

Professor Charles E. Wasley 2

Some Observations Before We Get
Started Firm/Product Life Cycle

When we conduct applied financial analysis, either trend,

common-size, or ratio analysis we must recognize that
where a firm is in its life cycle has a predictable affect on the
numbers reported in the financial statements, and hence any
inferences we may draw about the firms performance.

Think for a moment why this is the case?

Professor Charles E. Wasley 3

Firm/Product Life Cycle

Start-Up Firm:
Revenues are low.
Net income may be negative (losses).
Negative CF from operating activities.
Negative CF from investing activities.
External financing (Positive CF from financing).
Why?
Growth Firm:
Increasing revenues.
Net income becomes positive.
Increasing cash flows from operations.
Continuing negative cash flows from investing activities
Decreasing positive cash flows from financing activities.
Why? Professor Charles E. Wasley 4
 Firm/Product Life Cycle

Mature Firm:
Peak revenues.
Net income also peaks.
Positive cash flows from operations.
Cash flows from investing activities may begin to increase.
Cash flows from financing activities may become negative (retire debt, stock
repurchases, etc.).
Why?
Decline Firm:
Revenues decrease.
Net income decreases (may become negative).
Cash flows from operations decreases.
Cash flows from investing activities positive (as firm divests).
Cash flows from financing activities negative.
Professor Charles E. Wasley 5
Why?
Trend Analysis and Common-Size
Financial Statements

Trend analysis and common-size financial statements are

important building blocks for conducting applied financial
analysis of a firms current and past operating performance
and financial position, as well as for forecasting the firms
future operating performance and financial position.

As you will soon see, these simple financial analysis tools will
be used throughout the course and will pay vast dividends
based on a fairly small investment of our time.

Professor Charles E. Wasley 6

 Trend Analysis

Trend analysis is time-series analysis.

Trend analysis plays an important role in preparing projected (forecasted)
financial statements and such financial statements are an input into the equity
valuation process.
Trend analysis of the balance sheet and cash flow statement are possible, but
as a general rule, we are most interested in trend analysis of select income
statement items.
Under trend analysis we calculate the percentage change in income
statement items from year-to-year.
For example, assume that over 2014-2016 a firms Sales were 150, 180, and
210 and its Net Income was 25, 35, and 50.
In this case Sales increased at a decreasing rate while Net Income increased
at an increasing rate.
2014 2015 2016
Sales - 20% 16.7%
NI - 40% 42.9%Professor Charles E. Wasley 7
 Trend Income Statements

The following 2 slides contain the income statements

of Wal-Mart and Target prepared on a trend basis.
The firms original financial statements are in Appendix A.

Identify some interesting features of each firms

trend income statements.

Professor Charles E. Wasley 8

Wal-Marts Trend Income Statements
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 31-Jan-2014 31-Jan-2013 31-Jan-2012 31-Jan-2011 31-Jan-2010 31-Jan-2009 31-Jan-2008 31-Jan-2007 31-Jan-2006
Wal-Mart Stores, Inc.
TREND INCOME STATEMENT (YR-BY-YR)
Net Sales 1.6% 5.0% 5.8% 3.4% 1.0% 7.3% 8.4% 11.6% 9.8%
Membership and other income 5.6% -1.5% 6.8% -1.9% -6.8% -1.1% -11.3% 14.4% 11.8%
TOTAL OPERATING REVENUES 1.6% 5.0% 5.8% 3.4% 0.9% 7.2% 8.2% 11.6% 9.8%
COST OF GOODS 1.6% 5.2% 6.4% 3.6% 0.1% 7.0% 7.6% 11.1% 9.6%
GROSS PROFIT 1.6% 4.3% 4.3% 2.8% 3.7% 8.0% 10.1% 13.3% 10.3%
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 3.1% 4.2% 4.5% 2.1% 2.8% 9.3% 11.0% 14.6% 11.1%
TOTAL OPERATING EXPENSES 3.1% 4.2% 4.5% 1.7% 3.1% 9.3% 11.0% 14.6% 11.1%
INCOME BEFORE INTEREST AND TAXES -3.1% 4.7% 3.7% 6.4% 5.4% 3.7% 7.1% 9.5% 8.2%
INTEREST EXPENSE 3.8% -3.1% 5.2% 6.8% -5.4% 3.9% 16.3% 27.4% 19.9%
INTEREST INCOME -36.0% 15.5% -19.9% 11.0% -36.3% -8.1% 10.4% 15.7% 18.6%
INCOME BEFORE TAXES -3.9% 5.5% 3.4% 6.4% 6.0% 3.5% 6.3% 8.2% 7.4%
PROVISION FOR INCOME TAXES 1.8% 0.4% 4.6% 5.9% 0.3% 3.5% 8.4% 9.5% 3.8%
MINORITY INTEREST -11.1% 10.0% 13.9% 17.7% 2.8% 22.9% -4.5% 31.2% 30.1%
INCOME FROM CONTINUING OPERATIONS -6.3% 7.8% 2.4% 6.3% 9.2% 2.9% 5.5% 6.8% 8.8%
NET INCOME -5.7% 8.3% -4.2% 14.1% 7.4% 5.1% 12.8% 0.5% 9.4%
Professor Charles E. Wasley 9
Targets Trend Income Statements
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 01-Feb-2014 02-Feb-2013 28-Jan-2012 29-Jan-2011 30-Jan-2010 31-Jan-2009 02-Feb-2008 03-Feb-2007 28-Jan-2006
Target Corporation
TREND INCOME STATEMENT (YR-BY-YR)
Sales 0.9% 5.1% 4.1% 3.7% 0.9% 2.3% 6.2% 12.9% 12.2%
Credit card revenues -100.0% -4.1% -12.8% -16.5% -6.9% 8.9% 17.6% 19.5% 16.6%
TOTAL OPERATING REVENUES -1.0% 4.9% 3.7% 3.1% 0.6% 2.5% 6.5% 13.1% 12.3%
COST OF GOODS 1.2% 5.7% 4.7% 3.8% -0.2% 2.9% 6.3% 15.6% 11.1%
GROSS PROFIT -5.7% 3.3% 1.6% 1.7% 2.4% 1.7% 6.9% 8.1% 14.9%
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 3.1% 5.7% 4.7% 3.0% 1.0% 2.2% 6.9% 6.0% 14.2%
DEPRECIATION & AMORTIZATION EXPENSE 3.8% 0.5% 2.3% 3.0% 10.8% 10.1% 10.9% 6.2% 11.9%
Credit card expenses -100.0% 4.7% -48.1% -43.5% -5.5% 92.2% 18.4% -8.9% 5.3%
TOTAL OPERATING EXPENSES 1.7% 4.1% 1.6% -1.3% 1.4% 8.1% 7.9% 5.5% 13.0%
INCOME BEFORE INTEREST AND TAXES -29.5% 0.9% 1.3% 12.4% 6.2% -16.5% 4.0% 16.1% 21.2%
INTEREST EXPENSE -10.6% -12.3% 14.3% -5.5% -10.1% 33.8% 11.9% 12.2% -9.7%
INCOME BEFORE TAXES -32.7% 3.4% -0.9% 16.1% 9.5% -23.5% 2.8% 16.5% 27.4%
PROVISION FOR INCOME TAXES -29.7% 5.4% -3.0% 13.8% 4.7% -25.6% 3.9% 17.8% 26.7%
INCOME FROM CONTINUING OPERATIONS -34.3% 2.4% 0.3% 17.4% 12.4% -22.3% 2.2% 15.7% 27.7%
NET INCOME -34.3% 2.4% 0.3% 17.4% 12.4% -22.3% 2.2% 15.7% -24.7%
Professor Charles E. Wasley 10
 Common-Size Financial Statements

Common-size Income Statements, Balance Sheets, and

Statements of Cash Flow allow one to more easily appreciate
the relative size and importance of financial statement items.

Comparisons between (among) firms is enhanced by using

common-size financial statements.

Common-size financial statements play an important role in

preparing projected (forecasted) financial statements, and
again, projected financial statements are an important input
into the equity valuation process.
Professor Charles E. Wasley 11
 Common-Size Financial Statements

In common-size income statements items are expressed as a percent of sales.

In common-size balance sheets items are expressed as a percent of total assets or sales.

In common-size statements of cash flow, items are expressed as a percent of net

operating cash flow, sales or total assets (common-size Statements of Cash Flow are less
commonly-used and are not illustrated in these notes).

As a general rule, we are most interested in common-size income statements (rank #1)
and common-size balance sheets (rank #2).

In summary, common-size statements

Provide a convenient way to organize and summarize financial information about a firm.
Allows users to better appreciate the relative size and importance of items across firms.
Enhance comparisons across firms by controlling for differences in the scale of operations.

Professor Charles E. Wasley 12

Analysis of Common-Size Income
Statements Wal-Mart and Target

The following 2 slides present the income statements

of Wal-Mart and Target on a common-size basis.

Identify some important features of each firms

revenue and expense activities that are revealed by
the common-size income statements.

Professor Charles E. Wasley 13

Wal-Marts Common-Size Income
Statements
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 31-Jan-2014 31-Jan-2013 31-Jan-2012 31-Jan-2011 31-Jan-2010 31-Jan-2009 31-Jan-2008 31-Jan-2007 31-Jan-2006
Wal-Mart Stores, Inc.
COMMON-SIZE INCOME STATEMENT
Net Sales 99.3% 99.3% 99.3% 99.3% 99.3% 99.2% 99.2% 99.0% 99.0%
Membership and other income 0.7% 0.7% 0.7% 0.7% 0.7% 0.8% 0.8% 1.0% 1.0%
TOTAL OPERATING REVENUES 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
COST OF GOODS 75.2% 75.2% 75.0% 74.7% 74.5% 75.2% 75.4% 75.8% 76.1%
GROSS PROFIT 24.8% 24.8% 25.0% 25.3% 25.5% 24.8% 24.6% 24.2% 23.9%
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 19.2% 18.9% 19.0% 19.3% 19.5% 19.2% 18.8% 18.3% 17.9%
RESTRUCTURING CHARGES 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% 0.0% 0.0%
TOTAL OPERATING EXPENSES 19.2% 18.9% 19.0% 19.3% 19.6% 19.2% 18.8% 18.3% 17.9%
INCOME BEFORE INTEREST AND TAXES 5.6% 5.9% 5.9% 6.1% 5.9% 5.6% 5.8% 5.9% 6.0%
INTEREST EXPENSE 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.6% 0.5% 0.5%
INTEREST INCOME 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.1% 0.1% 0.1%
INCOME BEFORE TAXES 5.2% 5.5% 5.4% 5.6% 5.4% 5.2% 5.3% 5.4% 5.6%
PROVISION FOR INCOME TAXES 1.7% 1.7% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.9%
MINORITY INTEREST 0.1% 0.2% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
INCOME FROM CONTINUING OPERATIONS 3.3% 3.6% 3.5% 3.6% 3.5% 3.3% 3.4% 3.5% 3.7%
DISCONTINUED OPERATION (NET OF TAX) 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% 0.0% -0.3% -0.1%
NET INCOME 3.4% 3.6% 3.5% 3.9% 3.5% 3.3% 3.4% 3.2% 3.6%
Professor Charles E. Wasley 14
Targets Common-Size Income
Statements
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 01-Feb-2014 02-Feb-2013 28-Jan-2012 29-Jan-2011 30-Jan-2010 31-Jan-2009 02-Feb-2008 03-Feb-2007 28-Jan-2006
Target Corporation
COMMON-SIZE INCOME STATEMENT
Sales 100.0% 98.2% 98.0% 97.6% 97.1% 96.8% 97.0% 97.3% 97.4%
Credit card revenues 0.0% 1.8% 2.0% 2.4% 2.9% 3.2% 3.0% 2.7% 2.6%
TOTAL OPERATING REVENUES 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
COST OF GOODS 70.5% 69.0% 68.5% 67.9% 67.4% 68.0% 67.7% 67.9% 66.4%
GROSS PROFIT 29.5% 31.0% 31.5% 32.1% 32.6% 32.0% 32.3% 32.1% 33.6%
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 21.2% 20.3% 20.2% 20.0% 20.0% 19.9% 20.0% 19.9% 21.3%
DEPRECIATION & AMORTIZATION EXPENSE 3.1% 2.9% 3.1% 3.1% 3.1% 2.8% 2.6% 2.5% 2.7%
Credit card expenses 0.0% 0.6% 0.6% 1.3% 2.3% 2.5% 1.3% 1.2% 1.5%
Gain on receivables transaction -0.5% -0.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
G/L on early Exting. of lease relat debt 0.6% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
TOTAL OPERATING EXPENSES 24.3% 23.7% 23.9% 24.4% 25.4% 25.2% 23.9% 23.6% 25.3%
INCOME BEFORE INTEREST AND TAXES 5.2% 7.3% 7.6% 7.8% 7.1% 6.8% 8.3% 8.5% 8.3%
INTEREST EXPENSE 0.9% 1.0% 1.2% 1.1% 1.2% 1.4% 1.1% 1.0% 1.0%
INTEREST INCOME 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1%
INCOME BEFORE TAXES 4.3% 6.3% 6.4% 6.7% 5.9% 5.4% 7.3% 7.6% 7.3%
PROVISION FOR INCOME TAXES 1.6% 2.2% 2.2% 2.3% 2.1% 2.0% 2.8% 2.9% 2.8%
INCOME FROM CONTINUING OPERATIONS 2.7% 4.1% 4.2% 4.3% 3.8% 3.4% 4.5% 4.7% 4.6%
NET INCOME 2.7% 4.1% 4.2% 4.3% 3.8% 3.4% 4.5% 4.7% 4.6%
Professor Charles E. Wasley 15
Analysis of Common-Size Balance
Sheets Wal-Mart and Target

The following pages present the balance sheets of

Wal-Mart and Target on a common-size basis.

Identify some interesting features of each firms

asset, liability, and equity structures revealed by the
common-size statements.

Professor Charles E. Wasley 16

Wal-Marts Common-Size Balance Sheet (Assets)
Wal-Mart Stores, Inc.
COMMON-SIZE BALANCE SHEET (ASSETS)
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 31-Jan-2014 31-Jan-2013 31-Jan-2012 31-Jan-2011 31-Jan-2010 31-Jan-2009 31-Jan-2008 31-Jan-2007 31-Jan-2006
CASH 3.6% 3.8% 3.4% 4.1% 4.6% 4.5% 3.4% 5.1% 4.5%
ACCOUNTS RECEIVABLE 3.3% 3.3% 3.1% 2.8% 2.4% 2.4% 2.2% 1.9% 1.9%
INVENTORIES 21.9% 21.6% 21.1% 20.2% 19.2% 21.1% 21.5% 22.2% 23.1%
Prepaid expenses and other 0.9% 0.8% 0.9% 1.6% 1.8% 1.9% 1.7% 1.8% 1.8%
TOTAL CURRENT ASSETS 29.9% 29.5% 28.4% 28.8% 28.2% 30.0% 29.4% 31.0% 31.7%

PROP, PLANT & EQUIP (GROSS) 87.3% 84.5% 83.2% 85.5% 84.2% 80.3% 78.3% 76.0% 73.0%
ACCUMULATED DEP -29.7% -27.1% -25.1% -25.8% -24.2% -21.7% -19.0% -17.6% -16.7%
PROP, PLANT & EQUIP (NET) 57.6% 57.4% 58.1% 59.7% 60.0% 58.5% 59.2% 58.3% 56.3%
GOODWILL 9.5% 10.1% 10.7% 9.3% 9.5% 9.3% 9.7% 9.1% 8.8%
Other assets and deferred charges 3.0% 2.9% 2.8% 2.3% 2.3% 2.2% 1.7% 1.6% 3.2%
TOTAL LONG-TERM ASSETS 70.1% 70.5% 71.6% 71.2% 71.8% 70.0% 70.6% 69.0% 68.3%
TOTAL ASSETS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 31-Jan-2014 31-Jan-2013 31-Jan-2012 31-Jan-2011 31-Jan-2010 31-Jan-2009 31-Jan-2008 31-Jan-2007 31-Jan-2006
ACCOUNTS PAYABLE 18.3% 18.7% 18.9% 18.6% 17.9% 17.7% 18.6% 18.8% 18.2%
ACCRUED EXPENSES 9.2% 9.3% 9.4% 10.3% 11.0% 11.1% 9.6% 9.7% 9.6%
ACCRUED TAXES PAYABLE 0.5% 1.1% 0.6% 0.1% 0.8% 0.4% 0.6% 0.5% 1.0%
SHORT-TERM DEBT 3.7% 3.4% 2.1% 0.6% 0.3% 0.9% 3.1% 1.7% 2.7%
CURRENT PORTION OF LTD 2.0% 2.8% 1.0% 2.6% 2.4% 3.6% 3.6% 3.6% 3.3%
CURRENT PORTION OF CAPITAL LEASES 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%
TOTAL CURRENT LIAB 33.9% 35.4% 32.2% 32.4% 32.6% 33.9% 35.8% 34.4% 35.3%

LONG TERM DEBT 20.4% 18.9% 22.8% 22.5% 19.5% 19.2% 18.2% 18.0% 19.1%
CAPITAL LEASE OBLIGATIONS 1.4% 1.5% 1.6% 1.7% 1.9% 2.0% 2.2% 2.3% 2.7%
Deferred income taxes and other 3.9% 3.7% 4.1% 3.7% 3.2% 3.7% 3.1% 3.3% 3.4%
Redeemable noncontrolling interest 0.7% 0.3% 0.2% 0.2% 0.2% 0.2% 0.0% 0.0% 0.0%
Nonredeemable noncontrolling interest 2.5% 2.7% 2.3% 1.5% 1.3% 1.1% 1.2% 1.4% 1.1%
TOTAL INTEREST BEARING LTL 21.8% 20.4% 24.3% 24.3% 21.4% 21.1% 20.4% 20.3% 21.8%
TOTAL NON-INTEREST BEARING LTL 7.1% 6.7% 6.6% 5.4% 4.7% 5.0% 4.3% 4.7% 4.4%
TOTAL LONG-TERM LIABILITIES 28.9% 27.1% 30.9% 29.7% 26.1% 26.2% 24.7% 25.0% 26.2%
TOTAL LIABILITIES 62.8% 62.4% 63.1% 62.1% 58.6% 60.1% 60.5% 59.4% 61.5%

COMMON STOCK 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.2% 0.3% 0.3%
PAID IN CAPITAL 1.2% 1.8% 1.9% 2.0% 2.2% 2.4% 1.9% 1.9% 1.9%
RETAINED EARNINGS 37.4% 35.9% 35.5% 35.4% 38.9% 39.0% 35.1% 36.8% 35.5%
ACCUMULATED COMPREHENSIVE INCOME (LOSS) -1.5% -0.3% -0.7% 0.4% 0.0% -1.6% 2.4% 1.7% 0.8%
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Professor Charles E. Wasley 17

 Wal-Marts Common-Size Balance Sheet (Sales)
Wal-Mart Stores, Inc.
COMMON-SIZE BALANCE SHEET (SALES)
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 31-Jan-2014 31-Jan-2013 31-Jan-2012 31-Jan-2011 31-Jan-2010 31-Jan-2009 31-Jan-2008 31-Jan-2007 31-Jan-2006
CASH 1.5% 1.7% 1.5% 1.8% 1.9% 1.8% 1.5% 2.2% 2.0%
ACCOUNTS RECEIVABLE 1.4% 1.4% 1.3% 1.2% 1.0% 1.0% 1.0% 0.8% 0.8%
INVENTORIES 9.4% 9.3% 9.1% 8.6% 8.0% 8.5% 9.3% 9.7% 10.2%
Prepaid expenses and other 0.4% 0.3% 0.4% 0.7% 0.8% 0.8% 0.7% 0.8% 0.8%
TOTAL CURRENT ASSETS 12.8% 12.8% 12.3% 12.3% 11.8% 12.1% 12.7% 13.5% 14.0%

PROP, PLANT & EQUIP (GROSS) 37.5% 36.6% 36.0% 36.6% 35.2% 32.4% 33.9% 33.1% 32.3%
ACCUMULATED DEP -12.8% -11.7% -10.9% -11.0% -10.1% -8.8% -8.3% -7.7% -7.4%
PROP, PLANT & EQUIP (NET) 24.8% 24.9% 25.2% 25.6% 25.1% 23.7% 25.7% 25.4% 24.9%
GOODWILL 4.1% 4.4% 4.6% 4.0% 4.0% 3.8% 4.2% 3.9% 3.9%
Other assets and deferred charges 1.3% 1.3% 1.2% 1.0% 1.0% 0.9% 0.7% 0.7% 1.4%
TOTAL LONG-TERM ASSETS 30.1% 30.5% 31.0% 30.5% 30.0% 28.3% 30.6% 30.0% 30.2%
TOTAL ASSETS 43.0% 43.3% 43.3% 42.9% 41.8% 40.4% 43.4% 43.5% 44.3%

FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 31-Jan-2014 31-Jan-2013 31-Jan-2012 31-Jan-2011 31-Jan-2010 31-Jan-2009 31-Jan-2008 31-Jan-2007 31-Jan-2006
ACCOUNTS PAYABLE 7.9% 8.1% 8.2% 8.0% 7.5% 7.1% 8.0% 8.2% 8.0%
ACCRUED EXPENSES 3.9% 4.0% 4.1% 4.4% 4.6% 4.5% 4.2% 4.2% 4.3%
ACCRUED TAXES PAYABLE 0.2% 0.5% 0.3% 0.0% 0.3% 0.2% 0.3% 0.2% 0.4%
SHORT-TERM DEBT 1.6% 1.5% 0.9% 0.2% 0.1% 0.4% 1.3% 0.7% 1.2%
CURRENT PORTION OF LTD 0.9% 1.2% 0.4% 1.1% 1.0% 1.4% 1.6% 1.6% 1.5%
CURRENT PORTION OF CAPITAL LEASES 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
TOTAL CURRENT LIAB 14.6% 15.3% 14.0% 13.9% 13.6% 13.7% 15.5% 15.0% 15.6%
LONG TERM DEBT 8.8% 8.2% 9.9% 9.6% 8.1% 7.8% 7.9% 7.8% 8.5%
CAPITAL LEASE OBLIGATIONS 0.6% 0.6% 0.7% 0.7% 0.8% 0.8% 1.0% 1.0% 1.2%
Deferred income taxes and other 1.7% 1.6% 1.8% 1.6% 1.3% 1.5% 1.3% 1.4% 1.5%
Redeemable noncontrolling interest 0.3% 0.1% 0.1% 0.1% 0.1% 0.1% 0.0% 0.0% 0.0%
Nonredeemable noncontrolling interest 1.1% 1.2% 1.0% 0.6% 0.5% 0.4% 0.5% 0.6% 0.5%
TOTAL INTEREST BEARING LTL 9.4% 8.8% 10.5% 10.4% 8.9% 8.5% 8.9% 8.8% 9.6%
TOTAL NON-INTEREST BEARING LTL 3.1% 2.9% 2.8% 2.3% 2.0% 2.0% 1.9% 2.0% 2.0%
TOTAL LONG-TERM LIABILITIES 12.4% 11.7% 13.4% 12.7% 10.9% 10.6% 10.7% 10.9% 11.6%
TOTAL LIABILITIES 27.0% 27.0% 27.3% 26.6% 24.5% 24.3% 26.2% 25.8% 27.2%

COMMON STOCK 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
PAID IN CAPITAL 0.5% 0.8% 0.8% 0.8% 0.9% 1.0% 0.8% 0.8% 0.8%
RETAINED EARNINGS 16.1% 15.6% 15.4% 15.2% 16.3% 15.7% 15.2% 16.0% 15.7%
ACCUMULATED COMPREHENSIVE INCOME (LOSS) -0.6% -0.1% -0.3% 0.2% 0.0% -0.7% 1.0% 0.7% 0.3%
TOTAL SHAREHOLDER EQUITY 16.0% 16.3% 16.0% 16.2% 17.3% 16.1% 17.1% 17.7% 17.0%
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 43.0% 43.3% 43.3% 42.9% 41.8% 40.4% 43.4% 43.5% 44.3%
Professor Charles E. Wasley 18
 Targets Common-Size Balance Sheet (Assets)
Target Corporation
COMMON-SIZE BALANCE SHEET (ASSETS)
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 01-Feb-2014 02-Feb-2013 28-Jan-2012 29-Jan-2011 30-Jan-2010 31-Jan-2009 02-Feb-2008 03-Feb-2007 28-Jan-2006
CASH 1.6% 1.4% 1.3% 1.3% 1.3% 1.3% 1.3% 2.2% 4.7%
SHORT-TERM INVESTMENTS 0.0% 0.3% 0.4% 2.6% 3.6% 0.7% 4.2% 0.0% 0.0%
ACCOUNTS RECEIVABLE 0.0% 0.0% 12.7% 14.1% 15.6% 18.3% 18.1% 16.6% 16.2%
INVENTORIES 19.9% 16.5% 17.0% 17.4% 16.1% 15.2% 15.2% 16.7% 16.7%
DEFERRED INCOME TAXES 0.4% 0.4% 0.6% 0.9% 1.6% 1.6% 1.2% 1.1% 1.0%
Credit card receivables, held for sale 0.0% 12.2% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Vendor income receivable 1.3% 1.3% 1.3% 1.2% 0.9% 0.5% 0.5% 0.8% 1.6%
Other Receivables 0.0% 0.8% 0.9% 0.9% 1.2% 1.0% 0.8% 0.7% 0.0%
OTHER CURRENT ASSETS 3.1% 1.4% 1.1% 1.0% 1.0% 1.1% 1.1% 1.2% 1.0%
TOTAL CURRENT ASSETS 26.3% 34.2% 35.3% 39.4% 41.4% 39.6% 42.4% 39.4% 41.2%

PROP, PLANT & EQUIP (GROSS) 103.8% 91.7% 89.2% 84.8% 80.3% 78.9% 71.8% 76.0% 72.1%
ACCUMULATED DEP 32.7% 27.8% 26.6% 26.4% 23.5% 20.5% 17.7% 18.6% 17.6%
PROP, PLANT & EQUIP (NET) 71.2% 63.9% 62.6% 58.3% 56.8% 58.4% 54.1% 57.4% 54.4%
Company-owned life insurance investments 0.7% 0.6% 0.8% 0.8% 0.7% 0.7% 1.3% 1.5% 1.5%
GOODWILL 0.3% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.2% 0.2%
INTANGIBLE ASSETS 0.5% 0.3% 0.4% 0.4% 0.4% 0.4% 0.3% 0.4% 0.4%
Interest Rate Swaps 0.1% 0.2% 0.2% 0.3% 0.3% 0.4% 0.5% 0.1% 0.0%
Prepaid Pension Expense 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.9% 0.9% 2.1%
OTHER LONG-TERM ASSETS 0.9% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
TOTAL LONG-TERM ASSETS 73.7% 65.8% 64.7% 60.6% 58.6% 60.4% 57.6% 60.6% 58.8%
TOTAL ASSETS 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 01-Feb-2014 02-Feb-2013 28-Jan-2012 29-Jan-2011 30-Jan-2010 31-Jan-2009 02-Feb-2008 03-Feb-2007 28-Jan-2006
ACCOUNTS PAYABLE 17.4% 13.5% 13.5% 13.9% 14.6% 14.4% 15.1% 17.6% 17.9%
ACCRUED EXPENSES 6.4% 7.2% 6.8% 7.0% 5.6% 5.2% 5.2% 5.9% 6.3%
ACCRUED TAXES PAYABLE 0.5% 0.6% 0.6% 0.3% 0.1% 0.0% 0.2% 1.1% 1.1%
Gift Card Liability 1.2% 1.0% 1.0% 1.0% 0.9% 0.9% 0.8% 0.9% 0.0%
Interest Payable 0.2% 0.2% 0.2% 0.2% 0.2% 0.3% 0.4% 0.3% 0.0%
Dividends Payable 0.6% 0.5% 0.4% 0.4% 0.3% 0.3% 0.3% 0.3% 0.0%
CURRENT PORTION OF LTD 2.6% 6.2% 8.1% 0.3% 3.8% 2.9% 4.4% 3.6% 2.2%
TOTAL CURRENT LIAB 29.0% 29.3% 30.7% 23.0% 25.4% 23.8% 26.4% 29.8% 27.4%

LONG TERM DEBT 28.6% 30.6% 29.4% 35.7% 33.9% 39.7% 33.9% 23.2% 26.1%
DEFERRED TAXES 3.3% 2.7% 2.6% 2.1% 1.9% 1.0% 1.1% 1.5% 2.4%
Other noncurrent liabilities 3.1% 3.0% 3.0% 3.4% 3.9% 3.7% 3.9% 3.6% 3.5%
Pension and postretirement health care 0.3% 0.4% 0.5% 0.3% 0.4% 0.7% 0.3% 0.0% 0.0%
TOTAL INTEREST BEARING LTL 28.6% 30.6% 29.4% 35.7% 33.9% 39.7% 33.9% 23.2% 26.1%
TOTAL NON-INTEREST BEARING LTL 6.6% 6.1% 6.1% 5.8% 6.2% 5.4% 5.3% 5.2% 6.0%
TOTAL LONG-TERM LIABILITIES 35.3% 36.6% 35.5% 41.5% 40.1% 45.1% 39.2% 28.4% 32.0%
TOTAL LIABILITIES 64.2% 65.9% 66.2% 64.6% 65.5% 68.9% 65.6% 58.1% 59.4%

COMMON STOCK 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.2% 0.2% 0.2%
PAID IN CAPITAL 10.1% 8.2% 7.5% 7.6% 6.6% 6.3% 6.0% 6.4% 6.1%
RETAINED EARNINGS 28.6% 27.4% 27.8% 29.1% 29.1% 25.9% 28.6% 35.9% 34.3%
ACCUMULATED COMPREHENSIVE INCOME (LOSS) -3.1% -1.6% -1.6% -1.3% -1.3% -1.3% -0.4% -0.7% 0.0%
TOTAL SHAREHOLDER EQUITY 35.8% 34.1% 33.8% 35.4% 34.5% 31.1% 34.4% 41.9% 40.6%
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

Professor Charles E. Wasley 19

 Targets Common-Size Balance Sheet (Sales)
Target Corporation
COMMON-SIZE BALANCE SHEET (SALES)
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 01-Feb-2014 02-Feb-2013 28-Jan-2012 29-Jan-2011 30-Jan-2010 31-Jan-2009 02-Feb-2008 03-Feb-2007 28-Jan-2006
CASH 1.0% 0.9% 0.9% 0.9% 0.9% 0.9% 0.9% 1.4% 3.1%
SHORT-TERM INVESTMENTS 0.0% 0.2% 0.3% 1.7% 2.5% 0.5% 2.9% 0.0% 0.0%
ACCOUNTS RECEIVABLE 0.0% 0.0% 8.5% 9.1% 10.7% 12.4% 12.7% 10.4% 10.8%
INVENTORIES 12.1% 10.8% 11.3% 11.3% 11.0% 10.3% 10.7% 10.5% 11.1%
DEFERRED INCOME TAXES 0.2% 0.3% 0.4% 0.6% 1.1% 1.1% 0.9% 0.7% 0.7%
Credit card receivables, held for sale 0.0% 8.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Vendor income receivable 0.8% 0.8% 0.8% 0.8% 0.6% 0.4% 0.4% 0.5% 1.1%
Other Receivables 0.0% 0.5% 0.6% 0.6% 0.8% 0.7% 0.6% 0.5% 0.0%
OTHER CURRENT ASSETS 1.9% 0.9% 0.8% 0.7% 0.7% 0.7% 0.7% 0.8% 0.7%
TOTAL CURRENT ASSETS 15.9% 22.4% 23.5% 25.5% 28.2% 26.9% 29.8% 24.7% 27.4%

PROP, PLANT & EQUIP (GROSS) 63.1% 60.0% 59.4% 55.0% 54.7% 53.6% 50.5% 47.7% 47.9%
ACCUMULATED DEP 19.8% 18.2% 17.7% 17.1% 16.0% 13.9% 12.4% 11.7% 11.7%
PROP, PLANT & EQUIP (NET) 43.2% 41.8% 41.7% 37.8% 38.7% 39.7% 38.0% 36.0% 36.2%
Company-owned life insurance investments 0.4% 0.4% 0.5% 0.5% 0.5% 0.5% 0.9% 0.9% 1.0%
GOODWILL 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
INTANGIBLE ASSETS 0.3% 0.2% 0.3% 0.2% 0.3% 0.3% 0.2% 0.3% 0.2%
Interest Rate Swaps 0.1% 0.1% 0.2% 0.2% 0.2% 0.3% 0.3% 0.0% 0.0%
Prepaid Pension Expense 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.6% 0.5% 1.4%
OTHER LONG-TERM ASSETS 0.6% 0.5% 0.4% 0.4% 0.2% 0.2% 0.3% 0.2% 0.2%
TOTAL LONG-TERM ASSETS 44.8% 43.1% 43.1% 39.3% 39.9% 41.0% 40.5% 38.1% 39.1%
TOTAL ASSETS 60.7% 65.4% 66.7% 64.9% 68.1% 67.9% 70.3% 62.8% 66.5%

FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 01-Feb-2014 02-Feb-2013 28-Jan-2012 29-Jan-2011 30-Jan-2010 31-Jan-2009 02-Feb-2008 03-Feb-2007 28-Jan-2006
ACCOUNTS PAYABLE 10.6% 8.8% 9.0% 9.0% 10.0% 9.8% 10.6% 11.1% 11.9%
ACCRUED EXPENSES 3.9% 4.7% 4.6% 4.5% 3.8% 3.5% 3.7% 3.7% 4.2%
ACCRUED TAXES PAYABLE 0.3% 0.4% 0.4% 0.2% 0.0% 0.0% 0.2% 0.7% 0.7%
Gift Card Liability 0.7% 0.7% 0.7% 0.6% 0.6% 0.6% 0.6% 0.6% 0.0%
Interest Payable 0.1% 0.1% 0.2% 0.2% 0.2% 0.2% 0.3% 0.2% 0.0%
Dividends Payable 0.4% 0.3% 0.3% 0.3% 0.2% 0.2% 0.2% 0.2% 0.0%
CURRENT PORTION OF LTD 1.6% 4.1% 5.4% 0.2% 2.6% 1.9% 3.1% 2.3% 1.4%
TOTAL CURRENT LIAB 17.6% 19.1% 20.4% 14.9% 17.3% 16.2% 18.6% 18.7% 18.2%

LONG TERM DEBT 17.4% 20.0% 19.6% 23.2% 23.1% 26.9% 23.9% 14.6% 17.3%
DEFERRED TAXES 2.0% 1.8% 1.7% 1.4% 1.3% 0.7% 0.7% 1.0% 1.6%
Other noncurrent liabilities 1.9% 2.0% 2.0% 2.2% 2.6% 2.5% 2.7% 2.3% 2.3%
Pension and postretirement health care 0.2% 0.2% 0.3% 0.2% 0.3% 0.5% 0.2% 0.0% 0.0%
TOTAL INTEREST BEARING LTL 17.4% 20.0% 19.6% 23.2% 23.1% 26.9% 23.9% 14.6% 17.3%
TOTAL NON-INTEREST BEARING LTL 4.0% 4.0% 4.0% 3.8% 4.2% 3.7% 3.7% 3.2% 4.0%
TOTAL LONG-TERM LIABILITIES 21.4% 24.0% 23.6% 26.9% 27.3% 30.6% 27.6% 17.8% 21.3%
TOTAL LIABILITIES 39.0% 43.1% 44.1% 41.9% 44.7% 46.8% 46.2% 36.5% 39.5%

COMMON STOCK 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
PAID IN CAPITAL 6.2% 5.4% 5.0% 4.9% 4.5% 4.3% 4.2% 4.0% 4.0%
RETAINED EARNINGS 17.4% 17.9% 18.5% 18.8% 19.8% 17.6% 20.1% 22.6% 22.8%
ACCUMULATED COMPREHENSIVE INCOME (LOSS) -1.9% -1.1% -1.1% -0.9% -0.9% -0.9% -0.3% -0.4% 0.0%
TOTAL SHAREHOLDER EQUITY 21.7% 22.3% 22.6% 23.0% 23.5% 21.1% 24.2% 26.3% 27.0%
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 60.7% 65.4% 66.7% 64.9% 68.1% 67.9% 70.3% 62.8% 66.5%

Professor Charles E. Wasley 20

 Summary

Trend analysis and common-size financial statements

facilitate analysis of a firms past and current
operating performance and financial position, and
also facilitate making comparisons across firms.

Trend analysis and common-size financial statements

facilitate forecasting a firms future performance, and
thus playing an important role in forecasting and
valuation.

Professor Charles E. Wasley 21

 An Analytical Exercise Involving
Common-Size Statements

Developing effective financial analysis skills requires an understanding of a

firms economic and industry characteristics and how they get mapped into the
firms financial statements. Since a firms financial statements summarize the
results of managements operating, financing and investing policy decisions,
the relationships among various financial statement items provides evidence
and insight about many of a firms underlying economic characteristics.

The following analytical exercise requires you to use descriptions of various

firms operations and their strategies (along with whatever your knowledge of
these firms you might have) to identify the firms from unlabeled common-size
financial statements.

The exercises objective is to sharpen your analytical skills to understand and

appreciate how a firms economic and industry characteristics get mapped into
its firms financial statements. Professor Charles E. Wasley 22
From Common-Size Statements to
Firm Identities

The exhibit on the following slide presents common-size financial

statement information for firms in 12 different industries. These
common-size balance sheets and income statements express the
items as a percent of Sales (i.e., operating revenues). The last line
of the exhibit shows the cash flow from operations to capital
expenditures ratio. The absence of a particular percentage does
not necessarily mean the amount is zero. It merely indicates that
the amount is not sufficiently large for the firm to disclose it.

Professor Charles E. Wasley 23

Common-Size Financial Statement data for Firms in 12 Industries
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)
Balance Sheet at End of Year
Cash and Marketable Securities 1.8% 10.6% 30.5% 16.2% 11.5% 12.9% 7.2% 17.8% 30.9% 22.2% 24.9% 321.8%
Receivables 14.6% 1.4% 0.4% 16.5% 7.9% 17.9% 3.9% 50.4% 15.8% 203.9% 28.1% 13.6%
Inventories 0.0% 10.6% 11.8% 8.8% 8.6% 16.4% 0.8% 5.5% 8.3% 0.0% 2.7% 0.0%
Property, Plant and Equipment, at cost 7.2% 14.6% 39.6% 17.3% 49.2% 87.7% 160.0% 15.9% 99.4% 1.3% 275.3% 4.4%
Accumulated Depreciation -3.6% -5.5% -13.5% -9.0% -21.8% -50.3% -51.4% -9.3% -35.3% -0.3% -103.9% -1.1%
Property, Plant and Equipment, net 3.6% 9.1% 26.1% 8.3% 27.4% 37.4% 108.6% 6.6% 64.1% 1.0% 171.4% 3.3%
Intangibles 1.9% 2.1% 0.0% 24.9% 46.5% 18.0% 9.6% 66.9% 7.7% 18.6% 0.0% 2.9%
Other Assets 3.1% 1.4% 1.4% 20.6% 9.1% 27.7% 15.9% 17.0% 58.8% 7.6% 82.5% 75.7%
Total Assets 25.0% 35.2% 70.2% 95.3% 111.0% 130.3% 146.0% 164.2% 185.6% 253.3% 309.6% 417.3%
Current Liabilities 9.7% 18.3% 16.4% 35.8% 43.1% 29.0% 18.5% 89.7% 51.2% 17.6% 61.2% 295.7%
Long-term Debt 0.0% 2.0% 0.0% 5.8% 24.4% 20.3% 43.8% 24.2% 20.5% 192.9% 117.0% 15.8%
Other Noncurrent Liabilities 2.2% 1.0% 2.8% 6.7% 9.9% 35.3% 9.2% 6.3% 28.0% 9.8% 49.0% 41.8%
Shareholder's Equity 13.1% 13.9% 51.0% 47.0% 33.6% 45.7% 74.5% 43.8% 85.9% 33.0% 82.4% 64.0%
Total Equities 25.0% 35.2% 70.2% 95.3% 111.0% 130.3% 146.0% 164.0% 185.6% 253.3% 309.6% 417.3%

Income Statement for Year

Operating Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Costs of Sales (excluding depreciation) or
Operating Expenses -84.0% -73.2% -55.2% -75.3% -46.7% -71.1% -63.4% -70.2% -19.1% -27.1% -40.6% -66.6%
Depreciation and Amortization -0.9% -1.6% -3.9% -3.0% -3.4% -4.9% -6.3% -1.8% -6.3% -3.0% -13.5% 0.0%
Selling and Administrative -14.4% -19.9% -21.5% -11.8% -30.8% -10.9% -11.7% -15.5% -28.3% -32.0% -25.6% -22.0%
Research and Development - - - -4.40% -1.20% -4.90% - - -17.50% - - -
Interest 0.0% 0.0% 0.0% -0.2% 0.0% -1.3% -1.9% -0.5% 0.0% -19.6% -6.0% 0.0%
Income Taxes -0.3% -2.0% -7.6% -0.9% -5.6% -1.5% -4.8% -4.1% -9.4% -6.2% -7.6% -2.6%
All Other Items, net 0.0% 0.0% 0.2% - 0.3% 1.1% 0.1% -0.5% 5.9% 0.0% 0.5% -0.30%
Net Income 0.4% 3.3% 12.0% 4.4% 12.6% 6.5% 12.0% 7.4% 25.3% 12.1% 7.2% 8.5%

Cash Flow from Operation / Capital

Expenditure 1.7 2.6 2.8 2.4 4.6 2.6 2.8 8.1 5.1 72.5 1.3 133.7
Professor Charles E. Wasley 24
 From Common-Size Statements to
Firm Identities

The 12 firms and a brief description of their activities is:

a) Abercrombie & Fitch: Sells retail apparel primarily through stores to the fashion conscious adult
and has established itself as a trendy, popular player in the specialty apparel industry.
b) Allstate Insurance: Sells property and casualty insurance, primarily on buildings and automobiles.
Operating revenues include insurance premiums collected or due from customers and revenues
earned from investments made with cash received from customers prior to the time that Allstate pays
customers' claims. Operating expenses include amounts actually paid or expected to be paid in the
future on insurance coverage outstanding during the year.
c) Best Buy: Operates a chain of retail stores selling consumer electronic and entertainment
equipment at competitively low prices.
d) E. I. du Pont de Nemours: Manufactures chemical and electronics products.
e) Hewlett-Packard: Develops, manufactures, and sells computer hardware. The firm outsources
many of its computer components.
f) HSBC Finance: Lends money to consumers for periods ranging from several months to several
years. Operating expenses represent estimated uncollectible loans.
g) Kelly Services: Provides temporary office services to businesses and other firms. Operating
revenues represent amounts billed to customers for temporary help services and operating expenses
include amounts paid to the temporary help employees of Kelly.

Professor Charles E. Wasley 25

 From Common-Size Statements to
Firm Identities
The 12 firms
h) McDonald's: Operates fast-food restaurants worldwide. A large percentage of McDonald's
restaurants are owned and operated by franchisees. McDonald's frequently owns the restaurant
buildings of franchisees and leases them to franchisees under long-term leases.
i) Merck: A leading research-driven pharmaceutical products and services firm. Merck discovers,
develops, manufactures, and markets a broad range of products (primarily ethical drugs) to improve
human and animal health, directly and through its joint ventures.
j) Omnicom Group: Creates advertising copy for clients and is the largest marketing services firm in
the world. Omnicom purchases advertising time and space from various media and sells it to clients.
Operating revenues represent he commission or fee earned by Omnicom for advertising copy created
and media time and space sold. Operating expenses include compensation paid to employees.
Omnicom acquired a large number of marketing services firms in recent years.
k) Pacific Gas & Electric: Generates and sells power to customers in the western United States.
l) Procter & Gamble: Manufactures and markets a broad line of branded consumer products.

Study the economic features embedded in the common-size balance sheets

and income statements and use your intuition (i.e., your wits) to match the
firms to their industries.
Professor Charles E. Wasley 26
Appendix A: Wal-Marts and Targets
Actual Financial Statements

The firms actual income statements and

balance sheets appear on the following
slides.

Professor Charles E. Wasley 27

Wal-Mart Stores, Inc.
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 31-Jan-2014 31-Jan-2013 31-Jan-2012 31-Jan-2011 31-Jan-2010 31-Jan-2009 31-Jan-2008 31-Jan-2007 31-Jan-2006 31-Jan-2005
Net Sales $473,076 $465,604 $443,416 $418,952 $405,132 $401,087 $373,821 $344,759 $308,945 $281,488
Membership and other income $3,218 $3,047 $3,093 $2,897 $2,953 $3,167 $3,202 $3,609 $3,156 $2,822
TOTAL OPERATING REVENUES $476,294.0 $468,651.0 $446,509.0 $421,849.0 $408,085.0 $404,254.0 $377,023.0 $348,368.0 $312,101.0 $284,310.0
COST OF GOODS $358,069 $352,297 $334,993 $314,946 $304,106 $303,941 $284,137 $263,979 $237,649 $216,832
GROSS PROFIT $118,225.0 $116,354.0 $111,516.0 $106,903.0 $103,979.0 $100,313.0 $92,886.0 $84,389.0 $74,452.0 $67,478.0
SELLING, GENERAL & ADMINISTRATIVE EXPENSES $91,353 $88,629 $85,025 $81,361 $79,717 $77,546 $70,934 $63,892 $55,739 $50,178
RESTRUCTURING CHARGES $0.0 $0.0 $0.0 $0.0 $260.0 $0.0 $0.0 $0.0 $0.0 $0.0
TOTAL OPERATING EXPENSES $91,353.0 $88,629.0 $85,025.0 $81,361.0 $79,977.0 $77,546.0 $70,934.0 $63,892.0 $55,739.0 $50,178.0
INCOME BEFORE INTEREST AND TAXES $26,872.0 $27,725.0 $26,491.0 $25,542.0 $24,002.0 $22,767.0 $21,952.0 $20,497.0 $18,713.0 $17,300.0
INTEREST EXPENSE $2,335 $2,249 $2,320 $2,205 $2,065 $2,184 $2,103 $1,809 $1,420 $1,184
INTEREST INCOME $119 $186 $161 $201 $181 $284 $309 $280 $242 $204
INCOME BEFORE TAXES $24,656.0 $25,662.0 $24,332.0 $23,538.0 $22,118.0 $20,867.0 $20,158.0 $18,968.0 $17,535.0 $16,320.0
PROVISION FOR INCOME TAXES $8,105 $7,958 $7,924 $7,579 $7,156 $7,133 $6,889 $6,354 $5,803 $5,589
MINORITY INTEREST $673 $757 $688 $604 $513 $499 $406 $425 $324 $249
INCOME FROM CONTINUING OPERATIONS $15,878.0 $16,947.0 $15,720.0 $15,355.0 $14,449.0 $13,235.0 $12,863.0 $12,189.0 $11,408.0 $10,482.0
DISCONTINUED OPERATION (NET OF TAX) $144 $52 -$21 $1,034 -$79 $146 -$132 -$905 -$177 -$215
NET INCOME $16,022.0 $16,999.0 $15,699.0 $16,389.0 $14,370.0 $13,381.0 $12,731.0 $11,284.0 $11,231.0 $10,267.0
Prof. Charles E. Wasley 28
Wal-Mart Stores, Inc.
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 31-Jan-2014 31-Jan-2013 31-Jan-2012 31-Jan-2011 31-Jan-2010 31-Jan-2009 31-Jan-2008 31-Jan-2007 31-Jan-2006 31-Jan-2005
CASH $7,281 $7,781 $6,550 $7,395 $7,907 $7,275 $5,492 $7,767 $6,193 $5,488
ACCOUNTS RECEIVABLE $6,677 $6,768 $5,937 $5,089.0 $4,144 $3,905 $3,642 $2,840 $2,575 $1,715
INVENTORIES $44,858 $43,803 $40,714 $36,437 $32,713 $34,511 $35,159 $33,685 $31,910 $29,762
Prepaid expenses and other $1,909 $1,588 $1,774 $2,960 $3,128 $3,063 $2,760 $2,690 $2,468 $1,889
Current assets of discontinued operation $460 $0 $0 $131 $140 $195 $967 $0 $679 $0
TOTAL CURRENT ASSETS $61,185.0 $59,940.0 $54,975.0 $52,012.0 $48,032.0 $48,949.0 $48,020.0 $46,982.0 $43,825.0 $38,854.0

PROP, PLANT & EQUIP (GROSS) $178,678 $171,724 $160,938 $154,489 $143,517 $131,161 $127,992 $115,190 $100,929 $88,593
ACCUMULATED DEP -$60,771 -$55,043 -$48,614 -$46,611 -$41,210 -$35,508 -$31,125 -$26,750 -$23,064 -$20,475
PROP, PLANT & EQUIP (NET) $117,907.0 $116,681.0 $112,324.0 $107,878.0 $102,307.0 $95,653.0 $96,867.0 $88,440.0 $77,865.0 $68,118.0
GOODWILL $19,510 $20,497 $20,651 $16,763 $16,126 $15,260 $15,879 $13,759 $12,097 $10,803
Other assets and deferred charges $6,149 $5,987 $5,456 $4,129 $3,942 $3,567 $2,748 $2,406 $4,400 $2,379
TOTAL LONG-TERM ASSETS $143,566.0 $143,165.0 $138,431.0 $128,770.0 $122,375.0 $114,480.0 $115,494.0 $104,605.0 $94,362.0 $81,300.0
TOTAL ASSETS $204,751.0 $203,105.0 $193,406.0 $180,782.0 $170,407.0 $163,429.0 $163,514.0 $151,587.0 $138,187.0 $120,154.0

FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 31-Jan-2014 31-Jan-2013 31-Jan-2012 31-Jan-2011 31-Jan-2010 31-Jan-2009 31-Jan-2008 31-Jan-2007 31-Jan-2006 31-Jan-2005
ACCOUNTS PAYABLE $37,415 $38,080 $36,608 $33,676 $30,451 $28,849 $30,344 $28,484 $25,101 $21,987
ACCRUED EXPENSES $18,793 $18,808 $18,180 $18,701 $18,734 $18,112 $15,725 $14,675 $13,274 $12,120
ACCRUED TAXES PAYABLE $966 $2,211 $1,164 $157 $1,347 $677 $1,000 $706 $1,340 $1,281
Current liabilities of discontinued oper $89 $0.0 $0.0 $47 $92 $83 $140 $0.0 $477 $0.0
SHORT-TERM DEBT $7,670 $6,805 $4,047 $1,031 $523 $1,506 $5,040 $2,570 $3,754 $3,812
CURRENT PORTION OF LTD $4,103 $5,587 $1,975 $4,655 $4,050 $5,848 $5,913 $5,428 $4,595 $3,759
CURRENT PORTION OF CAPITAL LEASES $309 $327 $326 $336 $346 $315 $316 $285 $284 $223
TOTAL CURRENT LIAB $69,345.0 $71,818.0 $62,300.0 $58,603.0 $55,543.0 $55,390.0 $58,478.0 $52,148.0 $48,825.0 $43,182.0

LONG TERM DEBT $41,771 $38,394 $44,070 $40,692 $33,231 $31,349 $29,799 $27,222 $26,429 $20,087
CAPITAL LEASE OBLIGATIONS $2,788 $3,023 $3,009 $3,150 $3,170 $3,200 $3,603 $3,513 $3,667 $3,171
Deferred income taxes and other $8,017 $7,613 $7,862 $6,682 $5,508 $6,014 $5,087 $4,971 $4,630 $2,978
Redeemable noncontrolling interest $1,491 $519 $404 $408 $307 $397 $0.0 $0.0 $0.0 $0.0
Nonredeemable noncontrolling interest $5,084 $5,395 $4,446 $2,705 $2,180 $1,794 $1,939 $2,160 $1,465 $1,340
TOTAL INTEREST BEARING LTL $44,559.0 $41,417.0 $47,079.0 $43,842.0 $36,401.0 $34,549.0 $33,402.0 $30,735.0 $30,096.0 $23,258.0
TOTAL NON-INTEREST BEARING LTL $14,592.0 $13,527.0 $12,712.0 $9,795.0 $7,995.0 $8,205.0 $7,026.0 $7,131.0 $6,095.0 $4,318.0
TOTAL LONG-TERM LIABILITIES $59,151.0 $54,944.0 $59,791.0 $53,637.0 $44,396.0 $42,754.0 $40,428.0 $37,866.0 $36,191.0 $27,576.0
TOTAL LIABILITIES $128,496.0 $126,762.0 $122,091.0 $112,240.0 $99,939.0 $98,144.0 $98,906.0 $90,014.0 $85,016.0 $70,758.0

COMMON STOCK $323 $332 $342 $352 $378 $393 $397 $413 $417 $423
PAID IN CAPITAL $2,362 $3,620 $3,692 $3,577 $3,803 $3,920 $3,028 $2,834 $2,596 $2,425
RETAINED EARNINGS $76,566 $72,978 $68,691 $63,967 $66,357 $63,660 $57,319 $55,818 $49,105 $43,854
ACCUMULATED COMPREHENSIVE INCOME (LOSS) -$2,996 -$587 -$1,410 $646 -$70 -$2,688 $3,864 $2,508 $1,053 $2,694
TOTAL SHAREHOLDER EQUITY $76,255.0 $76,343.0 $71,315.0 $68,542.0 $70,468.0 $65,285.0 $64,608.0 $61,573.0 $53,171.0 $49,396.0
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $204,751.0 $203,105.0 $193,406.0 $180,782.0 $170,407.0 $163,429.0 $163,514.0 $151,587.0 $138,187.0 $120,154.0

Prof. Charles E. Wasley 29

Target Corporation
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 01-Feb-2014 02-Feb-2013 28-Jan-2012 29-Jan-2011 30-Jan-2010 31-Jan-2009 02-Feb-2008 03-Feb-2007 28-Jan-2006 29-Jan-2005
Sales $72,596 $71,960 $68,466 $65,786 $63,435 $62,884 $61,471 $57,878 $51,271 $45,682
Credit card revenues $0 $1,341 $1,399 $1,604 $1,922 $2,064 $1,896 $1,612 $1,349 $1,157
TOTAL OPERATING REVENUES $72,596.0 $73,301.0 $69,865.0 $67,390.0 $65,357.0 $64,948.0 $63,367.0 $59,490.0 $52,620.0 $46,839.0
COST OF GOODS $51,160 $50,568 $47,860 $45,725 $44,062 $44,157 $42,929 $40,366 $34,927 $31,445
GROSS PROFIT $21,436.0 $22,733.0 $22,005.0 $21,665.0 $21,295.0 $20,791.0 $20,438.0 $19,124.0 $17,693.0 $15,394.0
SELLING, GENERAL & ADMINISTRATIVE EXPENSES $15,375 $14,914 $14,106 $13,469 $13,078 $12,954 $12,670 $11,852 $11,185 $9,797
DEPRECIATION & AMORTIZATION EXPENSE $2,223 $2,142 $2,131 $2,084 $2,023 $1,826 $1,659 $1,496 $1,409 $1,259
Credit card expenses $0 $467 $446 $860 $1,521 $1,609 $837 $707 $776 $737
Gain on receivables transaction -$391 -$161 $0 $0 $0 $0 $0 $0 $0 $0
G/L on early Exting. of lease relat debt $445 $0 $0 $0 $0 $0 $0 $0 $0 $0
TOTAL OPERATING EXPENSES $17,652.0 $17,362.0 $16,683.0 $16,413.0 $16,622.0 $16,389.0 $15,166.0 $14,055.0 $13,328.0 $11,793.0
INCOME BEFORE INTEREST AND TAXES $3,784.0 $5,371.0 $5,322.0 $5,252.0 $4,673.0 $4,402.0 $5,272.0 $5,069.0 $4,365.0 $3,601.0
INTEREST EXPENSE $681 $762 $869.0 $760.0 $804.0 $894.0 $668.0 $597.0 $532.0 $589.0
INTEREST INCOME $0 $0 $3 $3 $3 $28 $21 $25 $27 $19
INCOME BEFORE TAXES $3,103.0 $4,609.0 $4,456.0 $4,495.0 $3,872.0 $3,536.0 $4,625.0 $4,497.0 $3,860.0 $3,031.0
PROVISION FOR INCOME TAXES $1,132 $1,610 $1,527 $1,575 $1,384 $1,322 $1,776 $1,710 $1,452 $1,146
INCOME FROM CONTINUING OPERATIONS $1,971.0 $2,999.0 $2,929.0 $2,920.0 $2,488.0 $2,214.0 $2,849.0 $2,787.0 $2,408.0 $1,885.0
DISCONTINUED OPERATION (NET OF TAX) $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $1,313.0
NET INCOME $1,971.0 $2,999.0 $2,929.0 $2,920.0 $2,488.0 $2,214.0 $2,849.0 $2,787.0 $2,408.0 $3,198.0
Prof. Charles E. Wasley 30
Target Corporation
FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 01-Feb-2014 02-Feb-2013 28-Jan-2012 29-Jan-2011 30-Jan-2010 31-Jan-2009 02-Feb-2008 03-Feb-2007 28-Jan-2006 29-Jan-2005
CASH $692 $654 $600 $583 $583 $562 $599 $813 $1,648 $2,245
SHORT-TERM INVESTMENTS $3 $130 $194 $1,129 $1,617 $302 $1,851 $0 $0 $0
ACCOUNTS RECEIVABLE $0 $0 $5,927 $6,153 $6,966 $8,084 $8,054 $6,194 $5,666 $5,069
INVENTORIES $8,766 $7,903 $7,918 $7,596 $7,179 $6,705 $6,780 $6,254 $5,838 $5,384
PREPAID ASSETS $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
DEFERRED INCOME TAXES $177 $193 $275 $379 $724 $693 $556 $427 $344 $344
Credit card receivables, held for sale $0 $5,841 $0 $0 $0 $0 $0 $0 $0 $0
Vendor income receivable $555 $621 $592 $517 $390 $236 $244 $285 $560 $428
Other Receivables $0 $395 $411 $405 $526 $433 $353 $278 $0 $0
OTHER CURRENT ASSETS $1,380 $651 $532 $451 $439 $473 $469 $455 $349 $452
TOTAL CURRENT ASSETS $11,573.0 $16,388.0 $16,449.0 $17,213.0 $18,424.0 $17,488.0 $18,906.0 $14,706.0 $14,405.0 $13,922.0

PROP, PLANT & EQUIP (GROSS) $45,780 $43,964 $41,531 $37,048 $35,765 $34,816 $31,982 $28,381 $25,214 $22,272
ACCUMULATED DEP $14,402 $13,311 $12,382 $11,555 $10,485 $9,060 $7,887 $6,950 $6,176 $5,412
PROP, PLANT & EQUIP (NET) $31,378.0 $30,653.0 $29,149.0 $25,493.0 $25,280.0 $25,756.0 $24,095.0 $21,431.0 $19,038.0 $16,860.0
Company-owned life insurance investments $305 $269 $371 $358 $319 $305 $578 $559 $524 $446
GOODWILL $151 $59 $59 $59 $59 $60 $60 $60.0 $60.0 $206.0
INTANGIBLE ASSETS $206 $165 $183 $164 $180 $171 $148 $152 $123 $0.0
Interest Rate Swaps $62 $85 $114 $139 $131 $163 $215 $23 $0 $0
Prepaid Pension Expense $0 $0 $0 $0 $0 $1 $394 $325 $752 $733
OTHER LONG-TERM ASSETS $409 $338 $249 $279 $140 $162 $164 $93 $93 $126
TOTAL LONG-TERM ASSETS $32,511.0 $31,569.0 $30,125.0 $26,492.0 $26,109.0 $26,618.0 $25,654.0 $22,643.0 $20,590.0 $18,371.0
TOTAL ASSETS $44,084.0 $47,957.0 $46,574.0 $43,705.0 $44,533.0 $44,106.0 $44,560.0 $37,349.0 $34,995.0 $32,293.0

FISCAL YEAR ENDED (MOST RECENT YEAR FIRST) 01-Feb-2014 02-Feb-2013 28-Jan-2012 29-Jan-2011 30-Jan-2010 31-Jan-2009 02-Feb-2008 03-Feb-2007 28-Jan-2006 29-Jan-2005
ACCOUNTS PAYABLE $7,683 $6,468 $6,282 $6,067 $6,511 $6,337 $6,721 $6,575 $6,268 $5,779
ACCRUED EXPENSES $2,835 $3,471 $3,184 $3,039 $2,477 $2,282 $2,337 $2,195 $2,193 $1,633
ACCRUED TAXES PAYABLE $221 $272 $257 $144 $24 $0 $111 $422 $374 $304
Gift Card Liability $521 $503 $467 $422 $387 $381 $372 $338 $0 $0
Interest Payable $85 $91 $109 $103 $105 $130 $162 $122 $0 $0
Dividends Payable $272 $232 $202 $176 $127 $120 $115 $103 $0 $0
CURRENT PORTION OF LTD $1,160 $2,994 $3,786 $119 $1,696 $1,262 $1,964 $1,362 $753 $504
TOTAL CURRENT LIAB $12,777.0 $14,031.0 $14,287.0 $10,070.0 $11,327.0 $10,512.0 $11,782.0 $11,117.0 $9,588.0 $8,220.0

LONG TERM DEBT $12,622 $14,654 $13,697 $15,607 $15,118 $17,490 $15,126 $8,675 $9,119 $9,034
DEFERRED TAXES $1,433 $1,311 $1,191 $934 $835 $455 $470 $577 $851 $973
Other noncurrent liabilities $1,375 $1,439 $1,409 $1,479 $1,728 $1,619 $1,733 $1,347 $1,232 $1,037
Pension and postretirement health care $115 $170 $225 $128 $178 $318 $142 $0 $0 $0
TOTAL INTEREST BEARING LTL $12,622.0 $14,654.0 $13,697.0 $15,607.0 $15,118.0 $17,490.0 $15,126.0 $8,675.0 $9,119.0 $9,034.0
TOTAL NON-INTEREST BEARING LTL $2,923.0 $2,920.0 $2,825.0 $2,541.0 $2,741.0 $2,392.0 $2,345.0 $1,924.0 $2,083.0 $2,010.0
TOTAL LONG-TERM LIABILITIES $15,545.0 $17,574.0 $16,522.0 $18,148.0 $17,859.0 $19,882.0 $17,471.0 $10,599.0 $11,202.0 $11,044.0
TOTAL LIABILITIES $28,322.0 $31,605.0 $30,809.0 $28,218.0 $29,186.0 $30,394.0 $29,253.0 $21,716.0 $20,790.0 $19,264.0

COMMON STOCK $53 $54 $56 $59 $62 $63 $68 $72 $73 $74
PAID IN CAPITAL $4,470 $3,925 $3,487 $3,311 $2,919 $2,762 $2,656 $2,387 $2,121 $1,810
RETAINED EARNINGS $12,599 $13,155 $12,959 $12,698 $12,947 $11,443 $12,761 $13,417 $12,013 $11,148
ACCUMULATED COMPREHENSIVE INCOME (LOSS) -$1,360.0 -$782.0 -$737.0 -$581.0 -$581.0 -$556.0 -$178.0 -$243.0 -$2.0 -$3.0
TOTAL SHAREHOLDER EQUITY $15,762.0 $16,352.0 $15,765.0 $15,487.0 $15,347.0 $13,712.0 $15,307.0 $15,633.0 $14,205.0 $13,029.0
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $44,084.0 $47,957.0 $46,574.0 $43,705.0 $44,533.0 $44,106.0 $44,560.0 $37,349.0 $34,995.0 $32,293.0

Prof. Charles E. Wasley 31