Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

Target Corp. (NYSE:TGT)

Financial Reporting Quality: Aggregate Accruals

Advanced level

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

Target Corp., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Feb 1, 2020 Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015
Operating Assets
Total assets 42,779  41,290  38,999  37,431  40,262  41,404 
Less: Cash and cash equivalents 2,577  1,556  2,643  2,512  4,046  2,210 
Operating assets 40,202  39,734  36,356  34,919  36,216  39,194 
Operating Liabilities
Total liabilities 30,946  29,993  27,290  26,478  27,305  27,407 
Less: Current portion of long-term debt and other borrowings 161  1,052  270  1,718  815  91 
Less: Long-term debt and other borrowings, excluding current portion 11,338  10,223  11,317  11,031  11,945  12,705 
Operating liabilities 19,447  18,718  15,703  13,729  14,545  14,611 
 
Net operating assets1 20,755  21,016  20,653  21,190  21,671  24,583 
Balance-sheet-based aggregate accruals2 (261) 363  (537) (481) (2,912)
Financial Ratio
Balance-sheet-based accruals ratio3 -1.25% 1.74% -2.57% -2.24% -12.59%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Amazon.com Inc. 27.51% 21.63% 105.22% 18.05%
Costco Wholesale Corp. 0.35% 4.27% 3.79% -6.51% 18.80%
Dollar General Corp. 3.56% 2.04% 5.02% 2.88% 3.98%
Home Depot Inc. 2.66% 2.61% -2.02% -0.07% 2.47%
Lowe’s Cos. Inc. 6.39% -14.72% 3.22% 9.18% -5.72%
TJX Cos. Inc. 15.53% 3.29% 23.01% -6.47% 11.27%
Walmart Inc. -2.64% 7.50% 0.79% -4.36% -1.78%
Balance-Sheet-Based Accruals Ratio, Sector
General Retailers 0.00% 8.33% 4.37% 8.42% -0.42%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Services 0.00% 11.38% 16.70% 8.30% 14.77%

Based on: 10-K (filing date: 2020-03-11), 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13).

1 2020 Calculation
Net operating assets = Operating assets – Operating liabilities
= 40,20219,447 = 20,755

2 2020 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2020 – Net operating assets2019
= 20,75521,016 = -261

3 2020 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × -261 ÷ [(20,755 + 21,016) ÷ 2] = -1.25%

4 Click competitor name to see calculations.

Financial ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, Target Corp. improved earnings quality from 2019 to 2020.

Cash-Flow-Statement-Based Accruals Ratio

Target Corp., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel LibreOffice Calc
Feb 1, 2020 Feb 2, 2019 Feb 3, 2018 Jan 28, 2017 Jan 30, 2016 Jan 31, 2015
Net earnings (loss) 3,281  2,937  2,934  2,737  3,363  (1,636)
Less: Cash provided by operations 7,099  5,970  6,849  5,329  5,140  5,131 
Less: Cash (required for) provided by investing activities (2,944) (3,416) (3,075) (1,473) 489  (1,605)
Cash-flow-statement-based aggregate accruals (874) 383  (840) (1,119) (2,266) (5,162)
Financial Ratio
Cash-flow-statement-based accruals ratio1 -4.18% 1.84% -4.02% -5.22% -9.80%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Amazon.com Inc. -5.12% -20.61% 52.87% -41.10%
Costco Wholesale Corp. -7.45% 1.32% 2.52% -13.60% 12.02%
Dollar General Corp. 2.79% 1.98% 4.42% 2.37% 3.62%
Home Depot Inc. 0.66% 1.98% -4.67% -0.96% 2.46%
Lowe’s Cos. Inc. 6.85% -13.55% -0.81% 4.08% -4.44%
TJX Cos. Inc. 14.48% -9.68% 16.13% -2.63% 12.23%
Walmart Inc. -0.97% 2.36% -7.84% -3.19% -1.60%
Cash-Flow-Statement-Based Accruals Ratio, Sector
General Retailers 0.00% -0.62% -7.36% 2.71% -2.93%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Services 0.00% 1.61% 7.22% 5.01% 1.86%

Based on: 10-K (filing date: 2020-03-11), 10-K (filing date: 2019-03-13), 10-K (filing date: 2018-03-14), 10-K (filing date: 2017-03-08), 10-K (filing date: 2016-03-11), 10-K (filing date: 2015-03-13).

1 2020 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -874 ÷ [(20,755 + 21,016) ÷ 2] = -4.18%

2 Click competitor name to see calculations.

Financial ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, Target Corp. deteriorated earnings quality from 2019 to 2020.