a) Compute Costco’s current ratio and quick ratio for 2006 and 2005. (Round answers two decimal places.)2006 current ratio =?2005 current ratio =?2006 quick ratio =?2005 quick ratio =?(b) Compute Target's times interest earned and its liabilities-to-equity ratios for 2006 and 2005. (Round your answers to two decimal places.)2006 times interest earned =?2005 times interest earned =?2006 liabilities-to-equity =?2005 liabilities-to-equity =?Comment on any observed trends. Which of the following statements best describes any trend in Target's liabilities-to-equity ratios? Choose the right Option from below a)The decrease in Target's liabilities-to-equity ratio remained constant.b)Target's liabilities-to-equity ratio decreased slightly in 2006, we have no concerns about Target's's ability to meet its debt obligations.c)Target's liabilities-to-equity ratio increased during the year primarily due to a decrease in its equity.d)Target's liabilities-to-equity ratio decreased due to a decrease in its equity. Analysis and Interpretation of Liquidity and SolvencyBalance sheets and income statements for Target Corporation follow.For Fiscal Years Ended ($ millions)SalesCredit card revenuesIncome StatementTotal revenuesCost of salesSelling, general and administrative expensesCredit card expensesDepreciation and amortizationEarnings before interest and income taxesInterest expenseEarnings before income taxesProvisions for income taxesNet earnings2006 20052004$51,271 $45,682 $ 40,9281,3491,1571,09752,620 46,83942,02534,927 31,44528,38911,1859,7978,6577767377221,4091,2591,0984,3233,6013,1594635705563,8603,0312,6031,4521,146984$2,408 $1,885$1,619 ($ millions, except footnotes)AssetsCash and cash equivalentsCredit card receivablesInventoryOther current assetsTotal current assetsProperty and equipmentLandBuildings and improvementsFixtures and equipmentComputer hardware and softwareConstruction-in-progressAccumulated depreciationProperty and equipment, netOther noncurrent assetsTotal assetsBalance SheetLiabilities and shareholders' investmentAccounts payableAccrued and other current liabilitiesCurrent portion of long-term debt and notes payableTotal current liabilitiesLong-term debtDeferred income taxesOther noncurrent liabilitiesShareholders' investmentCommon stockAdditional paid-in-capitalRetained earningsAccumulated other comprehensive income (loss)Total shareholders' investmentTotal liabilities and shareholders' equityJanuary 28, 2006 January 29, 2005$1,6485,6665,8381,25314,4054,44914,1743,2192,2141,158(6,176)19,0381,552$ 34,995$ 6,2682,5677539,5889,1198511,232732,12112,013(2)14,205$ 34,995$2,2455,0695,3841,22413,9223,80412,5182,9901,998962(5,412)16,8601,511$ 32,293$5,7791,9375048,2209,0349731,037741,81011,148(3)13,029$ 32,293

Lets understand the basics. Current ratio indicates firm's ability to pay its current liabilities…

Answered: ompute Costco’s current ratio and quick…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 24E

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Question

a) Compute Costco’s current ratio and quick ratio for 2006 and 2005. (Round answers two decimal places.)

2006 current ratio =?
2005 current ratio =?
2006 quick ratio =?
2005 quick ratio =?

(b) Compute Target's times interest earned and its liabilities-to-equity ratios for 2006 and 2005. (Round your answers to two decimal places.)

2006 times interest earned =?
2005 times interest earned =?
2006 liabilities-to-equity =?
2005 liabilities-to-equity =?

Comment on any observed trends. Which of the following statements best describes any trend in Target's liabilities-to-equity ratios? Choose the right Option from below

a)The decrease in Target's liabilities-to-equity ratio remained constant.

b)Target's liabilities-to-equity ratio decreased slightly in 2006, we have no concerns about Target's's ability to meet its debt obligations.

c)Target's liabilities-to-equity ratio increased during the year primarily due to a decrease in its equity.

d)Target's liabilities-to-equity ratio decreased due to a decrease in its equity.

Analysis and Interpretation of Liquidity and Solvency
Balance sheets and income statements for Target Corporation follow.
For Fiscal Years Ended ($ millions)
Sales
Credit card revenues
Income Statement
Total revenues
Cost of sales
Selling, general and administrative expenses
Credit card expenses
Depreciation and amortization
Earnings before interest and income taxes
Interest expense
Earnings before income taxes
Provisions for income taxes
Net earnings
2006 2005
2004
$51,271 $45,682 $ 40,928
1,349
1,157
1,097
52,620 46,839
42,025
34,927 31,445
28,389
11,185
9,797
8,657
776
737
722
1,409
1,259
1,098
4,323
3,601
3,159
463
570
556
3,860
3,031
2,603
1,452
1,146
984
$2,408 $1,885
$1,619

($ millions, except footnotes)
Assets
Cash and cash equivalents
Credit card receivables
Inventory
Other current assets
Total current assets
Property and equipment
Land
Buildings and improvements
Fixtures and equipment
Computer hardware and software
Construction-in-progress
Accumulated depreciation
Property and equipment, net
Other noncurrent assets
Total assets
Balance Sheet
Liabilities and shareholders' investment
Accounts payable
Accrued and other current liabilities
Current portion of long-term debt and notes payable
Total current liabilities
Long-term debt
Deferred income taxes
Other noncurrent liabilities
Shareholders' investment
Common stock
Additional paid-in-capital
Retained earnings
Accumulated other comprehensive income (loss)
Total shareholders' investment
Total liabilities and shareholders' equity
January 28, 2006 January 29, 2005
$1,648
5,666
5,838
1,253
14,405
4,449
14,174
3,219
2,214
1,158
(6,176)
19,038
1,552
$ 34,995
$ 6,268
2,567
753
9,588
9,119
851
1,232
73
2,121
12,013
(2)
14,205
$ 34,995
$2,245
5,069
5,384
1,224
13,922
3,804
12,518
2,990
1,998
962
(5,412)
16,860
1,511
$ 32,293
$5,779
1,937
504
8,220
9,034
973
1,037
74
1,810
11,148
(3)
13,029
$ 32,293

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