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Your friend, Liz, loves to shop at Target and is now interested in investing in the company. Tom, another friend, has told her that Target’s debt structure is risky with obligations of nearly 74% of total assets. Liz sees that debt on the balance sheet is 65% of total assets and is confused by Tom’s comment. Ace my homework – Write an explanation to Liz discussing the debt structure of Target and why Tom thinks Target is risky. Be sure to explain clearly what information appears on financial statements, as well as what information does not appear directly on the financial statements. Use the information below in your discussion.
At fiscal year-end February 2, 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers, Target Corporation had the following assets and liabilities on its balance sheet (in millions):
Current liabilities $11,782 Long-term debt 15,126 Other liabilities 2,345 Total assets 44,560
Target reported the following information on leases in the notes to the financial statements:
Total rent expense was $165 million in 2007, $158 million in 2006 – Write a paper; Professional research paper writing service – Best essay writers, and $154 million in 2005, including percentage rent expense of $5 million in 2007, 2006 – Write a paper; Professional research paper writing service – Best essay writers, and 2005. Most long-term leases include one or more options to renew, with renewal terms that can extend the lease term to more than 50 years. Certain leases also include options to purchase the leased property.
Future minimum lease payments required under non-cancellable lease agreements existing at February 2, 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers, were:
Future Minimum Lease Payments (in Millions) Operating Leases Capital Leases 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers $ 239 $ 12 2009 187 16 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer 173 16 2011 129 16 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer 123 17 After 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer 2, 843 155 Total future minimum lease payments $3694 (a) $232 Less: Interest (b) (105) Present value of minimum capital lease payments $127 (c)
(a) Total contractual lease payments include $1,721 million related to options to extend lease terms that are reasonably assured of being exercised, and also include $98 million of legally binding minimum lease payments for stores that will open in 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers or later.
(b) Calculated using the interest rate at inception of each lease.
(c) Get custom essay samples and course-specific study resources via course hero homework for you service – Include s current portion of $4 million.
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