Target Asset Turnover Ratio

The age and composition of long-term assets should be analyzed because of they are often the most productive assets of many companies. To help a corporation determine the average life of their long-term assets, the average life ratio can be determined by dividing property, plant and equipment by the depreciation expense. Additionally, to determine the average age of long-term assets, accumulated depreciation is divided by the depreciation expense. Finally, to determine how many dollars of assets are needed to every dollar of sales, the asset turnover ratio can be calculated by dividing net sales by average total assets (Porter & Norton, 2018).

In 2021, Target Corporation reported $49,384 million in property and equipment, $2,470 million in depreciation expense, $20,278 million in accumulated depreciation expense, $93,561 million in net sales and $47,013.5 million in average total assets. By using the calculations for each ratio, it is determined that Target Corporation’s the average life of their long-term assets is 19.99 years, the average age of their long-term assets is 8.21 years, and the asset turnover ratio is 1.99 – meaning that each dollar of assets produced $1.99 of sales. According to csimarket.com, the average asset turnover ratio in the retail industry was 1.77

Accounts Receivable Turnover Ratio = Net Credit Sales / Average Accounts Receivable Target Accounts Receivable Turnover Ratio: 93,561 million / 1,135 million = 82.43 Number of Days’ Sales in Receivables = Number of Days in the Period/Accounts Receivable Turnover Ratio Target Number of Days’s Sales in Receivables: 360/82.43 = 4.37 days By dividing Target’s net credit sales by their average accounts receivable, it was determined that Target’s accounts receivable turnover ratio was 82.43, meaning the company turns over its accounts receivable over 82 times per year. Dividing the number of days in the period by the accounts receivable turnover ratio tells investors that it took Target 4.37 days or less on average to collect its accounts receivable.