Compute a simple ROE decomposition using return on assets, return on sales, asset turnover and leverage. How would you assess Target’s performance relative to history and relative to Walmart? Can differences in operations rather than differences in performance explain some of the ratio differences? Notice that Target had its own credit card business in 2011. In 2012, Target sold off its credit-card receivables to TD Bank for $5.9 billion. Target continued to service its current credit card customers and maintain its 5% RedCard Rewards program. How might this sale affect shareholder value? In comparing Target’s ratios in 2011 to those in 2019, what ratios are likely to be increased or decreased? Why? How can Target increase shareholder value? Can Target increase shareholder value by buying back shares? Can Target increase shareholder value by selling its stores (for a gain) and leasing them back?

Compute a simple ROE decomposition using return on assets, return on sales, asset turnover and leverage. How would you assess Target’s performance relative to history and relative to Walmart? Can...

Feb 26, 2022