Question

Target Corporation prepares its financial statements according to U.S. GAAP. Target's financial statements and disclosure notes for the year ended February 1, 2020, are available in Connect. This material is also available under the Investor Relations link at the company's website (www.target.com). Required: 1. Did Target's cash provided by operating activities in fiscal 2019 increase or decrease from the previous year? 2. Is Target's cash provided by operating activities more or less than net income in fiscal 2019? 3. What is Target's largest investing activity? 4. Is Target increasing or decreasing its long-term debt? 5. Some transactions that don't increase or decrease cash must be reported in conjunction with a statement of cash flows. What activity of this type did Target report during each of the three years presented?

Answer 1

Financial capital is essential for companies to fund acquisitions and growth, which can stem from profits, borrowing, issuing bonds, or selling stock. The choice between these sources depends on the cost of capital and various other business and market conditions.

Step-by-step explanation:

Financial capital is the funds necessary for corporations to purchase assets, fund operations, and facilitate growth. These funds can come from internal sources, like profits retained in the company, or external methods such as borrowing, issuing bonds, or selling corporate stock. Profits are significant because they can be reinvested into the company, serving as a vital source of financial capital without incurring debt or diluting ownership.

Corporations borrow funds for a variety of reasons, including expanding operations, purchasing new equipment, or entering new markets. The process of borrowing can involve taking out loans or issuing bonds, which are essentially IOUs to investors with the promise to pay back the principal with interest. Companies may also issue corporate stock, selling a portion of ownership in the corporation to raise funds.

The decision on whether to borrow, issue bonds, or sell stock depends on a variety of factors, including the current condition of financial markets, interest rates, the financial health of the company, and its future growth prospects. One key factor in this decision is the cost of capital, which is the return expected by investors. Companies will often choose the source of financing that offers the lowest cost of capital, thereby minimizing expenses and potentially increasing shareholder value.