Assessing Target Corporation's Financial Health: A Case Study

This finance case study provides a detailed analysis of Target Corporation's financial health, following a nine-step assessment process. The study examines future external financing needs, including sources like bank overdrafts and equity share capital, while also assessing the viability of a 3-5 year plan, stress tests under adversity, and current financing plans. The analysis considers the company's complex supply chain, weak sales growth, and the importance of planning for both planned and unplanned activities. The study also emphasizes the need for Target Corporation to evaluate its debt and equity policies, investment needs, and product strategies in relation to its financing capabilities, and the importance of conducting stress tests to evaluate the practicality and reliability of its plans. The report concludes with an overview of the financial planning process, including setting objectives, goals, and formulating plans for the present year to assess the company's current market conditions and growth potential.

FINANCE CASE
STUDY

TABLE OF CONTENTS
1. Future External Financing Needs............................................................................................................3
2. Access to Target Sources of External Finance 250 words.......................................................................3
3. Viability of the 3-5 Year Plan..................................................................................................................4
4. Stress Test Under Scenarios of Adversity................................................................................................4
5. Current Financing Plan............................................................................................................................5
Requirement 2.............................................................................................................................................6
REFERENCES............................................................................................................................................7

1. Future External Financing Needs
External financing need (EFN) is identification of funds and resources which is needed
by company and which should be raised so that future sales are forecasted in way of output of
production. This will be called to as External Financing Needed (EFN) or Additional Fund
Needed (AFN). There are two sides which are negative and positive if company is having
negative ratio then this mean that they are able to generate more cash internally than it is actually
needed (Yin, 2017). While on other hand if company is having positive ratio then this means that
company is not been able to generate enough cash for its internal requirements it is very much
essential that company is able to focus more on their need for finance that they will be requiring
in future. TC should also be evaluating many options that are available for sourcing their fund
and investing in coming future.
It was noted that Target Corporation is having very much complex supply chain as they
are having higher level of stock at their stores. In year 2015 they were also having very weak
growth within their current quarter sales at the new opened store of company (Target's big
problem is clear, 2018). The focus on this supply chain network will help in the current
restructuring plan for Target Corporation. This will be very much essential that company is
analysing their future need for finance so that their current budget and other activities could be
adjusted according to it.
2. Access to Target Sources of External Finance
There are various sources through with long and short term finance could be gathered and
this help company in achieving all their goals and objective with help of these collected finance.
If company is setting their target market which is allowing them to penetrate within more new
markets then it is also required for them to collect funds from different type of sources that is
essential for them (Lehner & Nicholls, 2014). In way of financing themselves with available
source they will be requiring to judge that which one is most appropriate for them. This is only
done by forming an expert team who will be responsible for all activities and task they will
identify that which source is best suited for company in long and short run.
The long term finance for Target Corporation which is available for them are like that of
bank overdraft, debentures, term loan, trade credit, venture capital and equity share capital as

well. All these are options for company from where they will select one or two according to their
set target or need. It is also important that Target Corporation is selecting the correct one only
after analysing all the source and then look which will be best suited for them in which is then
helping them to achieve all targets.
3. Viability of the 3-5 Year Plan
For company it is very important that they are formulating their short, medium and long
term goal and then planning accordingly. This is very much essential as without this company
will not be able to follow and achieve all aims and objectives (Simon, Hyman & Laurent, 2014).
Planning is very much essential in every manner and that must be feasible, viable and practical
enough without which it is not possible for company to work efficiency. Company need to
follow their planning so that they are been able to match their targets and objective with
analysing the availability of funds. Then this will be helping organisation in way of their target
and this should be practical as well.
The planning and formulation of future term goal should be very much practical as Target
Corporation must be having resources and funds of the same. In way of setting long and short
term plan it is important that Target Corporation is considering all type and source of fund which
they are having or made available with. There are 2 main questions which company will be
answering and then testing practical of their 3-5 year plan.
• Target Corporation will test whether their debt and equity according to debt policy of
company or not if they are not matching with this policy then further action is needed.
• Target Corporation will test whether their need of investment, goals and product
strategies all are according to financing capabilities in coming 3-5 year or not.
If in these both question company is not following them then it is required that they are
all revising the above included other 6 steps of assessment again and planning according to them
only. The 3-5 year plan for company must be drawing attention to all planned and unplanned
activities of Target Corporation so that they are having clear view of their future
4. Stress Test under Scenarios of Adversity
This is conducted at time when company need to analyse their 3-5 year plan its
feasibility, practicality and reliability as well then including whether flow of funds will be proper

or not. For company it is very essential that they are analysing whether strategic program are
maintained at time of adversity (Crespí & Martín‐Oliver, 2015). There will be a 3-5 year plan
which is properly planned then research is meeting to aim and objective of firm. Further there are
events which will help company to reduce reliability and expectations of planning for company.
Performing in positive manner into condition of stress test will help them to reduce which help in
probability of negative occurrence in time of adversity. These adversity could include like that of
failure of project, lack of fund, inappropriate skills and techniques of employees and lack of time
period.
Target Corporation wills also analysis whether their 3-5 year plan is sound and finding
flow of funds in their strategic programs which is possible at time of problem and adversity. This
will not only be for company itself but for this employees and management will also be included
to test their stress level at time of pressure within company (Erel, Jang & Weisbach, 2015). The
adverse scenario is probably the time when company is having tough competition or they are
through their pressure times which help them to test how much amount of stress they are able to
take.
5. Current Financing Plan
This is the 9th step of this assessment plan which includes the evaluation of how firms
will be able to meet their future plan on way of current financial planning. The primary objective
of company will be that for balancing of future benefits and then realising the future stock price
in market. Further it is included that management expects that if they are having higher share
price of their selling up of equity share capital then they could sell it (Assessing a Firm’s Future
Financial Health, 2018). Then in coming year company must be making their efforts in
maintaining and depending upon market conditions and future sales forecast only.
So for Target Corporation it is very much important that they are planning for their
current years which will help them to analysis current market conditions of company. If they
have not planned for their current year then it will not be possible for them to grow in coming
future. Current financing planning will include setting objectives, goals and formulating plan for
this present year that allow them to critically evaluate where they are and where they want to go.

Requirement 2
There is included nine steps assessment while making out future financial health of
company which is very important factor. This will help in doing market research so that analysis
is easily done and then company could forecast revenue growth and expenses control
(Steinerowska‐Streb & Steiner, 2014). It is very important that company is knowing their future
opportunities and roles so that they could analysis their projections and growth capacity. For this
report Target Corporation is selected and its forecast for financial health is done so that its
growth projections could be analysis from where to collect funds and from where target need to
be set.
This will be analysis which is mostly presented to group of senior management with
Target Corporation this includes major information for the financial decision for the company.
This communication plan submits the overview of whole ability to focus that has chance on
information. For the presentation to senior level management it is required that I’m having
ability to grab attention of all my attenders. For this there are certain ability that would be help
me to focus on my presentation like main are my audience and other who are paying attention. I
will be having change of impressing them all and keeping overview focused and informative as
well. With the help of current financial plan it will be possible for Target Corporation that they
are been able to identify all planning of company in. with the help of this company will be able
to identify what are the planning and financial perspective of company. It is also included that
under the scenario of adversity there is always the stress test which company need to undergo to
test how much strong and efficient enough they are with their time of depression.
The 3-5 year plan for company will be very much essential s with help of this they would
be able to identify how they need to do their work and how planning will be helpful for company
in future. for all the financial part of company like from where funds will be sourced and it will
be sourced are all done after identifying number of sources from where they will derive their
funds. There are number of source from where funds are derived like that of loan, crowd
funding, short term overdraft and many more. For company it is also important that they are
considering their future external financing need which will help them to discover how much
funds to be required.

REFERENCES
Books and Journals
Crespí, R., & Martín‐Oliver, A. (2015). Do family firms have better access to external finance
during crises?. Corporate Governance: An International Review. 23(3). 249-265.
Erel, I., Jang, Y., & Weisbach, M. S. (2015). Do acquisitions relieve target firms’ financial
constraints?. The Journal of Finance. 70(1). 289-328.
Lehner, O. M., & Nicholls, A. (2014). Social finance and crowdfunding for social enterprises: A
public–private case study providing legitimacy and leverage. Venture Capital. 16(3).
271-286.
Simon, G. L., Hyman, J., & Laurent, A. (2014). Current debates and future research needs in the
clean cookstove sector. Energy for Sustainable Development. 20. 49-57.
Yin, R. K. (2017). Case study research and applications: Design and methods. Sage
publications.
Online:
Assessing A Firm’s Future Financial Health. (2018). [Online]. Available through:
<http://www.nationalforum.com/Electronic%20Journal%20Volumes/Kritsonis,
%20Alicia%20Assessing%20A%20Firms%20Future%20Financial%20Health
%20IJMBA%20V8%20N1%202005.pdf>.
Target's big problem is clear. (2018). [Online]. Available through:
<https://www.businessinsider.com/r-new-target-coos-headache-too-few-goods-to-
keep-shelves-filled-2015-8?IR=T>.