Use the financial statements included in Part II, Item 8 to calculate the gross margin percentage and inventory turnover ratio for each company for the most recent year. Which company has the higher gross margin percentage? Which company has the higher inventory turnover?

Target and Kohl’s are chains of stores that cater to customers
who desire name-brand goods at lower prices. The Securities and Exchange Commission
(SEC) Form 10-K filing rules require management of U.S. public companies to include
background information about the business, as well as the most recent financial condi-
tion and results of operations. Access each company’s most recent Form 10-K. These
can be obtained through the SEC website (www.sec.gov), or directly from the investor
relations section of the Target (www.target.com) and Kohl’s (www.kohls.com) websites.
a. Read the description of each company’s business in Part I, Item 1 of Form 10-K.
Evaluate the similarity of each company as a basis for making financial comparisons.
b. Each company follows what is called a 52/53-week year in which the fiscal year ends
on the Saturday nearest January 31. Given the nature of these companies, why does
a year end near January 31 make sense? Note that most public companies have a
December 31 year end.
c. Use the financial statements included in Part II, Item 8 to calculate the gross margin
percentage and inventory turnover ratio for each company for the most recent year.
Which company has the higher gross margin percentage? Which company has the
higher inventory turnover?
d. Evaluate whether the relation between the gross margin percentage and inventory
turnover makes sense given the description of each company’s business.

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