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IB9YH0

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Performance Management of the Firm

Term One 2024/25

WARWICK BUSINESS SCHOOL

70% Individual Assignment

2500 words

This is a strict limit not a guideline. Any piece submitted with more words than the limit will result in

the excess not being marked.

“Prepare a research report assessing the performance of Target from fiscal year 2018 to 2023

(from 31 January 2019 to 3 February 2024). Prepare your assessment from the shareholders’

perspective, asking if this has been a good investment over the period. Financial data for

Target can be found at the link “Target SEC filings ”.

You are assessed based partly on your technical skills, but more importantly the extent to

which you understand the materials covered in the module. Good discussions should include

relevant academic and practitioner-oriented journal readings, sector reports, as well as refer

tightly to your own analysis to support your arguments and discussions. The overall word

count is 2,500 words excluding appendix which contains full disclosure of the required

calculations. Your assignment contains two parts. Do not exceed the word count.

This assignment requires you to show progress from your Group Assignment Presentation in

the following ways:

 Writing skills and ability to conduct independent research individually

Ability to persuade readers of your ideas that are supported by data/information

(evidence)

 Ability to search legitimate sources of information and relevant academic readings to

enhance the quality of the report

 Demonstrating advanced analytical skills in applying DuPont model as a framework

 Integrating financial information provided by the financial statements taught in

the module

The assessment criteria for each part of the assignment are included below.

The overall

Marking criteria that will be applied are the WBS generic PG Marking criteria detailed in your

Student Handbook: Comprehension, Analysis, Critical Evaluation and Academic Writing.

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Part I – Technical skills (30%).

Use of databases for raw data is prohibited. This part should be adequately designed and well- presented and clearly illustrate the required indicators/figures. You must calculate your own

indicators/figures. It is not recommended to use the indicators disclosed by the company directly

1. 5 factor DuPont model of ROE and its components (ROCE, leverage, interest burden, and tax

burden)

2. Level 2 and Level 3 detailed analysis of ROE drivers.

Assessment criteria: 1) ability to compute the required indicators and figures and understand what

they mean in measuring performance of a firm in holistic views. 2) presentation and readability of

data in the assignment. List the process of the calculations, for example, the numerator and the

denominator for each financial indicator in each financial year. All balance sheet related

numerators and denominators should be based on the average amounts.

Round all financial indicators to 2 decimal places. ROE, ROCE, operating profit margin, interest

burden, and tax burden should be presented based on the ‘percentage’ number format (%). Asset

efficiency and financial leverage are presented based on the ‘number’ number format.

Part II – Critical evaluation skills (70%).

This part of the report should include the following content:

1. An executive summary page of the report, summarising the key findings (10%)

2. Content should include the following 4 points:

i) a brief overview of the company, and macroeconomic and sector conditions (10%)

ii) a summary of the company’s financial performance and position given its context (20%)

Assessment criteria: description of the key strategy that includes (but is not restricted to)

the choice of product segment (choice of sectors), competitor identification, intensity of

competition, and interpretations of ROE and its drivers that reflect the underlying strategy

and its outcomes. The discussions should be well structured and articulated. Do not use

bulletin points.

iii) Read the AI generated report on pages 3 – 4 and criticise the report on the company’s

recent financial performance and position based on 5 factor DuPont analysis (50%)

Assessment criteria: critical and analytical skills on how you make sense of the detailed

DuPont ratios in interpreting the company’s strategic initiatives. The arguments should be

well structured and discussed. Limit the use of bulletin points.

iv) Conclusion, presentation, use of references, and properly styled references and in-text

citations (10%).

Assessment note: Do not place the resources that are not cited in the main body in the

reference list. It is prohibited to use Investopedia and Wikipedia. All relevant concepts

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and ratios should refer to textbooks, academic and practitioners’ journals, news articles,

and the reports from databases provided by the University library.

Continued…/

ChatGPT generated report:

1. Sales Performance

 Sales have grown consistently from 2019 to 2021, with a peak in 2021 at $104.6 billion.

However, there is a slight decline in sales between 2022 ($107.6 billion) and 2023 ($105.8

billion), suggesting a cooling off after the pandemic-driven sales surge.

2. Total Revenue and Cost Management

 Total revenue follows the sales trend, with steady growth peaking in 2022 before declining

slightly in 2023.

 Cost of sales has also increased significantly from 2019 ($54.8 billion) to 2022 ($82.2 billion),

reflecting higher costs likely due to inflationary pressures, supply chain challenges, and

growth in sales. In 2023, cost of sales dropped to $77.7 billion, indicating better cost control

or reduced sales volume.

3. Profitability Margins

 Gross margins fluctuated over the five years, with a notable decline in 2023 (26.5%)

compared to 2021 (28.3%), suggesting increased cost pressures.

 Operating income margin also declined sharply from 8.4% in 2021 to 5.3% in 2023, showing

that Target faced challenges maintaining profitability despite high revenues.

4. SG&A Expenses

 Selling, general, and administrative expenses (SG&A) rose steadily over the years, from

$16.2 billion in 2019 to $21.5 billion in 2023. This increase, combined with lower revenue

growth, resulted in higher SG&A as a percentage of revenue (20.1% in 2023 vs. 18.6% in

2021).

5. Net Earnings and EPS

 Net earnings fell dramatically from $6.9 billion in 2021 to $2.8 billion in 2022 but slightly

improved to $4.1 billion in 2023.

 Similarly, basic earnings per share (EPS) dropped from $14.23 in 2021 to $6.02 in 2022,

rebounding to $8.96 in 2023.

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6. Long-Term Debt and Shareholder Investment

 Target’s long-term debt has increased moderately over the five years, from $11.5 billion in

2019 to $16.0 billion in 2023.

 Shareholders' investment has remained relatively stable, with a slight decrease in 2022 but

recovery in 2023.

7. Comparable Sales Performance

 After strong growth in 2020 and 2021, comparable sales dropped by 3.7% in 2023, indicating

challenges in maintaining previous momentum.

8. Operating Cash Flow and Capital Expenditure

 Operating cash flow saw significant variation, with a peak in 2020 ($10.5 billion), a drop in

2022, and a recovery to $8.6 billion in 2023.

 Capital expenditures have grown steadily, indicating ongoing investment in infrastructure,

rising from $3.0 billion in 2019 to $4.8 billion in 2023.

Summary:

Target has experienced strong growth between 2019 and 2021, driven by increased consumer

spending, especially during the pandemic. However, the company's financial performance in 2022

and 2023 indicates some challenges. Higher costs, both in SG&A and cost of sales, have compressed

margins and reduced profitability. Despite this, Target has managed to maintain strong cash flow

and continues to invest in its operations. Moving forward, managing costs and revitalizing sales

growth will be key to improving profitability.

Key Insights:

 Shifting Consumer Preferences: Consumers are spending more on essential goods like

beauty, household essentials, and groceries, while reducing their spending on discretionary

items like apparel, electronics, and home goods.

 Economic Headwinds: The declines in non-essential categories suggest that inflation, supply

chain disruptions, or changes in spending patterns post-pandemic may be influencing

Target's overall sales performance.

 Opportunities for Growth: Target’s strength in everyday essentials (beauty, household

items, and groceries) presents a significant opportunity for the company to focus on

maintaining and growing these high-demand areas while navigating challenges in more

discretionary categories.

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Continued…/

Please note,

“The University recognises an increasing number of technologies such as Artificial

Intelligence and that they may be applicable in your completing this assessment.

The student handbook has further guidance and advice.

You are reminded that the inappropriate use of such a technology may constitute

a breach of University policy, such as the Proofreading Policy or Regulation 11

(Academic Integrity). If you breach these policies, it may have significant

consequences for your studies. Please make sure you read and understand the

assessment brief and how AI may or may not be used.

You MUST NOT use any generative Artificial Intelligence in this assessment unless

specifically authorised for reasonable adjustments. You MAY use non-generative

tools such as a spell-check, basic grammar check (non-generative), calculator or

similar. If you have any doubts about a tool or service you plan to use please

contact the module leader.

SUBMISSION DEADLINE: 12:00 (UK time) Tuesday, January 14, 2025

Assignment Preparation (found in your Masters Student Handbook Section 6.2b)

Word Count Policy and Formatting (found in your Masters Student Handbook Section 6.2c)

Guidelines for Online Submission (found in your Masters Student Handbook Section 6.2e)

Your assignment cover sheet can be downloaded from this page.

ChatGPT and AI (found in your Masters Student Handbook Section 6.1e)

You must submit your completed assignment online via my.wbs. The submission deadline is visible

on your my.wbs home page. Submission dates and times are serious deadlines which must be strictly

adhered to. You must submit your document by 12:00 midday (UK time), if you submit later than

12:00:00 your submission will be late and penalty marks will be incurred.

A completed assignment coversheet must be included as the first page of your script (see section

6.2b/e).

If you have reasonable adjustments, you should also provide the cover sheet from the

Disability Team.

Do not include your name anywhere in the assignment, all marking is anonymous.

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Continued…/

You should include your University ID number in the header on every page and number all pages in

the centre footer, your document should be in A4 page layout, Arial font size 11pt with 1.5 line

spacing and 2.54 margins (see section 6.2c).

My.wbs will only allow you to upload one file.

Please submit your work as a PDF, we will not accept PDF files of scanned documents. You should

create your assignment in your chosen package (e.g., Word), then convert it straight to PDF. Please

ensure that you create the PDF in advance of the deadline as technological problems will not

normally be accepted as mitigating circumstances for late submission.

You should name your file as your Student ID number underscore Module Code, e.g.,

1234567_IB9XXX.

When submitting your assignment you will need to confirm that the work you are submitting is your

own, that you have referenced your work and that you understand the University Regulations with

regard to Academic Integrity.

Please note, AI generated text cannot be presented as your own. Like any other resource utilised in

the creation of your academic work, you need to acknowledge and reference that you have used AI- generated content (see section 6.1e).

Double check that you are submitting the correct file. You are responsible for ensuring that you

submit the final version of your work.

By submitting your assignment, you confirm that you agree with the following statements:

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Continued…/

Once you declare your agreement with the statements, it will not be possible to claim that you were

unaware of these requirements in the event that your work is subsequently suspected of Academic

Misconduct.

After submitting, please check the correct file has successfully uploaded, by opening the document

link on the submission page and scrolling through the entire document.

You can retract your submission before the deadline to upload an updated file, the retraction button

can be found in the same place you submit your assignment. Please upload your new document

before the deadline, submitting after the deadline will attract late penalties.

End

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