Read a selection of your colleagues’ postings. BY DAY 5 Respond to two or more of your colleagues’ postings in one or more of the following ways: Ask a probing questio

Student 1

Alexa Robinson

How did the company define cash on the balance sheet?

          Target defines cash as a current asset and breaks it down into cash and cash equivalents including short term investments of $130 million and $194 million. These are assets which, in addition to cash, can be quickly converted to cash to cover expenses (Spiceland, Nelson & Thomas, 2020). Cash equivalents include highly liquid investments with an original maturity of three months or less from the time of purchase (Target SEC, 2013). These investments were $130 million and $194 million at February 2, 2013 and January 28, 2012, respectively (Target SEC, 2013). Cash equivalents also include amounts due from third-party financial institutions for credit and debit card transactions. These receivables typically settle in less than five days and were $371 million and $330 million at February 2, 2013 and January 28, 2012, respectively (Target SEC, 2013). Payables due to Visa resulting from the use of Target Visa Cards are included within cash equivalents and were $34 million and $35 million at February 2, 2013 and January 28, 2012, respectively (Target SEC, 2013).

What definition of funds did they use in the operating activities section of the statement of cash flows?

          For operating activities, Target took their net earnings and adjusted for non-cash operating activities that will effect net earnings under the reconciliation to cash flow section. To determine the amount of cash and cash equivalents at the end of the period the company took the cash flow provided by operating activities an subtracted the cash flow required for investing and financing activities. Cash and cash equivalents are cash holdings and investment vehicles valued using the Net Asset Value (NAV) provided by the administrator of the fund (Target SEC, 2013). The Net Asset Value for the investment vehicles is based on the value of the underlying assets owned by the fund minus applicable costs and liabilities, and then divided by the number of shares outstanding (Target SEC, 2013). This cash and cash equivalents is the same as what is used for the balance sheet.

Determine if the ending balance on the statement of cash flows is the same as the cash balance on the balance sheet. If not, explain why these two amounts are not equal.

          Yes, the cash and cash equivalent amount at the end of the period on the statement of cash flow is the same amount used in the cash and cash equivalent line at the top of the balance sheet.

Is there an advantage to using the same definition of funds on both of these statements? Why or why not?

          Yes, this makes it easier to compare these statements and notice any trends affecting financial performance