New Activity for Class: Statement of Cash Flows: Target Corporation vs. Wayfair Inc.

Target Corporation and Wayfair Inc. are both retailers, but their 2025 statements of cash flows reveal a fundamental difference in financial structure. Target reported net earnings of $3.7 billion and generated $6.6 billion in operating cash flows, then used that cash to invest $3.7 billion in capital expenditures, repay debt, pay $2.1 billion in dividends, and repurchase $408 million of its own stock. Wayfair, by contrast, reported a net loss of $313 million yet still generated $534 million in positive operating cash flows, a result driven almost entirely by non-cash adjustments rather than profitability.

This pairing works particularly well for introducing students to the concept of cash flow quality. Both companies generated positive operating cash flows in 2025, which makes the activity more nuanced than a simple comparison of positive versus negative numbers. The central question is not whether operating cash flow is positive, but what is driving it.

One note for instructors: Target’s fiscal year ends in late January or early February rather than December 31. The column labeled 2025 covers the year ended February 1, 2025. This difference is flagged in the slide deck.

I developed a classroom activity using condensed statements of cash flows from both companies’ 2025 annual reports. Students work in pairs to answer 12 polling questions that guide them from identifying basic cash flow figures through evaluating the composition and quality of operating cash flows, before asking them to make an overall investment judgment. The polling questions (found in the slide deck) guide the students through assessing the statements of cash flows. I have also condensed each company’s statement of cash flows into a one-page document for ease of use.

The activity includes:

• A PowerPoint slide deck with both statements of cash flows and all 12 questions, formatted for use with a classroom polling tool (download at this link)
• A condensed, one-page statement of cash flows for Target in Word format
• A condensed, one-page statement of cash flows for Wayfair in Word format
• Answers to the polling questions in the slide deck (request the answers to the polling questions at this link; check your spam folder a week after requesting, I send out requests about once a week)

Discussion Questions

1. Both Target and Wayfair generated positive operating cash flows in 2025. Why is it important to look beyond the sign of operating cash flow when evaluating a company’s financial health?
2. Wayfair’s $534 million in operating cash flows in 2025 was driven largely by $335 million in stock-based compensation and a $256 million loss on debt extinguishment added back as non-cash items. What does this suggest about the sustainability of Wayfair’s operating cash flows?
3. Target generated $6.6 billion in operating cash flows and spent $3.7 billion on capital expenditures, leaving approximately $2.8 billion in free cash flow. How did Target use that free cash flow, and what does this suggest about its financial strength?
4. Based solely on the statements of cash flows, which company appears to be in a stronger financial position, and what specific evidence supports your conclusion?

Copyright 2026 Wendy M Tietz, LLC