Toys R Us and Subsidiaries
argumentative Essay
1363 words
Toys R Us and Subsidiaries
Running Head: Toys "R" Us Financial Analysis
Note: Consistent with the financial report, all amounts are expressed in millions except per share data.
Ernst & Young, LLP, independent auditors for Toys "R" Us Inc. and Subsidiaries issued an unqualified opinion on the company’s financial statements as of February 1, 1997 and on the consolidated results of operations and cash flows for the three years ending February 1, 1997, February 3, 1996 and January 28, 1995. The report by the independent auditors and their issuance of an unqualified opinion serves to provide reasonable assurance to stockholders, management, regulatory agencies and the public, that the financial statements are materially correct. Materiality is interpreted to mean that there are no unrecorded adjustments which would impact the decisions or opinions of the readers of these financial statements. The inclusion of the auditors’ report in the year-end financial report lends credibility to the presentation and allows the users including investors and potential investors to rely on the information as presented.
Common Stock & Treasury Stock
The company does not have preferred stock and has not declared or paid dividends on its common stock. As of February 1, 1997, Toys "R" Us, Inc. and subsidiaries had authorized 650 shares of par value $.10 common stock, of which 300.4 shares were issued. 12.6 shares were held in treasury stock leaving 287.8 shares issued and outstanding. The book value of the common stock issued and outstanding was $14.56 which is down from February 3, 1996 at which time the book value was $18.8. The total paid-in capital for common stock was $ 518.8 as of February 1, 1997 and $572.8 as of February 3, 1996. The average price per share received by the company for all common stock issued since inception of the corporation as of February 1, 1997 was $ 1.73.
Ratio Analysis
"There’s a saying that the nice thing about standards is that there are so many of them to choose from." (Maciag, 1998) It is important to choose carefully the ratios to be analyzed to be sure that there is relevance between the data and the conclusions drawn from it. When choosing industry standards, it is important to select like industries with commonalties that support comparison of results. It would not be appropriate to compare the financial statement of t...
... middle of paper ...
... beating the industry averages for inventory turns. In addition their receivables consistently exceed industry standard by a significant amount.
References
Enhanced Analytics. (May 16, 1999). S&P Personal Wealth. Available: http://www.personalwealth.com.
Industry Info. (May 16, 1999). S&P Personal Wealth. Available: http://www.personalwealth.com.
Maciag, Gregory, A. (April 13, 1998). A wake-up cal for industry standards. National Underwriter. P29.
Meigs, Robert F.; Williams, Jan R.; Haka, Susan F.; Bettner, Mark S., (1999) Accounting. p 619.
Mills, John R.; Yamamura, Jeanne H. (October 1998). The power of cash flow ratios. Journal of Accountancy. V186 n4 p53(7).
Stocksheet: Media General Quick Source Data-One Wev Page—Toys R Us INC. (5/16/99) Available: http://www.stocksheet.com.
Thomson Investors Network Company Report: Toys "R" Us Inc. (5/15/99). Available: http://www.thomson.com.
Vital Stats. (May 16, 1999). S&P Personal Wealth. Available: http://www.personalwealth.com.
Wallstreet Research Net Report: Toys R Us Inc. (May 7, 1999). Available: http://www.wsrn.com.
Berry, Donna Gorski. (Mid-Oct 1998). Mouths of the millennium. Dairy Foods. 73.74.
In this essay, the author
- Explains that toys "r" us, inc. and subsidiaries authorized 650 shares of par value $.10 common stock, of which 300.4 were issued, 12.6 were held in treasury stock leaving 287.8 shares issued and outstanding.
- Explains that it is important to choose carefully the ratios to be analyzed to ensure that there is relevance between the data and the conclusions drawn from it.
- Explains that the company's short term liquidity of 1.24 in 1997 does not make it a desirable credit risk.
- Explains that operating cash flow is cash from operations/current liabilities, which is low, but without comparable ratios for industry peers, it is difficult to evaluate.
- Explains that capital structure describes the mix of equity and liability used to finance the assets employed in a company.
- Explains that the company uses the indirect method of preparing its cash flow statement beginning with net earnings and adjusting for expenses, revenues, and non-operating gains and losses.
- Analyzes the company's financial analysis, which focuses on short-term liquidity, profitability, capital structure, leverage, and solvency. although inventory comprises a high percentage of their current assets, they are successfully beating industry averages for inventory turns.
- Explains that ernst & young, llp, independent auditors for toys "r" us inc. and subsidiaries issued an unqualified opinion on the company's financial statements and consolidated results of operations and cash flows for the three years ending february 1, 1997, february 3, 1996 and january 28, 1995.
- Explains net return on assets (roa) is measured by dividing operating income by average total assets to determine whether the company is earning a reasonable return.
- Compares toys "r" us' long-term debt/equity ratio with the industry standard, and explains that the company has less debt.
- Describes meigs, robert f., williams, jan r, haka, susan f, and bettner, mark s.
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- Analyzes toys "r" us, the world's largiest toy chain store, to provide the company with strategic recommendations for future success.
- Narrates how charles lazarus entered retailing in 1948, adding his savings to a $2,000 bank loan to convert his father's washington, dc bicycle repair shop into kids' furniture store.
- Explains that toys "r" us is one of the world's largest toy retailers, but it has lost its #1 us position to wal-mart.
- Explains that k-b toys is one of the largest toy companies in the us. it is owned by private equity firm bain capital.
- Explains that toys "r" us is the worlds leading online authority for children's accessories.
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- Analyzes how the current ratio determines a firm's liquidity and the acid test ratio. toys r us has reduced their short-term debt by over 50% and their current liabilities by more than 17%.
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