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.
"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 the cattle rancher with the financial statement of the meat processor even though the both derive their income from the beef industry. Their role in the industry is not the same. Their capital requirements, cash flows and profit margins are not comparable. In querying leading investor researchers, Standard & Poors, Thompson, and The Wallstreet Journal, the industry standards consistently mixed results from Toys "R" Us and other retailers with Mattel and Hasbro and others which are primarily manufacturers. While this is not ideal, these ratios are used here for comparison in the absence of other...