Financial Analysis of Mattel, Inc.
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It is the purpose of this research to perform a financial analysis of Mattel, Inc., in order to develop a recommendation as to investment in the firms's common stock. Mattel, Inc. is a conglomerate, or holding company, with operating companies in the toys and hobbies, consumer electronics, leisure, and publishing industries (Annual Report, 1982). Toy and hobby products account for approximately 44.0 percent of total sales for Mattel, Inc., while consumer electronics and publishing each account for approximately 25.0 percent, and leisure and entertainment accounts for approximately 6.0 percent (Annual Report, 1982). In this analysis, where comparisons are made between the performance of Mattel, Inc. and industry averages, industry averages represented weighted averages based upon contributions to total Mattel, Inc. sales. Profit contributions of the operating companies in the Mattel organization did not mirror their contributions to sales in fiscal 1982, when consumer electronics contributed 50.0 percent of total profits, toy and hobby products contributed 44.0 percent, publishing contributed 7.0 percent, and leisure contributed a 1.0 percent loss (Annual Report, 1982). Annual net sales of Mattel, Inc. have increased significantly in each fiscal year since 1978; however, operating profits declined significantly in fiscal 1981, primarily as a result of serious deterioration in consumer electronics profits, and net income flattened in fiscal 1980, before d
. . .
70.2
-28.5%
1.9
-93.8%
1982
1,134.3
+23.9%
148.0
+110.8%
3301
+1637.9%
Mean
+28.5%
+34.6%
+387.6%
Gain
697.7
+159.8%
87.3
+143.8%
4.4
+15.3%
Table 2
Liquidity Ratios
Ratio
1978
1979
1980
1981
1982
Current
1.8
2.0
2.5
2.3
2.0
Quick
1.5
1.2
1.6
1.4
1.2
1982 ratios are somewhat superior to the weighted industry averages. The major problems area with the liquidity ratios, however, is the fact that each of the ratios in the midst of a downward trend.
Activity Analysis
Activity analysis was performed in the contexts of sales as a function of inventory, total assets, total capital (equity plus long-term dept), and equity. These ratios are presented in Table 3, which may be found below on this page.
Table 3
Activity Ratios
Ratio
1978
1979
1980
1981
1982
Inventory turn
7.2X
6.2X
6.1X
6.1X
5.8X
Total assets turn
1.8X
1.8X
1.8X
1.7X
1.8X
Total capital turn
3.9X
3.4X
3.0X
2.7X
3.2X
Equity turn
4.7X
4.0X
4.0X
4.4X
4.8X
The single disturbing aspect of the activity analysis is the deterioration in inventory turn. While it has been somewhat commo
. . .
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Approximate Word count = 1270
Approximate Pages = 5 (250 words per page)
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