Mattel Financial Statement Review & Questions Essay

ESSAY TOPICS:   a4essay

This paper seeks to review Mattel’s financial statements and describe the company’s financial performance over the past three years. The paper will discuss trends in sales, expenses, profits or losses, assets, liabilities and owners equity. The changes noted will be expounded in terms of looking at a specific toy brand performance as well as the differences in geographic markets (international versus domestic).

The company financial performance is basically measured in term of changes in revenues, profits and net worth or wealth of stockholders. In terms of changes in sales, the company exhibited an increase from 2006 to 2007 by about 6% and then decreased by about 1% in 2008. See Appendix A. A company is normally expected to have increased sales hence the decreased in 2008 may be the result of recession that was felt in 2008 (Mattel, 2009). The company’s operates with reportable segments that are separately managed units and which are divided on a geographical basis between domestic and international. Its domestic segment is sub-divided into Mattel Girls & Boys Brand US, Fisher-Price Brand American Girl Brands and US. Revenues from international segment represent 49% of its total worldwide consolidate gross revenues in 2008 (Mattel, 2009). Despite the decrease sales in 2008, the company reported also the success of its toy brand for ‘American Girl which contributed high revenues for the company (Mattel, 2009.

The company has posted net incomes of $592.9, $600 million and $379.6 million for the years 2006, 2007 and 2008respectively. The increase from 2006 to 2007 and eventual decrease in 2008 followed the behavior of revenues. Net profit margin at 10% in 2007 decreased to 6% in 2008. Since net income is computed by deducting expenses from revenues, if follows that total expenses in relation to sales increased from 90% in 2007 to 94% in 2008. See Appendix A. This means that the company’s revenue growth and profitability are both affected by recession that was felt in 2008 as reported by the company’s CEO but not bad enough because of prudent retail and terrific marketing (Mattel, 2009). The notable changes from 2007 to 2008 are further supported by the following financial ratios of return on assets and return on equity, both of which exhibited decrease in 2008. See Appendix A.

Another way to evaluating Mattel’s performance is on its liquidity position and solvency position or capital structure on whether the same was also affected by recession that has affected its profitability and revenues. Mattel’s current ratio, which measures liquidity position, increased to 1.89 in 2000 compared with 1.65 in 2007 while debt to equity ratio improved deteriorated to 1.21 in 2008 from 1.08 2007. See Appendix A. The company’s liquidity position tells how whether the company would be able to meet its currently maturing obligations (Meigs and Meigs, 1995). A 1.0 current ratio would mean matching one dollar of current debt with one dollar of current assets. Since the company had more than 1.0 current ratios for 2007 and 2008, Mattel is considered liquid. On the other, solvency measures the long-term capacity or stability of the company in its ability to sustain its life because there is less risk to becoming insolvent over the long-term (Meigs and Meigs, 1995).

To conclude, the company was found to have decreased revenues in profitability from 2007 to 2008 due to recession in 2008. However, the company was able to maintain a very high liquidity, which is enough to indicate capacity to meet currently maturing obligations. The company’s capital structure however deteriorated slightly in 2008 from 2007 because of decrease level of revenues and profitability. On the overall, however, the company may be declared still to be generally profitable, liquid and solvent which should be good grounds to infer that the company’s stock is still a good investment option for investors on the premise that Mattel would be able to repeat the most recent years performance or perform better in the future.

Appendix A

References:

Mattel (2009) Annual Report for 2008, {www document} URL accessed May 9,2009

Meigs and Meigs (1995) Financial Accounting, McGraw-Hill, London, UK

How to cite this essay: