Introduction This case analysis primarily focuses on various reasons contributing to the failure of Toys R Us, a leading toy store for all toys, action figures, learning games, building blocks, and more. Toys R Us has almost consistent success since it was founded in 1957 by Charles Lazarus. The company has also been able stand out amongst the competition by providing the most up to date toys, a large variety of toys, and locations that attract customers from all over the world . However, in September 2017, Toys R US filed for bankruptcy; and in March 2018, the company filed for liquidation, which means it will close or sell its remaining US stores . This case analysis will look at the problems that cause the failure of Toys R U from an
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All data can be found in the Appendix . From FY 2017 to FY 2018, the revenue and earnings per share for Toys R Us continue to decrease due to the declining in sales. Within five years, the percentage of sales are declining from -2.22% to -3.67%, which is a very bad indication for Toys R Us’ performances. For growth rates, the sales and earnings per share for Toys R Us is lower than its industry and sector. These rates indicate that Toys R Us does not meet its profitability and suffers losses. For liquidity ratio, Toys R Us has the lowest quick ratio and higher current ratio compared to its industry and sector. Lower quick ratio indicates that Toys R Us is over-leveraged and struggling to grow sales, while a higher current ratio indicates that Toys R Us is capable to pay its debt requirements. However, with lower revenue and a decline in sales, Toys R US financial is in a bad …show more content…
These three ratios represent Toys R US ability to translate sales dollar into profits at different stages of measurement. Toys R US also has lower return on asset (ROA) and return on investment (ROI) compared to its industry. ROA and ROI indicate the amount of profit earned relative to the level of investment in total assets. Overall, Toys R Us is unable to control costs of inventories and its business expenses, which results in negative profitability. For activity ratio, Toys R US has a lower receivable turnover, inventory turnover and asset turnover compared to its industry. These three ratios indicate that Toy R Us has lower number of times in collecting accounts receivable in cash, selling inventory and payables are paid in a year. Overall, based on the financial analysis, the revenue and earnings per share, growth rates, liquidity ratio, profitability ratio, and activity ratio show that Toys R Us’ financial is in a very bad position.
II. SWOT Analysis From the SWOT analysis, we are going to look at Toys R Us’ internal strengths and weaknesses, as well as its external opportunities and threats
All data can be found in the Appendix . From FY 2017 to FY 2018, the revenue and earnings per share for Toys R Us continue to decrease due to the declining in sales. Within five years, the percentage of sales are declining from -2.22% to -3.67%, which is a very bad indication for Toys R Us’ performances. For growth rates, the sales and earnings per share for Toys R Us is lower than its industry and sector. These rates indicate that Toys R Us does not meet its profitability and suffers losses. For liquidity ratio, Toys R Us has the lowest quick ratio and higher current ratio compared to its industry and sector. Lower quick ratio indicates that Toys R Us is over-leveraged and struggling to grow sales, while a higher current ratio indicates that Toys R Us is capable to pay its debt requirements. However, with lower revenue and a decline in sales, Toys R US financial is in a bad …show more content…
These three ratios represent Toys R US ability to translate sales dollar into profits at different stages of measurement. Toys R US also has lower return on asset (ROA) and return on investment (ROI) compared to its industry. ROA and ROI indicate the amount of profit earned relative to the level of investment in total assets. Overall, Toys R Us is unable to control costs of inventories and its business expenses, which results in negative profitability. For activity ratio, Toys R US has a lower receivable turnover, inventory turnover and asset turnover compared to its industry. These three ratios indicate that Toy R Us has lower number of times in collecting accounts receivable in cash, selling inventory and payables are paid in a year. Overall, based on the financial analysis, the revenue and earnings per share, growth rates, liquidity ratio, profitability ratio, and activity ratio show that Toys R Us’ financial is in a very bad position.
II. SWOT Analysis From the SWOT analysis, we are going to look at Toys R Us’ internal strengths and weaknesses, as well as its external opportunities and threats