repaids etc.) is also low at .3, however this is higher than industry standard. It is likely the heavy investment in inventory that drives these ratios to be so low. Ten Year Trend for Current and Quick Ratios Another calculation that is worth looking at is the operating cash flow which is cash flow from operations/current liabilities. (Mills, 1998) For 1997 and 1996 this was .29 and .12 respectively. These seem extremely low but without comparable ratios for industry peers, it is difficult to evaluate.ProfitabilityNet return on assets (ROA) is measured by dividing operating income by average total assets to determine whether the company is earning a reasonable return on the resources available. ROA for 1997 was 5.79% as compared to industry standard of -.6%. (Thomson) Return on equity (ROE) measures the return on stockholders’ investment. ROE for the year ending in 1997 was 11.21% compared to the industry standard 16.2% (Thomson). The following graph shows ROE and ROA for the last nine years. Earnings per share (EPS) is one of the most widely used ratios in accounting. Earnings per share was $1.54, $.53 and $1.85 respectively for years ending 1997, 1996 and 1995. The following chart shows the volatility of EPS for Toys "R" Us. The industry standard is $.64. (Thomson) Capital StructureCapital Structure describes the mix of equity and liability used to finance the assets employed in a company. A company with a high level of liability is described as highly leveraged. Common measurements of leverage include assets/equity, and long-term debt/total equity. In 1997, the company’s assets to equity was 1.91 compared to an industry standard of 2.5. (Thomson) Long-term Solvency and LeverageLong-term debt/equity for the company was .22 in 1997 compared to .4 for the industry standard. (Thomson). Toys "R" Us has less debt compared to the industry. Toys "R" Us is not highly leveraged but has used retained earnings to finance the a...
