y balanced approach of financing. They are currently borrowing $1.34 from long-term creditors for every dollar contributed by equity financing. Although, Toys R Us seems to be ahead of the industry in total debt to equity financing, they are in line with the overall market average of $1.33. Even though Toys R Us uses a large portion of debt to finance their operating activities, the financial leverage index states that the company has used their debt very effectively. This is because the index is greater than 1. The financial leverage index gives the analyst insight on the firm’s ability to use debt to increase earnings. One of the most disturbing ratios we have viewed during our analysis of Toys R Us is the Altman Z Score. This ratio tells us the probability of the firm going bankrupt. According to the ratio a score below 1.20 suggest a high probability of bankruptcy, while Z-scores above 2.90 imply a low probability of bankruptcy. Scores between 1.20 and 2.90 are said to be in the gray or ambiguous area. Throughout the five previous years Toys R Us has not scored above 2.90. This signifies that they are not a stable corporation. We attribute this low score to the firms overall liquidity problems. Through our analysis we have discovered that the working capital of Toys R Us has decreased four out of the five previous years. As we have stated earlier the liquidity problems of Toys R Us seem to be effecting the overall performance of the firm.Asset Utilization Jan-01Jan-00Jan-99Jan-98Jan-97IndustrySales to Cash and Cash Equivalents26.3823.8735.822.6720.62N/ASales to Receivables 54.761.4658.9469.6273.30N/ASales to Inventories5.226.035.124.724.71N/ASales to Working Capital20.381338.914105.37719.06317.835N/ASales to Fixed Assets2.6614.1292.6432.6212.454N/ASales to Other Assets12.06810.7359.65412.29211.574N/ASales to Total Assets1.391.461.411.381.35N/ASales to Short-Term Liabilities78.4254.6677.0350.4631.22N/AAsset utilization ra...
