tios relate sales to different asset categories. These ratios are important determinants of return on investments. During our analysis of the asset utilization ratios of Toys R Us we discovered that the firm had some problems selling their products during the 2000 fiscal year. This is because the sales to inventory ratio decreased by more than 13%. Throughout the previous year inventory grew by 14% while sales decreased by 5%. This figure was of great concern to us because this was the greatest decrease during our five-year analysis. Another ratio that provided us with insight into the overall business plans of Toys R Us was the sales to total assets ratio. During 1996-1999 the total assets of Toys R Us has decreased by at least 4% each year. After reviewing the notes to the consolidated financial statements we have determined that Toys R Us has been closing some of their significant locations, including their largest location in Herald Square, New York. Although, this location did not close until May of 2001, Toys R Us wrote down the asset and accrued the loss for the quarter ending October 28, 2000. Toys R Us has currently revised a plan to open a number of key stores during 2001. The opening of the stores has been a significant factor in the computation of the sales to total assets ratio from 2000-2001. Toys R Us currently records construction in progress as a part of property and equipment. Throughout the previous year construction in progress has grown by more than 100%, this increase signifies drastic changes occurring within the firm. Toys R Us is now concerned with expanding their business instead of trying to cut costs.Operating Performance Jan-01Jan-00Jan-99Jan-98Jan-97A.IndustryGross Profit Margin28.57%27.51%24.40%27.90%28.50%35.27%Operating Profit Margin9.02%6.79%2.67%7.60%8.20%5.40%Net Profit Margin4.81%3.69%.003%4.44%4.30%1.78%Another important part of profitability analysis is the evaluation of the firms oper...
