The following information is available for Toys “R” Us Stores from January 2013 through January 2017. In the last column, the median industry values are reported for Retail- Hobby, Toy, and Game Shops. Assets and revenues are in millions of dollars, balance sheet percentages are a percentage of total assets, income statement percentages are a percentage of total revenues, and the statements of cash flow percentages are a percentage of total assets.

Required:
1. Evaluate the performance of Toys R Us over time. Is there a year, where you first become concerned about the likelihood of bankruptcy?
2. Because Toys R Us is a private company, the market value of equity is unknown. Compute the Z- score for private firms. Make an assessment of the likelihood of bankruptcy during 2018.

Transcribed Image Text:

Toys R Us (dollars in thousands) Balance Sheet Assets Total Liabilities Stockholders' equity Selected Balance Sheet Current Assets Current Liabilities Accounts Receivables Inventory Long-term debt Retained earnings Income Statement Total Revenues Cost of goods sold Gross margin Operating income Net income January 2013 8,921,000 8,436,000 485,000 3,842,000 2,671,000 255,000 2,229,000 5,329,000 445,000 13,543,000 8,592,000 4,951,000 556,000 39,000 January 2014 7,549,000 8,205,000 (656,000) 3,220,000 2,516,000 249,000 2,171,000 5,007,000 (612,000) 12,543,000 8,154,000 4,389,000 (350,000) (1,036,000) January 2015 January 2016 7,115,000 6,910,000 8,210,000 8,175,000 (1,095,000) (1,265,000) 12,361,000 7,931,000 4,430,000 191,000 (288,000) 3,154,000 2,799,000 225,000 2,064,000 2,270,000 4,788,000 4,685,000 (914,000) (1,062,000) 3,288,000 2,798,000 225,000 11,802,000 7,576,000 4,226,000 378,000 (124,000) January 2017 6,908,000 8,200,000 (1,292,000) 3,389,000 2,738,000 255,000 2,476,000 4,761,000 (1,124,000) 11,540,000 7,432,000 4,108,000 460,000 (29,000) Median Industry 2016 2,147,640 117% -19% 55% 42% 4 36% 97% -16% 5,197,292 63% 39% 4% 0%