In answering these questions, assume that you are the credit manager of a medium-size toy manufacturer. (Your companys annual sales are about $2 billion per year.) Toys R Us wants to make credit purchases from your company of approximately $15 million per month, with payment due in 60 days.

1. As general background, read the letter addressed To Our Stockholders and Managements Discussion Results of Operations and Financial Condition. Next, compute the following for the fiscal years ending January 28, 1995 and January 29, 1994 (round dollar amounts to the nearest million, percentages to the nearest tenth of one percent, and other computations to one decimal place):

a. Current ratio

b. Quick ratio

c. Amount of working capital

d. Percentage change in working capital from the prior year

e. Percentage change in cash (and cash equivalents) from the prior year.

Note: Please show solution.

2. Based upon the most recent year, compute the approximate percentage of the annual merchandise purchases of Toys R Us that your company would be supplying.

3. Based upon your analysis in number 1, does the companys liquidity appear to have increased or decreased during the most recent fiscal year? Explain.

Answer each of the following questions and briefly explain where in the statements, notes, or other sections of the annual report you located the information used in your answer.

ANNUAL REPORT OF TOYS "R" US Intended for Uise after Chapter 8. In this appendix we present the 1995 annual report of Toys "R" Us, a publicly held corporation. This report was selected to illustrate many of the financial reporting concepts discussed in this textbook. But not all of the terminology and accounting policies appearing in this report are consistent with our text discussions. This illustrates some of the diversity that exists in financial reporting. TOSUs ANNUAL REPORT YEAR END ED JANUARY 28. 1 99s