(c) Assume that the above profits of Toys Ltd. are identical to Operating Profit (before taxes and interest). Calculate Toys Inc.'s Operating Profit Margin. Now compare the company's profitability against the average industry margins shown below (Aswath Damodaran, January 2018). How do you interpret Toy's performance? Explain. Operating Profit Margin= 18 300/217 000 *100 = 8.43% With 8.43% we are below the average of 12.87%. Thus the performance is not as great. They could do a lot better. And this margin is only with the new investment, with the old operating profit they would be doing even worse compared to their competitors.

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Chapter1: Financial Statements And Business Decisions
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(c)
Assume that the above profits of Toys Ltd. are identical to
Operating Profit (before taxes and interest). Calculate Toys
Inc.'s Operating Profit Margin. Now compare the
company's profitability against the average industry
margins shown below (Aswath Damodaran, January 2018).
How do you interpret Toy's performance? Explain.
Operating Profit Margin= 18 300/217 000 *100 = 8.43%
With 8.43% we are below the average of 12.87%. Thus the
performance is not as great. They could do a lot better. And
this margin is only with the new investment, with the old
operating profit they would be doing even worse compared
to their competitors.
Pre-tax Unadjusted Operating
dargin
Industry Name
Apparel
Diversified
Education
Electronics (General)
Entertainment
Furm/Home Furnishings
Household Products
Publishing & Newspapers
Recreation
Software (Entertainment)
Mean
Median
Net Margin
343%
8,54%
1,38%
667%
11.50%
5,89%
13,90%
1.18%
212%
15,97%
6,82%
6,28%
Gross Margin
49,73%
20.62%
41,67%
29,41%
41,91%
10.89%
12,94%
833%
932%
20.99%
9,12%
18,15%
760%
10,90%
20,55%
12,87%
10,90%
25,90%
50,87%
39,29%
38.60
66,18%
40,42%
40,48%
Transcribed Image Text:(c) Assume that the above profits of Toys Ltd. are identical to Operating Profit (before taxes and interest). Calculate Toys Inc.'s Operating Profit Margin. Now compare the company's profitability against the average industry margins shown below (Aswath Damodaran, January 2018). How do you interpret Toy's performance? Explain. Operating Profit Margin= 18 300/217 000 *100 = 8.43% With 8.43% we are below the average of 12.87%. Thus the performance is not as great. They could do a lot better. And this margin is only with the new investment, with the old operating profit they would be doing even worse compared to their competitors. Pre-tax Unadjusted Operating dargin Industry Name Apparel Diversified Education Electronics (General) Entertainment Furm/Home Furnishings Household Products Publishing & Newspapers Recreation Software (Entertainment) Mean Median Net Margin 343% 8,54% 1,38% 667% 11.50% 5,89% 13,90% 1.18% 212% 15,97% 6,82% 6,28% Gross Margin 49,73% 20.62% 41,67% 29,41% 41,91% 10.89% 12,94% 833% 932% 20.99% 9,12% 18,15% 760% 10,90% 20,55% 12,87% 10,90% 25,90% 50,87% 39,29% 38.60 66,18% 40,42% 40,48%
|Industry Name
Apparel
Diversified
Education
Electronics (General)
Pre-tax Unadjusted Operating
Margin
10,89%
12,94%
Gross Margin
49,73%
Net Margin
3,43%
20,62%
8,54%
41,67%
29,41%
41,91%
25,90%
1,38%
6,67%
11,50%
5,89%
13,90%
-1,18%
2,12%
8,33%
9,32%
20,93%
9,12%
18,15%
7,60%
10,90%
20,55%
Entertainment
Furn/Home Furnishings
Household Products
Publishing & Newspapers
Recreation
Software (Entertainment)
Mean
Median
50,87%
39,29%
38,60%
66,18%
15,97%
40,42%
40,48%
6,82%
6,28%
12,87%
10,90%
Transcribed Image Text:|Industry Name Apparel Diversified Education Electronics (General) Pre-tax Unadjusted Operating Margin 10,89% 12,94% Gross Margin 49,73% Net Margin 3,43% 20,62% 8,54% 41,67% 29,41% 41,91% 25,90% 1,38% 6,67% 11,50% 5,89% 13,90% -1,18% 2,12% 8,33% 9,32% 20,93% 9,12% 18,15% 7,60% 10,90% 20,55% Entertainment Furn/Home Furnishings Household Products Publishing & Newspapers Recreation Software (Entertainment) Mean Median 50,87% 39,29% 38,60% 66,18% 15,97% 40,42% 40,48% 6,82% 6,28% 12,87% 10,90%
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