Financial Analysis of Mattel, Inc.

It is the purpose of this research to perform a financial analysis of Mattel, Inc., in order to develop a recommendation as to investment in the firms’s common stock. Mattel, Inc. is a conglomerate, or holding company, with operating companies in the toys and hobbies, consumer electronics, leisure, and publishing industries (Annual Report, 1982). Toy and hobby products account for approximately 44.0 percent of total sales for Mattel, Inc., while consumer electronics and publishing each account for approximately 25.0 percent, and leisure and entertainment accounts for approximately 6.0 percent (Annual Report, 1982). In this analysis, where comparisons are made between the performance of Mattel, Inc. and industry averages, industry averages represented weighted averages based upon contributions to total Mattel, Inc. sales.

Profit contributions of the operating companies in the Mattel organization did not mirror their contributions to sales in fiscal 1982, when consumer electronics contributed 50.0 percent of total profits, toy and hobby products contributed 44.0 percent, publishing contributed 7.0 percent, and leisure contributed a 1.0 percent loss (Annual Report, 1982).

Annual net sales of Mattel, Inc. have increased significantly in each fiscal year since 1978; however, operating profits declined significantly in fiscal 1981, primarily as a result of serious deterioration in consumer electronics profits, and net income flattened in fiscal 1980, before deteriorating significantly in fiscal 1981, also due primarily to the deterioration in consumer electronics profits. Both operating and net profit recovered in fiscal 1982 and record high levels were recorded by the company (Annual Report, 1982).

A summary of the sales, operating profit, and net income experience of the company for the 1978-1982 time period is presented in Table 1, which may be found on the following page.

The balance of this report consists of a de…

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