Financial Statement Review

Financial Statement Review
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Financial ratio analysis is an important technique used to understand how organizations perform using their available resources. It is notable that Mattel incorporation produced their 10-k report in 2014, which contains financial statements for 2014 and 2013. The statements contain useful information that can help investors understand how the company performs. This owes to the reality that the investors can calculate ratios such as the profit margin, the asset turnover, the return on assets, equity multiplier, and return on assets. After calculating the ratios mentioned before, investors can then interpret the ratios in order to understand how Mattel incorporation performs. It follows that this paper calculates the profit margin, the asset turnover, and equity multiplier before explaining their effect on the return on assets and return on equity for the Mattel incorporation.
To begin with, the profit margin can be obtained using the following formula.
Profit Margin=Net incomeNet Sales (Lee, Lee, and Lee, 2009)
It is notable that the 2014 net income for the organization under discussion is 498,874 while the net sale for the organization in the same year is 6,023,819 (MATTEL INC., 2014). Therefore, the profit margin is obtained as Profit Margin=498,8746,023,819 , which gives a profit margin of 0.082816897.
Additionally, the asset turnover for the organization can calculated using the following formula. Asset Turnoer=Net SalesAverage Total Assets (Lee, Lee, and Lee, 2009).
The 10-K report reveals that the total assets for 2014 are 6,722,046 while the total assets for 2013 are 6,439,626 (MATTEL INC., 2014). This gives an asset turnover of 0.915357714 after calculation.
It is notable that the return on assets could be calculated after dividing the net income by the average of the total assets in 2013 and 2014. It is critical to note that the total assets for 2013 are 6, 439,626 while the total assets for 2014 are 6,722,046 (MATTEL INC., 2014) implying the return on assets is given by:
ROA=4988746722046+64396262
The calculation gives 0.075807086 as the return on asset ratio.
Another important ratio is the equity multiplier, which is obtained using the following formula. Equity Multiplier=Average Total AssetsAverage Total Equity (Lee, Lee, and Lee, 2009) Considering that the total assets for 2014 are 6,722,046, while the total equity or 2014 is 2,949,071 (MATTEL INC., 2014), the equity multiplier could be obtained as:Equity Multiplier=6722046+6,439,62622949071+3,251,5592. This gives an equity multiplier ratio of 2.122634636.
Ultimately, the return on equi...