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Principles of Finance: Unit 3, Forecasting Molded Plastics 4 Views


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Description:

Let's take a look at Mattel, the company that brought you Barbie and her literal boy toy, Ken. We'll dig into the numbers.

Language:
English Language

Transcript

00:00

Principles of finance ah la shmoop forecasting molded plastics All

00:06

right so there's a bit of a departure from our

00:08

normal thing we're going to mumble isa purposely rambling but

00:11

structured mumble is we read through the published annual numbers

00:15

from mattel corporation makers of ken and barbie and american

00:21

girl and value added plastics of all shapes and sizes

00:25

We're reading through the numbers from a few perspectives potential

00:29

equity investor potential debt lender existing competitors like hasbro potential

00:35

foreign partner in the whole bunch of others now that

00:37

we could wear So just to stare at this charge

00:40

for a few moments and we're going to mumble here

00:44

booth all right so well what do we see here

00:47

The future goes to the left that is two thousand

00:50

thirteen is on the far right and we can see

00:52

that revenues are basically flat in north america flat is

00:55

not very good in the context of flat is compounded

00:59

by the fact that this period of time was a

01:01

very good one in full economy north america So the

01:04

first thing we need to figure out is how mattel

01:06

did against the rest of the market Maybe we're in

01:09

a recession and flat was the new up now off

01:12

of an economic bottom in two thousand ten while the

01:15

region recovered nicely So for mattel to be on ly

01:18

flat on revenues there well that means the company lagged

01:22

in progress versus the overall market So there must be

01:25

other things going on Like what Well one potential problem

01:29

is that a competitors building market share and eating away

01:32

our own share Are there other dolls eating the lunch

01:35

of american girl in the gang Maybe nothing obvious to

01:38

see here yet Or maybe kids just aren't into dolls

01:42

anymore and the barbie iphone well just isn't that big

01:44

of a deal when a real life phone isn't that

01:46

much more expensive than a standard barbie plastic setup But

01:49

regardless revenues which should look robust are anemic at best

01:54

All right moving on how international is ugly so there

01:57

isn't one big competitor that's the problem second potential issue

02:00

here is the problem global or just us based or

02:04

just international more mumbling looking at numbers tryingto seek an

02:08

answer here Well let's See the company went from three

02:10

point three billion in two thousand thirteen only two point

02:13

Six billion in two thousand fifteen and it's likely they're

02:16

fixed Recurring cost didn't drop by much shmoop well in

02:21

international markets companies have to maintain offices relationship with retailers

02:25

stocking fees marketing arrangements with media et cetera The international

02:29

revenues are particularly bad here Domestic on the other hand

02:32

well grew nicely If you believe the numbers the tells

02:35

cost for international stayed the same while revenue went down

02:39

All right well if the company was a seven hundred

02:41

million dollars in operating profit company in two thousand thirteen

02:45

from international markets well they're likely a zero margin business

02:49

at the end of two thousand fifteen so basic math

02:52

would say that operating profit took a massive hit All

02:56

right so check international is a problem We have other

02:58

problems Well let's look at some specific product lines Mumbling

03:02

mumbling Interesting That american girl has her own line Wow

03:06

she's powerful she's A pip All right Well she comprises

03:08

such a large part of mattel's revenues while she deserves

03:12

her own line And she was an acquisition by the

03:14

company So breaking her out is likely a good accounting

03:17

decision And well easy todo but sadly she's not doing

03:21

well six hundred sixty million dollars in revenues in two

03:23

thousand thirteen down under six hundred million in two thousand

03:26

fifteen The trend is not her friend All right ignore

03:30

adjustments for now and just look at net sales here

03:33

Six point five billion in two thousand thirteen down to

03:37

five point seven billion two thousand fifteen ouch were declining

03:40

here And just to drive the last nail into the

03:43

very negative assessment of the company Well look at the

03:46

bottom line here Free tax income two thousand thirteen was

03:49

one point one billion It was way less than half

03:52

that in two thousand fifteen Well what happened We've identified

03:55

two big potential issues American girl product line kind of

03:59

dying and international Definitely dying Well toa do good diligence

04:04

is a financial manager You just start calling around If

04:07

you were good you'd go as low as you can

04:09

go on the food chain as you could The best

04:12

call you could make would be to the people actually

04:15

directly interfacing with customers The sales clerks If you were

04:18

an investor you'd call and ask why barbie in american

04:22

girl aren't selling and you might get a lot of

04:25

it is kind of boring or who we're selling a

04:27

lot of high tech toys now instead or we don't

04:30

stock or any more the image is offensive to modern

04:34

women Yeah stuff like that Well in this case we're

04:37

focused on revenues here Why are we focused on revenues

04:40

Because the marginal cost of stamping ah hunk of plastic

04:43

and painting it is relatively whoa if the dolls cost

04:46

five bucks or six bucks or seven bucks when it

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doesn't really matter when they retail for thirty and wholesale

04:51

for twenty the problem here isn't just an expenses related

04:55

one it's a revenues related one and kind of both

04:58

meaning that expenses have been flat particularly internationally while revenues

05:02

have declined at a spurious rate Well at this point

05:05

we're going to stay cursory on the analysis but over

05:07

time will cover low margin businesses in painful detail and

05:11

how a change in one tiny cost in foot like

05:15

fuel prices for an airline that can crush profit margin

05:18

especially when they're highly leveraged like most airlines are the

05:21

bottom line is that a good financial manager will go

05:23

over everything that comprises elements to make their bottom line

05:27

Revenues operating expenses interest expenses taxes the logic of dividends

05:32

and payout ratios And don't worry that we didn't cover

05:35

all these issues In this video There will be coverage

05:37

of them and all the next set of videos In 00:05:40.04 --> [endTime] a painful detail we promise Okay

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