23 Pages Posted: 30 May 2017
Acting as management, students determine the effects of different degrees of leverage and review this company's current leverage in light of inherent industry risks and company goals.
Rev. Jun. 19, 2012
Tonka Corporation, the fifth-largest toy company in the United States, had two of the most successful years in its history in 1985 and 1986. The company's sales of $ 293 million and profitability of $ 22 million were unprecedented; Tonka had also issued more than one million shares of common stock in December 1986 and had retired its long-term debt in January 1987, both of which contributed to its low leverage and high liquidity.
Becoming and remaining financially sound was a difficult task in the toy industry because of the typically short life spans and “hit-or-miss” nature of most products. Now, in February 1987, Tonka's management was undergoing a capital-structure policy review in an effort to determine whether the company could use its financial resources more efficiently and yet remain conservative.
The Toy Industry
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Keywords: debt policy, financial policy, industry analysis, leverage, liability management, risk analysis
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