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EBIT and EPS Calculations for Mattel

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If Mattel engaged in a capital acquisition program that expected to improve EBIT by 10% in 2004.

How do I calculate the EBIT/EPS for debt financing.

How do I calculate the EBIT/EPS for equity financing.

Based on the above calculations what would be the best capital structure.

Please explain and let me know where to find the financial information.

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Solution Summary

This solution helps with accounting problems that involve calculating EBIT/EPS.

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(PS: Answer is included in brainmasss.doc file attached below. I also found the all necessary financial information about Mattel Inc which is included in financ_mattel.doc if you want to find the best capital structure by yourself using financial data. )

Before deciding on the appropriate capital structure for Mattel Inc. , the first thing is to understand the effect on Earning Per Share (EPS) due to the changes in Earning Before Interest and Taxes (EBIT) under different financing alternatives.

First of all, we need the financial data of Mattel Inc. I found this data from Hoovers online database that is included in financ_mattel.doc file which is attached to the answer with this document.

EBIT (Earnings before interest and taxes) is calculated by subtracting costs of sales and operating expenses ( general and administrative expenses) from revenues. In other words, operating and non-operating profit before the deduction of interest and income taxes. The ...

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  • BSc, Dokuz Eylul University
  • MBA, Texas A&M University-Kingsville
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