Evaluating The Prospectus of Leapfrog

Evaluating the Prospectus of Leapfrog

Introduction

Organizations need to make effective investment decisions that will deliver maximum return with an acceptable amount of risk (Peterson, 2012). Hence, while making investment decisions it is essential to efficiently analyze the given alternatives and determine the option that will enable the company to maximize its profits and minimize the returns.

Investment Theory

An investment theory encompasses the body of information that is required for supporting decision-making process of choosing investments for various purposes. There are certain theories that can be utilized by organizations for making effective and efficient investment decisions (Peterson, 2012). These include portfolio theory, Capital Asset Pricing Model, Arbitrage Pricing Theory and the efficient market hypothesis. In order to successfully survive the industry competition it is imperative for companies to make informed investment decisions.

Discussion

Background Information Leapfrog

The company Leapfrog Enterprises Inc. was founded in the year 1995 and was incorporated in 1997 in the state of Delaware. The company is engaged in producing goods for educational entertainment for children. It offers products to enhance learning experience of children (media.corporate-ir.net). The company's product portfolio comprises of vast number of products related to multimedia learning platforms and related content and learning toys.

The products offered by Leapfrog are available in the market in four different languages targeting the international market, the company sells its products through retailers, distributors and directly to consumers via the company's website leapfrog.com and Leapfrog App Center

The company was able to deliver strong financial result by the end of the year 2012 with achieving 28% growth in its net sales, it nearly tripled its operating profits and the company's income before taxes increased by more than three times (media.corporate-ir.net). Furthermore, the Leapfrog's working capital was improved by $78.8 million and was able to increase its cash balance by 67% (media.corporate-ir.net).

The company experienced an increase in its sales as a result of continuous increase in the demand for LeapPad. There was an increase in the company's costs of products due to higher sales volume. However, yet Leapfrog had increased Gross Margin. In addition to this, Leapfrog also had improved income from operations by 170% as compared to 2011 as a result of increase in its net sales (media.corporate-ir.net).

Industrial Information

The company competes in the toy industry in the electronic learning-aids category. However, the company is involved in developing and creating innovative products by offering numerous electronic products. The multimedia platforms ...