Company Analysis

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Walt Disney Company Financial Ratios Calculation 2019

Walt Disney Company Financial Ratios Calculation 2020

Walt Disney Company Financial Ratios Comparison

DuPont Analysis

In the context of the study of economic and financial performance, a very useful tool in the specialized literature and practice is the DuPont model. The analysis by the DuPont model is realized through the decomposition rate of return ROE (Return on Equity) according to other rates of return, such as ROS (Return on Sales), ROA (Return on Assets) or Equity Multiplier. 

Decomposition of Net Profit Margin

Two-component Disaggregation of ROA

Four-component Disaggregation of ROA

Two-component Disaggregation of ROE

ROE = ROA * Financial Leverage
Year	ROE	ROA	Financial Leverage
2020	-3.43%	-1.42%	2.41
2019	12.44%	5.70%	2.18

Three-component Disaggregation of ROE

	2019	2020
Debt Ratio	0.46(Stronger)	0.51(Weaker)
Gross Profit margin	39.6%(Stronger)	32.9%(Weaker)
Free cash flow	1.6%(Stronger)	1.5%(Weaker)
Times interest earned	12.19(Less risk)	-0.06(More risk)
Accounts receivable turnover	4.49(Slower)	5.15(Quicker)
Inventory turnover	9.4(Quicker)	8.8(Slower)
Return on Sales	15.89%(Stronger)	-4.38%(Weaker)
Asset Turnover	0.36(Quicker)	0.32(Slower)
Return on Assets	5.7%(Stronger)	-1.42%(Weaker)
Financial Leverage	2.18(Less Risk)	2.41(More risk)
Return on Equity	12.4%(Stronger)	-3.4%(Weaker)

This paper discusses the trends within the financial performance of Walt Disney, supported the 2 financial years, 2019 and 2020 discussing different aspects of the firm that include

liquidity, efficiency, profitability and solvency.

Profitability

The return on sales of Walt Disney deteriorated in 2020 because it was at -4.38% compared to 15.89% that was achieved in 2019. this might be attributed to numerous issues chief among them increased administration costs and increased.

The ratio of Walt Disney deteriorated in 2020. The profit margin shows the power of the corporate to hold the prices related to the sales low. The return on assets of the firm deteriorated from 5.7% in 2019 to -1.42% in 2020. The return on assets indicates the management’s ability to form sales using total assets. The deterioration of the ROA ratio indicates that there is downswing in efficiency of assets.

Lastly, the Return on Equity also deteriorated because it reduced from 12.4% to -3.4%. The

return on equity indicated the use of shareholders equity in creating income. The breakdown of ROE into its three components, financial leverage, margin of profit, and asset turnover show us the productive aspects of the Walt Disney. The return on assets indicates the management’s ability to form sales using total assets. While there was a rise in financial leverage and asset turnover in 2020, there was a decrease within the margin of profit, which decreased the overall ROE. The profitability of Walt Disney, considering the profit ratios, is deteriorating, with key factor being the decrease within the gross margin.

Liquidity

Liquidity is that the ability to use its current assets to meet its current or short-term liabilities. In our analysis, liquidity is indicated by the days interest earned. This ratio indicates, the number of times the earnings of an organization cove the interest expense. The days interest earned decreased from 12.19 in 2019 to -0.06 in 2020, which indicates the reduced ability of earnings to compensate for interest. The liquidity of Disney decreased.

Free cash flows also indicate the flexibility of the firm to stay in business and help meet it’s daily and long-term cash needs. The cash flows of Walt Disney deteriorated in 2020 compared to the previous year 2019.

Solvency

Solvency of a company is the ability to meet its long-term debts when they fall due. In our analysis, solvency is represented as debt ratio. The debt ratio of this firm improved from 0.46 in 2019 to 0.51 in 2020. The flexibility of organization to satisfy its long-term obligations thus deteriorated.

Efficiency

Efficiency is that the measure of how well an organization is ready to perform its processes and

how well it utilizes its resources. In our analysis, it's indicated by the assets turnover, inventory turnover and also the total asset turnover. The assets turnover of the firm improved from 4.49 to 5.15 times, which indicates the improved ability of the firm to gather accounts receivables from sales.

The inventory turnover ratio of Walt Disney deteriorated from 9.4 in 2019 to 8.8 times in

2020. this means decreased sales compared to the inventory that the firm maintains. Lastly, the overall assets turnover for Walt Disney increased from 0.36 times to 0.32 times. Asset turnover indicates the quantity of times assets create sales in a very year. Increase indicated the increased ability to come up with sales from these assets.

Conclusion

The financial performance of Walt Disney supported the ratios deteriorated in 2020 compared

to the previous year.

References

Vintilă et al., 2012 Vintilă G., Gheorghe I., Pocan I. M., M.G. Anghel (2012) Factorial analysis of profitability, RevistaRomână de Statistică- SuplimentTrimestrul II/2012, pp. 256-259.

Chang Amy. (2020). Form 10-K Walt Disney Co. Retrieved from https://sec.report/Document/0001744489-20-00197/#i6261866521954ef19f64de03269f40a7_157

Barati, A. A., & Forouz, A. (2017). Cash Flow and Profit Effect on the Value of the Companies during Different Stages of their Life Cycle. International Journal of Scientific Study, 5(4), 223–231. https://doi.org/10.17354/ijss/2017/32

Financial Ratio 2019 Ratio 2020 RatioComparison

Inventory Turnover 9.4 8.8

↓

Receivables Turnover 4.49 5.15

↑

Debt Ratio 0.46 0.51

↑

Gross Profit Margin 39.60% 32.90%

↓

Interest Coverage Ratio 12.19 -0.06

↓

Free Cash Flow Yield 1.60% 1.50%

↓

YearNet Profit MarginTax BurdenInterest BurdenEBIT Margin

2020-4.38%——-0.79%

201915.89%0.780.9222.04%

Net Profit Margin=Tax Burden*Interest Burden*Ebit Margin

YearROANet Profit MarginAsset Turnover

2020-1.42%-4.38%0.32

20195.70%15.89%0.36

ROA = Net Profit Margin * Asset Turnover

YearROATax BurdenInterest BurdenEBIT MarginAsset Turnover

2020-1.42%— —-0.79%0.32

20195.70%0.780.9222.04%0.36

ROA = Tax Burden * Interest Burden * EBIT Margin * Asset Turnover

YearROENet Profit MarginAsset TurnoverFinancial Leverage

2020-3.43%-4.38%0.32 2.41

201912.44%15.89%0.36 2.18

ROE = Net Profit Margin * Asset Turnover * Financial Leverage

Financial Ratio Formula Calculation2019 Ratio

Inventory Turnover Cost of Sales / Avg. Inventories 42.061 / 4.476 9.4

Receivables Turnover Net Revenue / Accounts Receivable 69,570 / 15,4814.49

Debt Ratio Total Liabilities / Total Assets 91,132 / 193.980.46

Gross Profit Margin Gross Profit / Net Revenue 27.546 B / 69.607 B 39.60%

Interest Coverage Ratio EBIT / Interest Expense 15,190 / 124612.19

Free Cash Flow YieldLevered Free Cash Flow / Market Capitalization3.671 B / 234.8 B1.60%

Financial Ratio Formula Calculation2020 Ratio

Inventory Turnover Cost of Sales/ Avg. Inventories 43.88 / 5 8.8

Receivables Turnover Net Revenue / Accounts Receivable 65,388 / 12,7085.15

Debt Ratio Total Liabilities / Total Assets 104,037 / 201.550.51

Gross Profit Margin Gross Profit / Net Revenue 21.508 B / 65.388 B32.90%

Interest Coverage Ratio EBIT/ Interest Expense 96 / 1647 -0.06

Free Cash Flow YieldLevered Free Cash Flow / Market Capitalization3.369 B / 224.2 B1.50%