Company Analysis

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Running Head: GROUP PROJECT PART 3 – WALT DISNEY COMPANY

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GROUP PROJECT PART 3 – WALT DISNEY COMPANY

a)

Industry Title:

Walt Disney Company

Primary Industry Codes:

SIC CODE: 7812 - Motion Picture and Video Tape Production

NAICS CODE: 512110 - Motion Picture and Video Production

b)

Industry averages information for SIC CODE: 7812

Ratio	Year	Year	Description and Formulae
	2020	2019
Solvency Ratios
Debt ratio	0.85	0.78	This indicates the ratio of debt to total assets. Formula: Liabilities / Assets.
Debt-to-equity ratio	0.48	0.69	It indicates the ratio of equity and debt Formula: Liabilities / Equity
Interest coverage ratio	-6.36	-0.99	It is a measure of a firm's ability to pay back its interest payments. Formula: EBIT / Interest expenses.
Liquidity Ratios
Current Ratio	0.74	0.5	This ratio incates the firm's progress on short-term debt obligations. Formula: Current Assets / Current Liabilities.
Quick Ratio	0.75	0.49	This ratio incates the firm's progress on short-term debt obligations using its most liquid assets. Formula: (Current Assets - Inventories) / Current Liabilities.
Cash Ratio	0.37	0.12	This ratio incates the firm's readily available funds to pay off current liabilities. Formula: Cash and cash equivalents / Current Liabilities.
Profitability Ratios
Profit margin	-89.10%	-35.80%	This is the money available after all expenses have been paid. Formula: Profit (after tax) / Revenue
ROE (Return on equity), after tax	-121.70%	-32.90%	It is net income returned as shareholders equity. Formula: Net income after tax / Shareholder's equity
ROA (Return on assets)	-29.80%	-16.70%	It is portion of profit that a company earns on overall resources. Formula: Net Income after tax / Total assets (or Average Total assets).
Gross margin	22.50%	31.70%	It is the ratio of gross profit to revenue. Formula: Gross profit margin = Gross profit / Revenue
Operating margin (Return on sales)	-116.20%	-10.50%	This shows the amount of profit after variable costs of production Formula: EBIT / Revenue.
Activity Ratios
Asset turnover (days)	1365	778	It shows how management is using the assets to promote sales. Formula: Revenue / Average total assets, or in days = 365 / Asset turnover
Receivables turnover (days)	51	22	It determines how early the firm collects outstanding cash balances Formula: Net receivable sales/ Average accounts receivables, or in days: 365 / Receivables Turnover Ratio
Inventory turnover (days)	7	3	It is a measure of the number of times inventory is sold Formula: Cost of goods sold / Average Inventory, or in days: 365 / Inventory turnover.
Price Ratios
Dividend Payout Ratio	-0.07	0.82	Dividends that are paid by a firm Formula: Total Dividends / Total Net Earnings x 100%.

C)

Industry average ratio of Walt Disney Company

Financial Ratio	Industry Average Ratio For the Year 2020
Current ratio	1.64%
Debt ratio	60.38%
Gross profit margin	24.49%
Times interest earned	32.18%
Accounts receivable turnover	5.15%
Inventory turnover	27.72%
Return on sales	15.98%
Asset turnover	0.32%
Return on assets	-1.21%
Financial leverage	1.27%
Return on equity	-3.28%

This report covers the Walt Disney company revenue and financial results. The company is delighted to see more encouraging signs of recovery across the businesses, and the company is focused on gaining the financial advantage from the operations while planning the long term growth for the company, mainly the company evaluates the performance of its operating segments which is based on the segment of operating income and the organization management will use the total segment operating income to measure the performance of the business that operates from non operating factors. Here the investors will evaluate the changes

that happens while calculating the operating results of the company’s portfolio of businesses which is separate from the non operational factors of business which affects the net income of the business (Disney, 2021).

The average industry ratio of Walt Disney declined in the year 2020. The business profit margin will show it has the control of the company to hold the stock prices related to the less sales. The return on assets of the firm declined from 5.7% in 2019 to -1.42% in 2020. Over all the decline of the ROA ratio shows that there is decreasing in efficiency of assets.

The above images show how the company had negatively impacted during the outbreak of the corona virus pandemic

In the year 2020 the company reported the earnings of 32% per share in the month of January, and less of $1.53 from the previous year due to this Walt Disney company suffered huge losses when compared to the results of 2019 and 2020 which shows the decline in the financial results but not the losses which the company expected to receive in the year as the company has experienced the limited number of performances in Disney parks due to COVID-19 and the company have taken the preventive measure to reduce the impact of risks but still this has impacted the company segments in numerous ways such as the theme parks were closed or operated at significantly with reduced capacity, due to this the business has experienced the disruptions and loss in the production of its business performance (Disney, 2021).

The increase in the interest, investment and other income was due to the higher investment gains and the decrease in the effective of income tax rate was due to the reduced tax on foreign income and other higher excess tax benefits even on employee share based awards. The financial statements are made on the basis of management views and assumptions that focuses the future events and business performance where the business see the changes in every level and department of the company and these changes can be both positive and negative which also includes the risk of current and future impacts of the business (Disney, 2021).

The earnings of the company will discharge the present free cash flow which is important for taking the financial measures for the company, but these measures are not defined by the GAAP. It is important to review the financial measures which are conjunction with the relevant GAAP because the measures are not presented as alternative measures for operating the cash flow.

The Walt Disney Company is using the free cash flow along with other measures to evaluate the ability of its operation to generate the cash which can be used for capital expenditures.

Even in the time of pandemic the business has continued to incur the additional costs which are used to address the government regulations and the safety of the employees (Disney, 2021).

Parks, experiences and other products were the main reason why the segment operating income was declined dramatically, as this reduced the revenue down for 85% and the income of the company significantly went to negative stage and this impacted the income by $4.953 billion impairment charge for the international channels. The future of Walt Disney company is depended on when the whole economic shutdown begins to end as this makes able to return the levels that are approaching normal to make it stable even in the time of risk (Aughinbaugh, 2020).

The financial statements of Disney results that the company has entered into the stabilized state which allows the company to keep its expenses less to reduce any future losses, and now Walt Disney is positively contributing to the firm and as long as the company can remain open the company can focus more towards increasing the demand that occurs in the future but still the company had the stabilized operations in its tough quarter. The company was also able to reduce the costs which have put in more constant ground and this has helped the media significantly to reduce its costs (Aughinbaugh, 2020).

Conclusion

To remain competitive in the industry the company has to continuously adapt itself to the consumers taste in both content and distribution as the viewers are moving from television to OTT (over the top) platform. The actual results of the company might differ materially from the expressed calculations and the differences can result making the company to take the required action or other business decisions which are beyond the company control, and even the company suffered the setbacks in huge but still the company’s stock continued to rise in the record levels. The financial performance of Walt Disney Company has supported the ratios that were declined in the year 2020 when compared to the previous year, which clearly shows how this has negatively impacted the top line growth.

References

Aughinbaugh, D. (2020) Retrieved from, https://www.navfile.com/center/the-walt-disney-company-financial-analysis-q3-2020

Disney. (2021) Retrieved from, https://thewaltdisneycompany.com/the-walt-disney-company-reports-second-quarter-and-six-months-earnings-for-fiscal-2021/