Question: RATIO ANALYSIS – WALT DISNEY
Robert A Iger is the chairman and CEO of the company. The company has several business verticals which have separate leaders and report to the Group CEO. Some of the channels owned and run by the company are Disney Channel, ABC, ESPN. The entertainment units owned and operated by the company are Disneyland, Disney resort, etc (Thewaltdisneycompany, 2016).
Ratios for the calculation (finance.yahoo, 2016)
Current Ratio = current assets/current liabilities 16,758,000/ 16,334,000 = 1.0259 15,169,000/ 13,292,000 = 1.141
Quick ratio = (Total current assets – stock – prepaid expenses)/current liabilities 13055000/16334000 = 0.799 11740000/13292000 = 0.882
The current ratio for the company indicates how exposed the company is towards discharging its current liabilities. The company has current ratio of above 1 which is good sign. Even though the current ratio of the company has decreased from year 2014 to 2015, but still the ratio is above 1 which is good in terms of accounting rations.
The quick ratio of the company has decreased marginally. The quick ratio is a more stringent measure of liquidity of the company as compared to the current ratio. The quick ratio has decreased for the company. The company can work in the area of improving its liquidity position even though the company has reasonable liquidity for covering its short term liabilities.
Accounts receivable ratio = Revenue/average accounts receivable 52,465,000/8552500 = 6.134 48,813,000/7885500 = 6.19
Average payable turnover ratio = cost of sales/ Average payable turnover 28,364,000/ 7719500 = 3.67 26,420,000/ 7199000 = 3.669
The accounts receivable ratio of the company indicates that how well the credit policy of the company is working. The more the receivable ratio, the better for the company. In the given case, the accounts receivable ratio for the company is decreasing slightly for the current year which means that as compared to the previous year, the company’s credit policy is not working better for this financial year.
In the case of accounts payable ratio, it indicates how well the company is able to discharge off its obligations. The higher ratio is not good for the company. However, in the given case, the ratio is exactly the same for the two years indicating that the company has been able to maintain the payable ratio. Also, in absolute terms, the ratio is not that high which is a good sign for the company.
Debt equity ratio = long term debt / shareholder’s fund 12,773,000/ 44,525,000 = 0.286 12,631,000/ 44,958,000 = 0.280
Debt To Total Capital Ratio = Long term debt/Total capital 12773000/57298000 = 0.222 12631000/ 57589000 = 0.219
The ratio of debt-equity funds as the name suggests indicating that how well the long term financial position of the company is and to what extent does the company depends on its long term finances from the borrowed funds. In the given case, the company is maintaining a reasonable ratio and the increase in the ratio is also marginal which can be ignored.
The debt to total capital ratio of the company indicates the relationship of the outside debt to the total capital employed for the company. The ratio is minimal for the company and indicates the around 78% of the funds of the company are equity owned. The change in the ratio is also negligible.
Gross profit ratio = gross profit/ revenue 24,101,000/ 52,465,000 = 0.459 22,393,000/ 48,813,000 =0.458
Net profit ratio = net profit/revenue 8,382,000/52465000 = 0.159 7,501,000/48813000 = 0.153
The gross profit ratio of the company indicates how well the company is able to generate the profit out of the cost of sales of the company. The gross profit of the company is the same in both the years which indicates that the company has not been able to grow in the current year.
The net profit ratio of the company indicates how well the company is able to generate profits after deducting all of its operating and non-operating expenses from the revenue. The net profit ratio for both the years is the same which is not a good sign for the company as the has not been able to grow.
finance.yahoo.com, 2016. The Walt Disney Company (DIS). [Online] Available at http://finance.yahoo.com/quote/DIS/financials?p=DIS [Access Date 3rd September 2016]