SHD 3583/FPPSM/Sec 02/G7

Faculty of Management and Human Resource Development

Experiential Exercise 4A: Performing a Financial Ratio

Analysis for Walt Disney Company

Subject Code : Business Strategy (SHD 3583)

Lecturer’s Name : Mr. Lokman Bin Ali

Submission Date : 14th February 2011

Group Name :7

Group Members :

Name Matric No. IC No.

Moo Fong Lin AH 080238 880229-23-5448

Ng Kam Hong AH 080244 880713-01-5113

Ng Pang Huay AH 080245 881203-01-5388
Lai Chai Hong AH 060076 850928-05-5246
Saira Sarbine Binti Samsuri AH 080477 880922-08-5134
Mazlin Bt Musa AH 080231 890402-23-5038
No. Ratio Formula Calculation
1.
Current ratio Current assets_ $11 314
Current liabilities $11 391
= 0.993x
 SHD 3583/FPPSM/Sec 02/G7

2.
Quick ratio Current assets – inventory $11 314 - $641
Current liabilities $11 391
= 0.937x

3.
Debt to total assets Total debt $30 175
ratio Total assets $60 928
= 0.49

4.
Debt to equity ratio Total debt $30 175
Total stakeholders equity $30 753
= 0.981

5. Long term debt $18784

Long term debt to Total stockholders’ equity $30753
equity ratio =0.611

6. Profit before interest and taxes $7725

Times interest earned Total interest charges $770
ratio =10.03

7. Sales $35510
Inventory turnover Inventory of finished goods $641
=52.27
8.
Fixed assets turnover ____Sales___ $35 510
Fixed assets $17 433
= 2.037x

9.
Total assets turnover ____Sales___ $35 510
Total assets $60 928
= 0.583x

10. Annual credit sales $5032

Accounts receivable Accounts receivable $3670
turnover =1.37
11. Average collection Accounts receivable $3670
period Total credit/365 days $5032
=266.20days
12.
Gross profit margin Sales – COGS $35 510 - $28 729
Sales $35 510
 SHD 3583/FPPSM/Sec 02/G7

= 0.920

13.
Operating profit margin Earning before interest and taxes $7 225
Sales $35 510
= 0.218
14.
Net Profit Margin Net income $4 687
Sales $35 510
= 0.132
15.
Return on total assets Net income $4 687
(ROA) Total assets $60 928
= 0.077

16.
Return on Stockholders _______Net income_____ $4 687
equity (ROE) Total stockholders equity $30 753
= 0.152

17.
Earnings per share __________Net income__________ $4 687
(EPS) Number of share of common stock $18 102
outstanding = 0.259

18. Price earnings ratio $0.01

Market price per share 0.259
Earnings per share = 0.156

19. $35510
Sales Annual percentage growth in total $34285
sales =103.57%

Annual percentage growth in profits $4687

20. Net income $3374
=138.92%

21. Earnings per share

Annual percentage growth in EPS $0.259
8.7 million
=0.029
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22. Dividends per share

Annual percentage growth in -
dividends per share

Current Ratio
If current liabilities are rising faster than current asset, the current ratio will fall and that could
spell trouble. In Walt Disney Company in 2007, the current liabilities are higher than current
asset, so that the current ratio is weaknesses.

Quick Ratio
A large amount of current asset relative to current liabilities provides assurances that the
company will be able to satisfy its immediate obligations. So, after current asset minus the
inventory the total quick ratio is still lower than current liabilities. So that, quick ratio is
weaknesses.

Debt to total assets ratio

In Walt Disney Company the total debt asset ratio is 0.49. That is less than 1 so that its strength.
This is because, the total debt ratio tells us that this business is not in good health and may
become really ill; for good health, the total debt ratio should be 1 or less. If the ration less than 1
means the company have more assets than debt.

Debt to equity ratio

A high equity ratio generally means that a company has been aggressive in financing its growth
with debt. This can result in volatile earnings as a result of the additional interest expense. Debt
to equity ratio related to the debt to total assets ratio because they are both measure of company
capital structure. So it still same with debt total asset ratio is if the total less than 1 so that its
strength because the total is 0.9.

Long term debt to equity ratio

This ratio needs to be used in conjunction with other financial information to determine what is
appropriate. A profitable company might be well served to take on new debt in order to leverage
additional profits, while a company that is having cash difficulties may need to raise new capital
 SHD 3583/FPPSM/Sec 02/G7

by issuing stock, which will lower the long-term debt to equity ratio. It still same with long term
debt to equity ratio if the total less than 1 so that its strength because the total is 0.6.

Times Interest Earned Ratio

The number, the better the firm can pay its interest expense on debt. If the times interest earned
ratio is less than 1.0, then the firm cannot meet its total interest expense on its debt. So, for the
Walt Company Disney is 10.03 and the company have strength factor.

Inventory turnover
For high and strength inventory ratio means that the company is efficiently managing and selling
its inventory. The faster the inventory sells the fewer funds the company has tied up. Companies
have to be careful if they have a high inventory turnover as they are subject to stock outs. So, for
Walt Disney Company the inventory turnover is 52.27times per year and that is strength because
the ratio is high.

Fixed assets turnover

If the fixed asset turnover ratio is low as compared to the industry or past years of data for the
firm, it means that sales are low or the investment in plant and equipment is too much. Fixed
assets turnover for year 2007 and 2006 is 2x. So the conclusion is neutral.

Total assets turnover

The higher the ratio of sales to total assets, is better and strength.  This implies that a company is
generating number of sales for every dollar of assets on hand. We can see total asset is higher
than total sales. So the conclusion is the ratio is weakness.

Accounts receivable turnover

The higher the value of the ratio, the better the company is in terms of collecting their accounts
receivables.  A lower accounts receivable turnover ratio indicates that the company is not making
efficient use of their accounts receivables are basically grace periods that are given to customers
to pay something. So we can see, Walt Disney Company ratio is higher and strength because
there get ratio 1.37.
Average collection period
The longer operating cycle, the more current asset needed and relative to current liabilities
because they takes longer to convert inventories and receivables in to cash. In other words, the
longer the operating cycles the more networking capital required. So, for Walt Disney Company,
 SHD 3583/FPPSM/Sec 02/G7

the cycles are 266.20 days. So that that is weakness because must take longer times to do
receivables.
Gross profit margin
The higher the gross profit margin is better however, delineation must be made between
production oriented companies and service oriented companies.  We can see, for Walt Disney
Company, the gross profit margin is 92%. So this ratio is strength because every dollar generated
in sales, the company has 92 cents left over to cover basic operating costs and profit.

Operating profit margin

The higher the ratio, the better a company is. A higher operating profit margin means that a
company has lower fixed cost and a better gross margin or increasing sales faster than costs,
which gives management more flexibility in determining prices. For Walt Disney Company the
operating profit margin is strength because 21.8% of operating profit in 2007. However,
operating profit in 2006 is 15.87%.Therefore, the operating profit in year 2007 become well than
year 2006.
Net profit margin
For high net profit margin does not correlate to large profits.  If the company cannot move their
product, it does not matter what the net profit margin is, they are not making money. However,
the net profit margin for Disney in year 2007 is 0.132 (13.2%).That is strength because the ratio
is higher than year 2006 which is just 9.8% for every $1 it generates in revenue or sales.

Return on total assets (ROA)

Walt Disney Company can have a high return on assets even if it has a low profit margin because
it has a high asset turnover. For the year 2007 the ROA is 0.076 and for the past year is 0.0056.
So there Walt Disney gets strength for ROA. In 2007, Disney is able converting its investment
into profit.

Return on Stockholders equity (ROE)

The higher a company's return on equity compared to its industry, the better. This should be
obvious to even the less-than-astute investor. Walt Disney Company also gets strength for ROE
because the ratio in 2007(0.152) is higher than 2006(0.106).

Earnings per share (EPS)

The earnings per share ratio are mainly useful for companies with publicly traded shares. EPS
doesn't really tell a whole lot. But if you compare it to the EPS from a previous quarter or year it
 SHD 3583/FPPSM/Sec 02/G7

indicates the rate of growth a company’s earnings are growing. After calculate we can see the
EPS for the year 2007 is 0.259 but for the year 2006 is 0.302. So we can see, that is decrease and
automatically the EPS is weakness.

Sales

The sales of company in 2007 is $35510 and $34285 in year 2006.The sales of the company is
growth to 103.57%.We can see that the sales of Disney is getting strength in 2007 if compare
with year 2006.

Net income

The net income of company in 2007 is $4687 and $3374 in year 2006.The net income of Disney
is getting strength in 2007 if compare with year 2006 because the net income of the company is
growth to 138.92%.

DISNEY FINANCIAL RATIO

  2010 2009 2008 2007 2006

10/02/201 10/03/200 09/30/200
Period End Date 09/27/2008 09/29/2007
0 9 6
12 12
Period Length 12 Months 12 Months12 Months
Months Months
Stmt Source 10-K 10-K 10-K 10-K 10-K
11/24/201 12/02/200 11/21/200
Stmt Source Date 12/02/2009 12/02/2009
0 9 7
Reclassifie Reclassifie
Stmt Update Type Updated Updated Restated
d d
           
Revenue 38,063.0 36,149.0 37,843.0 35,510.0 33,747.0
Total Revenue 38,063.0 36,149.0 37,843.0 35,510.0 33,747.0
           
Cost of Revenue, Total 31,337.0 30,452.0 30,400.0 28,655.0 28,392.0
Gross Profit 6,726.0 5,697.0 7,443.0 6,855.0 5,355.0
           
Selling/General/Administrativ
0.0 0.0 0.0 48.0 0.0
e Expenses, Total
Research & Development 0.0 0.0 0.0 0.0 0.0
Depreciation/Amortization 0.0 0.0 0.0 0.0 0.0
Interest Expense (Income),
0.0 0.0 0.0 0.0 0.0
Net Operating
Unusual Expense (Income) 205.0 264.0 98.0 26.0 -88.0
 SHD 3583/FPPSM/Sec 02/G7

Other Operating Expenses,

0.0 0.0 0.0 0.0 0.0
Total
Operating Income 6,627.0 5,658.0 7,402.0 7,725.0 5,324.0
           
Interest Income (Expense),
0.0 0.0 0.0 0.0 0.0
Net Non-Operating
Gain (Loss) on Sale of Assets 0.0 0.0 0.0 0.0 0.0
Other, Net 0.0 0.0 0.0 0.0 0.0
Income Before Tax 6,627.0 5,658.0 7,402.0 7,725.0 5,324.0
           
Income Tax - Total 2,314.0 2,049.0 2,673.0 2,874.0 1,837.0
Income After Tax 4,313.0 3,609.0 4,729.0 4,851.0 3,487.0
           
Minority Interest -350.0 -302.0 -302.0 -177.0 -183.0
Equity In Affiliates 0.0 0.0 0.0 0.0 0.0
U.S. GAAP Adjustment 0.0 0.0 0.0 0.0 0.0
Net Income Before Extra.
3,963.0 3,307.0 4,427.0 4,674.0 3,304.0
Items
           
Total Extraordinary Items 0.0 0.0 0.0 13.0 70.0
Discontinued Operations
Net Income 3,963.0 3,307.0 4,427.0 4,687.0 3,374.0
           
           
Total Adjustments to Net
0.0 0.0 0.0 0.0 0.0
Income
Preferred Dividends
General Partners' Distributions
           
Basic Weighted Average
1,915.0 1,856.0 1,890.0 2,004.0 2,005.0
Shares
Basic EPS Excluding
2.07 1.78 2.34 2.33 1.65
Extraordinary Items
Basic EPS Including
2.07 1.78 2.34 2.34 1.68
Extraordinary Items
           
Diluted Weighted Average
1,948.0 1,875.0 1,948.0 2,092.0 2,076.0
Shares
Diluted EPS Excluding
2.03 1.76 2.28 2.24 1.6
Extraordinary Items
Diluted EPS Including
2.03 1.76 2.28 2.25 1.64
Extraordinary Items
           
Dividends per Share -
0.4 0.35 0.35 0.35 0.31
Common Stock Primary Issue
 SHD 3583/FPPSM/Sec 02/G7

Gross Dividends - Common

756.0 653.0 648.0 664.0 637.0
Stock
Interest Expense,
456.0 588.0 712.0 746.0 706.0
Supplemental
Depreciation, Supplemental 1,602.0 1,631.0 1,582.0 1,491.0 1,426.0
           
Normalized EBITDA 8,439.0 7,379.0 9,080.0 8,298.0 6,792.0
Normalized EBIT 6,726.0 5,697.0 7,443.0 6,807.0 5,355.0
Normalized Income Before
6,832.0 5,922.0 7,500.0 7,751.0 5,236.0
Tax
Normalized Income After
4,446.42 3,777.39 4,791.61 4,867.33 3,429.36
Taxes
Normalized Income Available
4,096.42 3,475.39 4,489.61 4,690.33 3,246.36
to Common
           
Basic Normalized EPS 2.14 1.87 2.38 2.34 1.62
Diluted Normalized EPS 2.1 1.85 2.31 2.25 1.57
Amortization of Intangibles 111.0 51.0 55.0 0.0 11.0

Financial data in U.S. Dollars

Values in Millions (Except for per share items)

http://moneycentral.msn.com/investor/invsub/results/statemnt.aspx?Symbol=DIS