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EXECUTIVE SUMMARY
The objective of this report is to present a comprehensive financial statement analysis of The
Walt Disney Company (Disney). Disney is the worlds largest entertainment and media
conglomerate with business operations in media networks, parks and resorts, and film
studios. This report details Disneys financial standing and operating environment through an
in depth analysis of the companys balance sheet, income statement and statement of cash
flows. This report also provides a comprehensive overview of the companys industry,
management and, finally, competitive environment, through comparative analysis between
Disney and Viacom Inc. Ultimately, with the detailed analysis provided, this report serves as
a useful tool for investors thinking about investing in Disney.

OBJECTIVE OF THE STUDY

The Objective of the study includes:
1] To study the different types of financial ratio.
2] To study importance, benefits &uses of financial ratio in the organization.
3] To study the company performance (Indian Oil Corporation Ltd.) through financial ratio
analysis.

DATA COLLECTION METHOD

My project is basically depend on the Secondary Data which includes:

Various internet websites

Textbook
Newspapers

INTRODUCTION TO FINANCIAL RATIO ANALYSIS

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Meaning:
Ratio analysis is the process of determining and interpreting numerical relationships based on
financial statements. A ratio is a statistical yardstick that provides a measure of the
relationship between two variables or figures.
This relationship can be expressed as a percent or as a quotient. Ratios are simple to calculate
and easy to understand. The persons interested in the analysis of financial statements can be
grouped under three heads,
i) owners or investors
ii) creditors and
iii) financial executives.
Although all these three groups are interested in the financial conditions and operating
results, of an enterprise, the primary information that each seeks to obtain from these
statements differs materially, reflecting the purpose that the statement is to serve.
Investors desire primarily a basis for estimating earning capacity. Creditors are concerned
primarily with liquidity and ability to pay interest and redeem loan within a specified period.
Management is interested in evolving analytical tools that will measure costs, efficiency,
liquidity and profitability with a view to make intelligent decisions.

DEFINITION OF FINANCIAL RATIO ANALYSIS

According to J. Batty, "The term accounting ratios is used to describe significant relationships
which exist between figures shown in a balance sheet, in a profit and loss account, in a
budgetary control system or in any other part of the accounting organization
"As stated by Investopedia, there are numerous ratios that can be estimated from the financial
statements pertaining to a business companys activity, performance, liquidity, and financing
In simple words, "Ratio" is the numerical relationship between two variables which are
connected with each other in some way or the other. Ratios may be expressed in any one of
the following manners

CLASSIFICATION OF FINANCIAL RATIOS

Generally, financial ratios are classified on the basis of function or test, on the basis of
financial statements, and on the basis of importance. These three classifications are briefly
discussed below:

Types of Ratio in Ratio Analysis

You have learnt in the previous lesson that accounting ratios can be classified into five major
groups viz. liquidity ratios, activity ratios, solvency ratios, profitability ratios and leverage
ratio. You have already learnt the meaning, computations and significance of liquidity and
activity ratios. In this lesson, you will learn about the various solvency ratios, profitability
ratios and leverage ratio and their significance.
OBJECTIVES
After studying this lesson you will be able to : explain various types of accounting ratios i.e.
solvency, profitability and leverage ratios; calculate the various ratios on the basis of given
information; describe the limitations of accounting ratios.
SOLVENCY RATIOS
The term solvency refers to the ability of a concern to meet its long term obligations. The
long-term liability of a firm is towards debenture holders, financial institutions providing
medium and long term loans and other creditors selling goods on credit. These ratios indicate
firms ability to meet the fixed interest and its costs and repayment schedules associated with
its long term borrowings. The following ratios serve the purpose of determining the solvency
of the business firm.

Debt equity ratio

Proprietary ratio

Debt-equity ratio

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It is also otherwise known as external to internal equity ratio. It is calculated to know the
relative claims of outsiders and the owners against the firms assets. This ratio establishes the
relationship between the outsiders funds and the shareholders fund. Thus, Debt-equity ratio =
Outsiders' funds/Share holders' funds The two basic components of the ratio are outsiders
funds and shareholders funds. The outsiders funds include all debts/liabilities to outsiders
i.e. debentures, long term loans from financial institutions, etc. Shareholders funds mean
preference share capital, equity share capital, reserves and surplus and fictitious assets like
preliminary expenses. This ratio indicates the proportion between shareholders funds and the
long-term borrowed funds. In India, this ratio may be taken as acceptable if it is 2 : 1. If the
debt-equity ratio is more than that, it shows a rather risky financial position from the long
term point of view.
Significance
The purpose of debt equity ratio is to derive an idea of the amount of capital supplied to the
concern by the proprietors. This ratio is very useful to assess the soundness of long term
financial position of the firm. It also indicates the extent to which the firm depends upon
outsiders for its existence. A low debt equity ratio implies the use of more equity than debt. It
is also known as equity ratio. This ratio establishes the relationship between shareholders
funds to total assets of the firm. The shareholders fund is the sum of equity share capital,
preference share capital, reserves and surpluses. Out of this amount, accumulated losses
should be deducted. On the other hand, the total assets mean total resources of the concern.
The ratio can be calculated as under :
Proprietory ratio = Shareholders' funds/Total assets
Significance
Proprietary ratio throws light on the general financial position of the enterprise. This ratio is
of particular importance to the creditors who can ascertain the proportion of shareholders
funds in the total assets employed in the firm. A high ratio shows that there is safety for
creditors of all types. Higher the ratio, the better it is for concerned. A ratio below 50% may
be alarming for the creditors since they may have to lose heavily in the event of companys
liquidation on account of heavy losses.

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PROFITABILITY RATIOS
The main aim of an enterprise is to earn profit which is necessary for the survival and growth
of the business enterprise. It is earned with the help of amount invested in business. It is
necessary to know how much profit has been earned with the help of the amount invested in
the business. This is possible through profitability ratio. These ratios examine the current
operating performance and efficiency of the business concern. These ratios are helpful for the
management to take remedial measures if there is a declining trend. The important
profitability ratios are :
(i) Gross profit ratio
(ii) Net profit ratio
(iii) Operating profit ratio
(iv) Return on investment ratio
(i) Gross profit ratio
It expresses the relationship of gross profit to net sales. It is expressed in percentage. It is
computed as
Gross profit ratio = Gross profit/Net sales100
Significance
Gross profit ratio shows the margin of profit. A high gross profit ratio is a great satisfaction to
the management. It represents the low cost of goods sold. Higher the rate of gross profit,
lower the cost of goods sold.
(ii) Net profit ratio
A ratio of net profit to sales is called Net profit ratio. It indicates sales margin on sales. This is
expressed as a percentage. The main objective of calculating this ratio is to determine the
overall profitability. The ratio is calculated as

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Net profit ratio =Net profit/Net sales100
Significance
Net profit ratio determines overall efficiency of the business. It indicates the extent to which
management has been effective in reducing the operational expenses. Higher the net profit
ratio, better it is for the business.
(iii) Operating profit ratio
Operating profit is an indicator of operational efficiencies. It reveals only overall efficiency. It
establishes relationship between operating profit and net sales. This ratio is expressed as a
percentage. It is calculated as :
Operating profit =Operating profit /Net sales100
Operationg Profit = Gross Profit (Administration expenses + selling expenses)
Significance
It helps in examining the overall efficiency of the business. It measures profitability and
soundness of the business. Higher the ratio, the better is the profitability of the business. This
ratio is also helpful in controlling cash.
(iv) Return on investment ratio (ROI)
ROI is the basic profitability ratio. This ratio establishes relationship between net profit
(before interest, tax and dividend) and capital employed. It is expressed as a percentage on
investment. The term investment here refers to long-term funds invested in business. This
investment is called capital employed.
Capital employed = Equity share capital + preference share capital+ Reserve and surplus +
long term liabilities

fictitious assets Non trading investment

Capital employed = (Fixed asset depreciation) + (Current Asset Current liabilities)

Capital employed = (Fixed Assets Depreciation) + (Working capital)

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This ratio is also known as Return on capital employed ratio. It is calculated as under
ROI = Net profit before interest, tax and dividend /Capital employed100
Note : If net profit after interest, tax and dividend is given, the amount of interest, tax and
dividend should be added back to calculate the net profit before interest, tax and dividend.
Significance
ROI ratio judges the overall performance of the concern. It measures how efficiently the
sources of the business are being used. In other words, it tells what is the earning capacity of
the net assets of the business. Higher the ratio the more efficient is the management and
utilisation of capital employed.

LEVERAGE RATIO
Leverage ratio is otherwise known as capital structure ratio. The term capital structure refers
to the relationship between various long term forms of financing such as debentures (long
term), preference share capital and equity share capital including reserves and surpluses.
Financing the firms assets is a very crucial problem in every business and as a rule there
should be a proper mix of debt and equity capital in financing the firms assets. Leverage or
capital structure ratios are calculated to test the long term financial position of a firm.
Generally capital gearing ratio is mainly calculated to analyse the leverage or capital structure
of the firm
Capital gearing ratio
The capital gearing ratio is described as the relationship between equity share capital
including reserves and surpluses to preference share capital and other fixed interest bearing
loans. If preference share capital and other fixed interest bearing loans exceed the equity
share capital including reserves, the firm is said to be highly geared. The firm is said to be
low geared if preference share capital and other fixed interest bearing loans are less than
equity capital and reserves.

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Capital gearing ratio = Equity share capital reserves and surpluses/Preference share capital +
long term debt bearing fixed interest
Significance
Capital gearing ratio is very important ratio. Gearing should be kept in such a way that the
company is able to maintain a steady rate of dividend. High gearing ratio is not good for a
new company or a company of which future learnings are uncertain.
LIMITATION OF ACCOUNTING RATIOS
Accounting ratios are very significant in analysing the financial statements. Through
accounting ratios, it will be easy to know the true financial position and financial soundness
of a business concern. However, despite the advantages of ratio analysis, it suffers from a
number of disadvantages. The following are the main limitations of accounting ratios.
Ignorance of qualitative aspect
The ratio analysis is based on quantitative aspect. It totally ignores qualitative aspect which is
sometimes more important than quantitative aspect.
Ignorance of price level changes
Price level changes make the comparison of figures difficult over a period of time. Before
any comparison is made, proper adjustments for price level changes must be made.
No single concept
In order to calculate any ratio, different firms may take different concepts for different
purposes. Some firms take profit before charging interest and tax or profit before tax but after
interest tax. This may lead to different results.

Misleading results if based on incorrect accounting data

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Ratios are based on accounting data. They can be useful only when they are based on reliable
data. If the data are not reliable, the ratio will be unreliable.
No single standard ratio for comparison
There is no single standard ratio which is universally accepted and against which a
comparison can be made. Standards may differ from Industry to industry.
Difficulties in forecasting
Ratios are worked out on the basis of past results. As such they do not reflect the present and
future position. It smay not be desirable to use them for forecasting future events.

PURPOSE OF FINANCIAL RATIOS ANALYSIS

Financial ratios have two primary users, investors and management. Management uses
financial ratios to determine how well their firm is performing in order to evaluate where the
firm can improve. For example, if a firm has a low gross margin, a manager can evaluate how
to increase their gross margin. Investors use financial ratios to see if the firm is a good
investment. By comparing financial ratios between companies and between industries,
investors can better determine the best investment.
1. Liquidity Ratios
Liquidity ratios deal with a firm's short-term financing and debt. By being liquid, a firm is
quickly able to convert assets to cash, and pay off interest. The main liquidity ratios are the
current ratio and quick ratio.
2. Leverage Ratios
Leverage ratios involve the amount of debt used to finance a firm's assets. A firm can finance
through debt or equity. The firm must eventually pay back debt, while equity is an investment
in the company. The main leverage ratios are debt to equity ratio and long-term debt to
capitalization ratio.

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3. Operational Ratios
Operational ratios show a firm's performance. For example, accounts receivable turnover
ratio shows the firm's performance in collecting accounts receivable. Inventory turnover ratio
shows a firm's performance in converting inventory into cost of goods sold.

4. Profitability Ratios
Profitability ratios show the return on sales and the profitability of the firm. The main
profitability ratios are return on assets, return on equity and return on capital employed.

5. Solvency Ratios
Solvency ratios show the firm's ability to pay off debt through cash flows. The main solvency
ratio is the solvency ratio. The solvency ratio divides net tax profit plus depreciation by shortterm liabilities plus long-term liabilities. A general rule of thumb is that a solvency ratio of
about 20 percent is healthy.

BENEFITS OF FINANCIAL RATIOS ANALYSIS

Financial ratios are a comparison of financial statement numbers to each other. They help a
business owner to analyses current operations and predict the future performance of the
company. Various financial ratios can present measures of liquidity in the business, speed of
sales, and debt levels, amongst other benchmarks. Ratios tell the financial story of a business
and are helpful tools for any business.
1. Yearly Comparisons
One of the most useful benefits of using financial ratios in a company is that it allows
comparison of the company's performance to that of previous periods or years. For example,
if the company's inventory turnover ratio of 1 to 4 this year when it was 1 to 3 last year, this
means that inventory levels are building in the current year. The increase in the ratio is an
indication that sales are slowing or that inventory levels (which are expensive to maintain)

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are growing. The ratio change alerts the business manager to a pending cash crunch in time to
avert it.

2. Helps Predict Financial Distress Early

A company can burn through its cash reserves quickly during tough economic times or
industry contraction. Financial ratios can operate as an early warning system for businesses
that are heading into financial distress. Ratios such as the quick ratio (how much money will
there be to pay current debts?), gross margin (how much is the company making on every
widget it sells?), and accounts receivable ratio (how quickly are sales being paid for?) tell the
company's owners if the money is going to run out and how quickly. The sooner the cash
flow problem is identified, the sooner it can be corrected.

3. Facilitates Fair Comparison amongst Potential Purchases

When a company is looking to expand by purchasing another company, it is critical to be able
to compare companies that are potential purchases. The most objective way to compare
companies is through ratios so that the financial results of each business can be compared
regardless of its size. Ratios will tell the investing company which potential purchase is more
profitable, which is more efficient at using its assets and which is more harnessed by debt.

4. Makes it Possible to Compare Company to Others in the Industry

On-going industry analysis is important to all businesses. Understanding what the company's
performance is in relation to its competitors allows business managers to adjust business
strategies and learn from the best practices in the industry. Financial ratios can show how a
company is doing compared to other companies in the same field. This tells managers what
they are doing right and what they can improve on.
Reviewing industry ratios can also alert managers to potential industry-wide slowdowns so
that the company can set up a more defensive business strategy.
5. Forecasting

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At present, many companies use ratio analysis to reveal the trends in production. This
provides them an opportunity for estimation of future trends and thus the foundation for
budget planning so as to determine the course of action for the growth and development of
the business.
6. Determines Profitability
Financial Ratio analysis assists managers to work out the production of the company by
figuring the profitability ratios. Also, the management can evaluate their revenues to check if
their productivity. Thus, probability ratios are helpful to the company in appraising its
performance based on current earning.
7. Helpful in Evaluating Solvency
By computing the solvency ratio, the companies are able to keep an eye on the correlation
between the assets and the liabilities. If, in any case, the liabilities exceed the assets, the
company is able to know its financial position. This is helpful in case they wish to set up a
plan for loan repayment.
8. Better Financial Analysis
Financial Ratio analysis is also helpful to recluses, in addition to shareholders, debenture
holders, and creditors. Besides, bankers are also able to know the profitability of the company
to find out whether they are able to pay the dividend and interests under a specific period.

Objectives of Ratio Analysis

Financial ratios are true test of the profitability, efficiency and financial soundness of the
firm. These ratios have following objectives:

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(1) Measuring the profitability: Profitability is the profit earning capacity of the business.
This can be measured by Gross Profit, Net Profit, Expenses and Other Ratios. If these ratios
fall we can take corrective measures.
(2) Determining operational efficiency: Operational efficiency of the business can be
determined by calculating operating / activity ratios.
(3) Measuring financial position: Short-term and long-term financial position of the
business can be measured by calculating liquidity and solvency ratios. In case of unhealthy
short or long-term position, corrective measures can be taken.
(4) Facilitating comparative analysis: Present performance can be compared with past
performance to discover the plus and minus points. Comparison with the performance of
other competitive firms can also be made.
(5) Indicating overall efficiency: Profit and Loss Account shows the amount of net profit
and Balance Sheet shows the amount of various assets, liabilities and capital. But the
profitability can be known by calculating the financial ratios.
(6) Budgeting and forecasting: Ratio analysis is of much help in financial forecasting and
planning. Ratios calculated for a number of years work as a guide for the future. Meaningful
conclusions can be drawn for future from these ratios.

Uses of Financial Ratios

Benchmarking Financial Ratios
Financial ratios are not very useful on a stand-alone basis; they must be benchmarked against
something. Analysts compare ratios against the following:
1.The Industry norm - This is the most common type of comparison. Analysts will typically
look for companies within the same industry and develop an industry average, which they
will compare to the company they are evaluating. Ratios per industry are also provided by
Bloomberg and the S&P. These are good sources of general industry information.

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Unfortunately, there are several companies included in an index that can distort certain ratios.
If we look at the food and beverage ratio index, it will include companies that make prepared
foods and some that are distributors. The ratios in this case would be distorted because one is
a capital-intensive business and the other is not. As a result, it is better to use a cross-sectional
analysis, i.e. individually select the companies that best fit the company being analyzed.
2.Aggregate economy - It is sometimes important to analyze a company's ratio over a full
economic cycle. This will help the analyst understand and estimate a company's performance
in changing economic conditions, such as a recession.

3.The company's past performance - This is a very common analysis. It is similar to a timeseries analysis, which looks mostly for trends in ratios.

Limitations of Financial Ratios

There are some important limitations of financial ratios that analysts should be conscious of:

Many large firms operate different divisions in different industries. For these
companies it is difficult to find a meaningful set of industry-average ratios.

Inflation may have badly distorted a company's balance sheet. In this case, profits will
also be affected. Thus a ratio analysis of one company over time or a comparative
analysis of companies of different ages must be interpreted with judgment.

Seasonal factors can also distort ratio analysis. Understanding seasonal factors that
affect a business can reduce the chance of misinterpretation. For example, a retailer's
inventory may be high in the summer in preparation for the back-to-school season. As
a result, the company's accounts payable will be high and its ROA low.

Different accounting practices can distort comparisons even within the same company
(leasing versus buying equipment, LIFO versus FIFO, etc.).

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It is difficult to generalize about whether a ratio is good or not. A high cash ratio in a
historically classified growth company may be interpreted as a good sign, but could
also be seen as a sign that the company is no longer a growth company and should
command lower valuations.

A company may have some good and some bad ratios, making it difficult to tell if it's
a good or weak company.

In general, ratio analysis conducted in a mechanical, unthinking manner is dangerous. On the

other hand, if used intelligently, ratio analysis can provide insightful information.

FINANCIAL ACCOUNTING RATIOS & FORMULAS

Analysis of Profitability:
General profitability:

Gross profit ratio = (Gross profit / Net sales) 100

Operating ratio = (Operating cost / Net sales) 100

Expense ratio = (Particular expense / Net sales) 100

Operating profit ratio = (Operating profit / Net sales) 100

Overall profitability:

Return on shareholders investment or net worth = Net profit after interest and tax /
Shareholders funds

Return on equity capital = (Net profit after tax Preference dividend) / Paid up equity
capital

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Earnings per share (EPS) ratio = (Net profit after tax Preference dividend) /
Number of equity shares

Return on gross capital employed = (Adjusted net profit / Gross capital employed)
100

Return on net capital employed = (Adjusted net profit / Net capital employed) 100

Dividend yield ratio = Dividend per share / Market value per share

Dividend payout ratio or pay-out ratio = Dividend per equity share / Earnings per
share

Short Term Financial Position or Test of Solvency:

Current ratio = Current assets / Current liabilities

Quick or acid test of liquid ratio (for immediate solvency) = Liquid assets / Current
liabilities

Absolute liquid ratio = Absolute liquid assets / Current liabilities

Current Assets Movement, Efficiency or Activity Ratios:

Inventory / Stock turnover ratio = Cost of goods sold / Average inventory at cost

Debtors of receivables turnover ratios = Net credit sales / Average trade debtors

Average collection period = (Trade debtors No. of working days) / Net credit sales

Creditors or payables turnover ratio = Net credit purchase / Average trade creditors

Average payment period = (Trade creditors No. of working days) / Net credit
purchase

Working capital turnover ratio = Cost of sales / Net working capital

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Analysis of Long Term Solvency:

Debt to equity ratio = Outsiders funds / Shareholders funds or External funds /

Internal funds

Ratio of long term debt to shareholders funds (Debt equity) = Long term debt /
Shareholders funds

Proprietary of equity ratio = Shareholders funds / Total assets

Fixed assets to net worth = Fixed assets after depreciation / Shareholders funds

Fixed assets ratio or fixed assets to long term funds = Fixed assets after depreciation /
Total long term funds

Ratio of current assets proprietors funds = Current assets / Shareholders funds

Debt service or interest coverage ratio = Net profit before interest and tax / Fixed
interest charges

Capital gearing ratio = Equity share capital / Fixed interest bearing funds

Nature Of Ratio Analysis

In financial analysis, ratio is used as an index of yardstick for evaluating the financial
position and performance of the firm. It is a technique of analysis and interpretation of
financial statements. Ratio analysis helps in making decisions as it helps establishing
relationship between various ratios and interpret thereon. Ratio analysis helps analysts to
make quantitative judgement about the financial position and performance of the firm. Ratio
analysis involves following steps:
1. Relevant data selection from the financial statements related to the objectives of the
analysis.

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2. Calculation of required ratios from the data and presenting them either in pure ratio form
or in percentage.
3. Comparison of derived different ratios with:
i. The ratio of the same concern over a period of years to know upward or downward trend or
static position to help in estimating the future, or
ii. The ratios of another firm in same line, or
iii. The ratios of projected financial statements, or
iv. The ratios of industry average, or
v. The predetermined standards, or
vi. The ratios between the departments of the same concern assessing either the financial
position or the profitability or both.
4. Interpretation of the ratio
Ratio analysis uses financial report and data and summarizes the key relationship in order to
appraise financial performance. The effectiveness will be greatly improved when trends are
identified, comparative ratios are available and inter-related ratios are prepared.

Ways to Express Accounting Ratios

Accounting ratios can give financial statement users the opportunity to make quick judgments
about the health of your company. While these ratios only provide a short glimpse under the
hood of your company, they offer generally understood inferences. When you're speaking
with creditors or potential investors and they want to know some of your company's financial
ratios, you should be able to show them. Understanding the way these ratios are expressed is
the first step in making sure that you look like you know what you are talking about.
Percentage
Many financial ratios are expressed as a percentage of another financial figure. For example,
the gross profit margin, a measure of the amount of profit earned when making sales, is
calculated as sales less cost of goods sold all divided by sales. If this ratio is determined to be
0.17, it is spoken of as a 17 percent gross profit margin. Other common financial ratios that

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are expressed in this manner include profit margin, contribution margin ratio and variable
expense ratio.
Decimal
Financial ratios that do not have percentage meanings are often just expressed as a unitless
decimal number. For example, the current ratio, a measure of a company's liquidity, is
calculated as current assets divided by current liabilities. While this may sometimes be
expressed as a ratio, such as 4.2:1, most often this will be shown only in numbers. Many of
the most common liquidity and solvency ratios are expressed in this manner; they include
quick ratio, debt ratio, turnover ratios, return on assets, return on equity and the price to
earnings ratio.
Times Interest Earned
Some financial ratios use a denominator of interest to express financial meaning. For
example, a common measure of a company's ability to service debt payments is the times
interest earned ratio. This figure is calculated by dividing earnings before interest, taxes,
depreciation and amortization -- known as EBITDA -- by interest expense. This gives a
measure of how many multiples of the company's interest expense the company earns. These
types of ratios are also known as coverage ratios, as they tell financial statement users how
well the company can cover a certain expense.
Period
Financial statement ratios related to inventory, accounts payable and accounts receivable are
often expressed as a time period, such as days outstanding. For example, days sales
outstanding, which measures how well a company is managing accounts receivable, is
calculated as average accounts receivable divided by average sales per day. This ratio is then
expressed as X number of days sales outstanding. Other financial ratios expressed in number
of days or a time period include days payable outstanding, inventory conversion period, cash
conversion cycle and payback period.

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The walt Disney Company Description

For almost a century Disney has been distinguished in the field of family entertainment.
Headquartered in Burbank, California, Disney began as a cartoon studio in the 1920s. Since
then, it has become a global corporation that continues to proudly provide quality
entertainment for every member of the family across America and around the world.1 Disney,
together with its subsidiaries, has operations in five business segments including media
networks, parks and resorts, studio entertainment, consumer products, and interactive
media. Disney is a leading diversified international family entertainment and media
enterprise.
Originally a cartoon studio founded by brothers Walt and Roy Disney, Disney has grown
exponentially since its inception. Disney currently has 166,000 full time employees working
in the companys five business segments3 and is involved in multiple sectors of the
entertainment industry ranging from television broadcasts to theme parks. It currently ranks
66 on the 2012 Fortune 500 list,4 and 226 on the 2011 Global Fortune 500 list. In addition,
it can be seen that Disney is taking the right steps towards innovation by recently receiving
the prestigious 2012 Huntington Award,6 and the company maintains a global presence as
the Worlds Most Admired Entertainment Company for both years of 2011 and 2012.7
Disney's growth strategy has focused on expansion to provide an all-encompassing
entertainment company. This reduces risks and also allows exploitation of brands across
multiple channels to maximize gains. Disney's strategy relies heavily on branded creative
content that the company can monetize. Recently, Disney paid over $4 billion for Lucasfilm.
Other notable purchases by the company include Pixar Animation for $7.4 billion in 2006 and

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Marvel Entertainment for $4 billion in 2009. These purchases are an asset to the company,
and have produced iconic franchises ranging from Toy Story to Iron Mancapitalizing on a
market of parent consumers and their children. Disneys revenues in 2012 were $42.3 billion,
and the largest segment was Media Networks, which was responsible for 46% of
revenues.Despite the companys multitude of successes, there has been controversy and
failure within recent times. In January 2013, Disney announced the closure of Junction Point,
the Austin, Texas game development studio responsible for the Epic Mickey series. Disney
acquired Junction Point in 2007, before it had any released titles. While the first game in the
series was deemed a success, its successor failed miserably. Although sales data has not been
made public, the Los Angeles Times reported that the multi-platform game only sold a total of
270,000 copies in 2012.
In addition, towards the end of last year, Disney released information regarding its new
Disney princess, Princess Sofia. Disney's first Latina princess, featured in the movie "Sofia
the First: Once Upon A Princess," has received backlash as well as support from media
outlets, especially the Latino community. However, this is not the first time there has been
controversy surrounding one of Disney's princesses. In 2009, "The Princess and the Frog"
received criticism from parents and the media for being set in New Orleans after Hurricane
Katrina, its voodoo references, and Disneys first African-American princess, Tiana, falling in
love with a Caucasian prince.10 While both princesses showcase Disneys support for
diversity and innovation, the company has received heavy criticism in its portrayal of these
new princesses. Disney has had a long and illustrious history filled with childhood memories
and commercial successes, to controversies surrounding stereotypes and joint-business
failures. Despite its history and what it has accomplished, the company strives to achieve
more through its core commitments: to act in an ethical manner, to champion the happiness
and well being of kids and families, and to inspire positive change in the world.11 These core
values are the main driving forces in the company and set a high standard to achieve success
in the future.

Balancesheet: Quarterly Data

Period Ending

Jun 27,

Mar 28,

Dec 27,

Sep 27,

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2015
Assets
Current Assets
Cash And Cash Equivalents
Short Term Investments
Net Receivables
Inventory
Other Current Assets
Total Current Assets
Long Term Investments
Property Plant and Equipment
Goodwill
Intangible Assets
Accumulated Amortization
Other Assets
Deferred Long Term Asset Charges

4,475,000
8,631,000
1,513,000
1,893,000
16,512,000
2,694,000
24,436,000
27,848,000
7,237,000
8,640,000
-

2015

3,745,000
8,657,000
1,432,000
1,812,000

2014

5,077,000
9,043,000
1,476,000
1,644,000

2014

3,421,000
8,319,000
1,574,000
1,862,000

15,646,000 17,240,000 15,176,000

2,575,000
2,642,000
2,696,000
23,762,000 23,660,000 23,332,000
27,855,000 27,849,000 27,881,000
7,302,000
7,369,000
7,434,000
8,575,000
8,275,000
7,667,000
-

Total Assets
87,367,000
Liabilities
Current Liabilities
Accounts Payable
7,794,000
Short/Current Long Term Debt
3,119,000
Other Current Liabilities
3,913,000

85,715,000

87,035,000

84,186,000

6,823,000
2,771,000
3,816,000

9,069,000
4,376,000
3,359,000

7,595,000
2,164,000
3,533,000

Total Current Liabilities

Long Term Debt
Other Liabilities
Deferred Long Term Liability
Charges
Minority Interest
Negative Goodwill

14,826,000
12,154,000
5,767,000

13,410,000 16,804,000 13,292,000

12,186,000 12,167,000 12,676,000
5,994,000
5,857,000
5,942,000

Total Liabilities
Stockholders' Equity
Misc Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock
Retained Earnings
Treasury Stock
Capital Surplus
Other Stockholder Equity

4,113,000

4,388,000

4,414,000

4,098,000

3,988,000
-

3,699,000
-

3,628,000
-

3,220,000
-

40,848,000

39,677,000

42,870,000

39,228,000

34,930,000 34,720,000 34,488,000 34,301,000

57,425,000 56,058,000 53,969,000 53,734,000
(43,932,000) (42,897,000) (42,412,000) (41,109,000)
(1,904,000) (1,843,000) (1,880,000) (1,968,000)

23
Total Stockholder Equity

46,519,000

46,038,000

44,165,000

Net Tangible Assets

11,434,000

10,881,000

8,947,000

44,958,000
9,643,000

Profit and loss statement

Fiscal year is Oct - Sep.

2015- 2015Q3
Q2

2015Q1

2014Q4

2014Q3

2014Q2

Walt Disney Net Sales or 13.1B 12.46B 13.39B 12.39B 12.47B 11.65B
Revenues
Cost Of Goods Sold (COGS) 6.66B 6.69B 7.66B -860M 8.97B 8.67B
6.44B 5.77B 5.74B 13.25B 3.5B

2.98B

Selling General & Admin

Expense

2.1B

2.08B 1.94B 8.64B

48M

Income Before Depreciation

Depletion Amortization

4.34B 3.69B 3.8B

4.61B

3.5B

2.93B

Depreciation Depletion
Amortization

575M 584M

592M

2.29B

Non Operating Income

212M 206M

212M

176M

222M

180M

Interest Expense

12M

58M

38M

50M

-62M

Walt Disney Pretax

Income
Provision for Income Taxes

3.96B 3.32B 3.36B 2.46B

3.67B 3.18B

1.32B 1.09B 1.12B 836M

1.25B 1.12B

Minority Interest

156M 120M

62M

126M

174M

139M

Investment Gains Losses

Other Income

Walt Disney Gross Profit

Research & Development
Expense

-8M

Income Before Extraordinaries 2.48B 2.11B

2.18B 1.5B

2.25B 1.92B

24
& Disc Operations
Extraordinary Items &
Discontinued Operations
Walt Disney Net Income
(Profit/Loss)
Average Shares used to
compute Diluted EPS

2.48B 2.11B

2.18B 1.5B

2.25B 1.92B

1.71B 1.72B 1.72B 1.73B

1.75B 1.77B

Average Shares used to

compute Basic EPS

1.7B

1.72B

1.73B 1.75B

Income Before Nonrecurring

Items

2.48B 2.11B

2.18B 1.55B

2.25B 1.97B

Income from Nonrecurring

Items

52.02M

-52M

Walt Disney Earnings Per 1.46

Share Basic Net

1.24

1.28

0.87

1.30

1.10

Walt Disney Earnings Per 1.45

Share Diluted Net
EPS Diluted Before
1.45
Nonrecurring Items

1.23

1.27

0.86

1.28

1.08

1.23

1.27

0.89

1.28

1.11

Preferred Dividends Acc Pd

Dividends Common

Dividend Per Share Common

1.15

1.7B

1.7B

Quick ratio = Total quick assets Current liabilities

= 12,487 14,826 = 0.84
Current ratio = Current assets Current liabilities

25
= 16,512 14,826 = 1.11
Cash ratio = Total cash assets Current liabilities
= 4,475 14,826 = 0.30
Debt to Equity ratio=debt/equity
=156458000/487555000
=0.3

Asset Turnover ratio=net sale/total sale

=247929941/(298331837+337617580)/2
=247929941/317974699
=0.78
Inventory turnover ration=cost of goods sold / average inventory
= 370296000/(182232000+166082000)/2
= 370296000/174157000
= 2.13
Interest coverage ration= earning before intrest and taxes(EBIT)/interest expenses
=76925000/850000
= 90.50
Net profit margin = net income/ sale or revenue
= 38229000/725244000
=5.27%
Return on equity = net income/ shareholders or owners fund
= 38229000/331097000

26
= 11.55%
Market value = price per share of common stock* no.of outstanding shares
= 36808750shares * 23.84
= 877520600
Price to earning ratio = price per share of common stock/ earning per share
= 23.84/ ( 38229000/ 36808750)
= 23.84/1.04
= 22.95
Goodwill to assets = goodwill / total assets
=27848/87367
= 0.32
Earning yield = earning per share / share price
= 4.814/ 100.21
= 0.04
Working Capital = Current assets Current liabilities
= 16,512+14,826
= 31338
P/E ( price earning) ratio = share price/ earning per share
= 100.04 / 4.814
= 20.78

27
Gross profit= revenue cost of goods sold
= 13101 6663
= 6438

Dividend payout ratio = dividend per share/ earning per share

= 0.86/ 4.26
= 0.20
Debt service coverage ration= operating income / total debt service
costs
=150000/115000
=1.3
Working Capital Turnover= sale / working capital
= 12000000/ 2000000
= 6.0
Inventory turnover = COGS/average inventory
= 12,000 / 4,100 = 2.93
Accounts receivable turnover = Sales/ average receivables
= 19,000 / 3,250 = 5.85
Fixed asset turnover = sales/average fixed assets
= 19,000 / 13,400 = 1.42
Total asset turnover = sales/average assets
= 19,000 / 22,850= .83

28

Conclusion
An analysis of Disneys financial statements reinforces that Disney in the king in the media
and entertainment industry. Disneys increasing sales over the past three years coupled with
their increasing operating profit, net income and CFFO indicate that Disney is financially
stable and growing every year. It is especially impressive that Disney was able to increase
operating profit despite two of their five business segments reporting a decrease in revenue
from 2011-2012. Disneys ability to cut expenses in order to maintain increasing net profit
margins and CFFO speaks volumes to the managements business acumen and understanding
of how to generate growth. This also displays one of Disneys large competitive advantages,
that they can generate revenue from any one of there five business segments. Given Disneys
competent management team they are poised to keep this growth trajectory in the future
through strategic cost cutting, expansions and acquisitions. Currently, Disneys shares are
trading at an all time high, increasing about 73% over the past year. This, along with Disneys
large repurchases of treasury stock indicate that Disneys management as well as the market
see a profitable future for the company. These record results should come as no surprise given
Disneys recent 2011-2012 performance. With a staggering $7.9 billion in CFFO Disney is
able to efficiently pay off its liabilities while still reinvesting in the company through
expansions and acquisitions. Given our financial analysis, our team strongly believes thats
Disney is a safe and lucrative investment.
We keep moving forward, opening new doors, and doing new things, because were curious
and curiosity keeps leading us down new paths. Walt Disney122

29

BIBLIOGRAPHY
http://www.investopedia.com/terms/r/ratioanalysis.asp
http://www.crfonline.org/orc/cro/cro-16.html
http://en.wikipedia.org/wiki/Ratio#Financial_ratios
http://www.gurufocus.com/term/payout/DIS/Dividend%2BPayout%2BRatio/Walt
%2BDisney%2BCo
http://www.accounting4management.com/financial_ratios_formulas.htm#Ratios%20Analysis

https://www.stock-analysis-on.net/NYSE/Company/Walt-DisneyCo/Ratios/Liquidity/Quarterly-Data