FIN 6406
A Financial Ratio Quarterly Trend Analysis of:
The Walt Disney Company
(DIS)
Listed on New York Stock Exchange
Prepared for:
Dr. Deanne Butchey
Department of Finance and Real Estate
Florida International University
In partial fulfillment of the requirements of Course:
FIN 6406

By: Group #8
Samuel Mateo
Rashida Walters
Johnny de la Espriella
Carlos Ramos
Javier M. Alfonso

Conclusions and Decisions Pages 16-18 and New References By:
Javier M. Alfonso

Financial Trend Comparison

Liquidity:
The Walt Disney Company liquidity numbers show that the company is in a place to repay its short-term obligations. For example, the company has a 51% “effective” ownership in Disneyland Park, 48% in Hong Kong Disneyland Resort and 43% of ownership interest in the operation in Shanghai Disney Resort. Thus, as of June 29, 2013, The Disney Company incurred a net balance in borrowing in the amount of $15,003 for this purpose. The following ratios show these facts to be true. The current ratio of 1.07 indicates the company assets outweigh its liabilities by 1.07, or that the company has 1.07 times the assets it needs to pay its liabilities. The quick ratio of 0.95 is lower than the current ratio, but still fairly close to the current ratio due to inventories amounting to only 2% of total assets. However, the current ratio indicates good liquidity valuing above one, and the quick ratio shows exceptional control of inventories. Quarter over quarter, the various liquidity ratios show a steady climb from Q1 through Q3, but in Q4 most ratios had a drop except for Current Liabilities to Inventory Ratio and Operating Ratio. Current Liabilities to Inventory Ratio showed an increase from Q3 at 7.49 to Q4 at 8.34 for both liabilities and inventories, and Operating Ratio from Q3 at 2.75 to Q4 at 3.77, also showed a huge increase in operating expenses and operating income as Walt Disney Company entered their busiest season of the year which is summer. The use of cash to procure the increased inventories for this season can explain the drops in the current and quick ratios from the previous steady increases. The Walt Disney Company’s FY12 Annual Report states that cash provided by operating activities increased 14% from FY11. It was due to higher net operating cash receipts driven by higher revenues in their parks and resorts, networks and consumer products businesses. As well, lower operating cash payments by studio entertainment were driven by lower cost of goods sold and distribution costs.
Asset Utilization:
The Walt Disney Company asset utilization ratios indicate the company is very efficiently using the investment in assets to generate revenues/sales. The inventory turnover ratio of 47.11 indicates that The Walt Disney Company was able to sell and replace their inventory forty seven times in 2012. Total assets ratio of 0.98, indicates that The Walt Disney Company was able to generate sales almost one time the dollars spent in assets in 2012. Its low Total assets ratio indicates that the company has employed its total assets efficiently and enjoys a high profit margins. Fixed assets turnover ratio of 1.21 for 2012 reflects the ratio of fixed assets to total assets of 0.81 showing a very small increase from fixed to total assets. Asset to equity ratio of 1.79 shows the amount of leverage used in The Walt Disney Company’s capital structure. The Walt Disney Company’s FY12 Annual Report states that capital expenditures increased by $200 million driven by an increase at Corporate due to investments in facilities and IT infrastructure and an increase at Parks and Resorts driven by resort expansion and new guest offerings at Walt Disney World Resort and construction costs at Shanghai Disney Resort, partially offset by reduced expenditures at Disneyland Resort. Those reduced expenditures at Disneyland Resort avoided the ratios jumping extremely high due to needed