Walt Disney has experienced steady growth over the past several years according to its financial statements. Its net income has increased each year from 2009 to 2013, with an average annual growth rate of about 15%. Gross margins have also increased steadily during this period from around 16% to 21%. The company invests roughly 18% of its total assets in current assets and 31% in long-term assets on average. It uses straight-line depreciation and has high inventory turnover, indicating efficient management of inventory. Liabilities consist of an average 35% in current liabilities and 65% in long-term liabilities, showing increasing investment in long-term assets.

1. ACCT414 FinancialAnalysis& Reporting Project
Instructor: Ms. NguyenThi PhuongLinh & Mr. SundaresanMohan
Walt Disney
Group
Project
Group members:
Bui Ngoc Minh Chau – 201100280
Saily Sor – 201100334
Farrel – 201000309
Sawyu – 201000339
Due June 23, 2014

2. PART A
Brief history of Walt Disney
Walt Disney was born on December 5, 1901 in Chicago Illinois, to his father Elias Disney, and
mother Flora Call Disney. Walt was one of five children, four boys and a girl.
After Walt's birth, the Disney family moved to Marceline Missouri, Walt lived most of his
childhood here.
Walt had very early interests in art, he would often sell drawings to neighbors to make extra
money. He pursued his art career, by studying art and photography by going to McKinley
High School in Chicago.
Walt began to love, and appreciate nature and wildlife, and family and community, which
were a large part of agrarian living. Though his father could be quite stern, and often there
was little money, Walt was encouraged by his mother, and older brother, Roy to pursue his
talents.
During the fall of 1918, Disney attempted to enlist for military service. He was rejected
because he was under age, only sixteen years old at the time. Instead, Walt joined the Red
Cross and was sent overseas to France, where he spent a year driving an ambulance and
chauffeuring Red Cross officials. His ambulance was covered from stem to stern, not with
stock camouflage, but with Disney cartoons.
Once Walt returned from France, he began to pursue a career in commercial art. He started
a small company called Laugh-O-Grams, which eventually fell bankrupt. With his suitcase,
and twenty dollars, Walt headed to Hollywood to start anew.
After making a success of his "Alice Comedies," Walt became a recognized Hollywood figure.
On July 13, 1925, Walt married one of his first employees, Lillian Bounds, in Lewiston, Idaho.
Later on they would be blessed with two daughters, Diane and Sharon.
In 1932, the production entitled Flowers and Trees (the first color cartoon) won Walt the
first of his studio's Academy Awards. In 1937, he released The Old Mill, the first short
subject to utilize the multi-plane camera technique.
On December 21, 1937, Snow White and the Seven Dwarfs, the first full-length animated
musical feature, premiered at the Carthay Theater in Los Angeles. The film produced at the
unheard cost of $1,499,000 during the depths of the Depression, the film is still considered
one of the great feats and imperishable monuments of the motion picture industry. During
the next five years, Walt Disney Studios completed other full-length animated classics such
as Pinocchio, Fantasia, Dumbo, and Bambi.

3. Walt Disney's dreamof a clean, and organized amusement park, came true, as Disneyland
Park opened in 1955. Walt also became a television pioneer, Disney began television
production in 1954, and was among the first to present full-color programming with his
Wonderful World of Color in 1961.
Walt Disney is a legend; a folk hero of the 20th century. His worldwide popularity was based
upon the ideals which his name represents: imagination, optimism, creation, and self-made
success in the American tradition. He brought us closer to the future, while telling us of the
past, it is certain, that there will never be such as great a man, as Walt Disney.
Major operationof the company, products, and major competitors
The company is best known for the products of its film studio, the Walt Disney Studios,
which is today one of the largest and best-known studios in Hollywood. Disney also owns
and operates the ABC broadcast television network; cable television networks such as
Disney Channel, ESPN, A+E Networks, and ABC Family; publishing, merchandising, and
theatre divisions; and owns and licenses 14 theme parks around the world including resorts.
The major competitors are Time Warner Inc., NBV Universal Media and Twenty-First
Century Fox, Inc. those are the major competitors who producing similar products in high
quantity that become threat to Walt Disney. Not just the quantity that they producing, the
quality of the products that they serve is also good that might attract the consumer to
change their choices to them.
SWOT analysis
Strengths
1. Strong product portfolio. Walt Disney’s products include broadcast television
network ABC and cable networks such as Disney Channel or ESPN, which is one of
the most watched cable networks in the world. Combining the significant audience
reach of these cable networks, (ESPN has nearly 300 million and Disney Channel 240
million subscribers) and the solid growth of cable television, Disney’s product
portfolio provides a competitive advantage for the company over its competitors.
2. Brand reputation. Walt Disney brand has been known for more than 90 years in US
and has been widely recognized worldwide, especially due to its Disney Channel,
Disney Park resorts and movies from Walt Disney studios. The company is perceived
as the primary family entertainment provider and was the 13th most valuable brand
(valued at $27.4 billion) in the world in 2012.

4. 3. Competency in acquisitions. One of the strongest sides the company has is its
competency in acquisitions. The Walt Disney Company has acquired Pixar Animation
Studios in 2006, Marvel Entertainment in 2009 and Lucasfilmin 2012. The former 2
acquisitions have already proved to be very successful in terms of revenue and profit
growth. The third acquisition is expected to be just as successful because Disney has
acquired rights to all of the Lucasfilmprevious works including Star Wars. Few other
Disney competitors have had such record of successful acquisitions.
4. Diversified businesses. The business operates five different business segments:
media networks, parks and resorts, studio environment, consumer products and
interactive media. These company’s segments are operated online and offline, in
many different economies and are generating their income using different business
models. Due to such diverse operations, Disney is less affected by changes in
external environment than its competitors are.
5. Localization of products. Recently, Disney has started adapting its products to suit
local tastes. Besides the parks and resorts, company’s movies and consumer
products are adapted for Chinese market to attract more visitors. This is rarely
initiated by the movie studio itself and is something that few other studios are doing.
Weaknesses
1. Heavy dependence on income from North America. Although, Disney operates in
more than 200 countries, it heavily depends on US and Canada markets for its
income. More than 70% of the business the revenues come from US alone, while the
major Disney’s competitor News Corporation receives less than 50% of revenues
from US, making it less vulnerable to changes in US market.
2. Few opportunities for significant growth through acquisitions. The Walt Disney
Company is the largest entertainment provider in the world and has become so due
to acquisition of competitors. The last Disney’s acquisition had to be approved by
Federal Trade Commission so that the company wouldn’t have to deal with antitrust
problems. This means that the size of the Disney’s business has become a concern
for the government due to significant market concentration and that the company
has very few opportunities to acquire competitors. Otherwise, Disney may become a
subject to antitrust laws.

5. 3. Interactive Losses: The interactive business has operated in the red over the past
several years, mainly because of weak video game sales and a failure of social
network gaming to take off. Still, management expects the unit to turn profitable
shortly, and has high hopes for a new “Infinity” platform that lets animated Disney
and Pixar characters be synthesized into the gaming experienc
Opportunities
1. Growth of paid TV industries in emerging economies. The Asia Pacific region
accounted for more than 50% market share of the world pay TV subscribers (394
million) in 2011. It was expected to grow to more than 55% by the end of 2016,
where China would account for more than 27% of the market. The similar growth is
expected in India as well. Disney Company has already entered these markets and
should continue to strengthen its position there to benefit from such high industry
growth.
2. Expansion of movie production to new countries. Disney has an opportunity to
expand its movie production to such countries as India or China, where movie
production industries have developed good quality infrastructure. This would result
in lower movie production costs and more localized movies for India and China’s
markets.
3. Additional acquisitions are always a possibility, as Disney has continuously proven in
the past that they are willing to pay out large amounts of money to acquire its
targets
Threats
1. Intense competition. Disney operates in very competitive industries such as media,
tourism, parks and resorts, interactive entertainment and others. The competitive
landscape changes quite drastically in the media industry, where news and TV go
online and new competitors with new business models compete more successfully
than incumbent media companies. Disney’s parks and resorts business segment also
receives strong competition from local competitors who can offer better-adapted
product. This results in growing competitive pressure for Walt Disney Company.
2. Increasing piracy. The advancements in technology allow copying, transmitting and
distributing copyrighted material much easier. With an increasing number of internet
users and the speed of internet, this poses a great risk to Disney’s income, as fewer
people would go to watch movies in a cinema or buy its DVD, when it’s freely
available online.

6. 3. Strong growth of online TV and online movie renting. Besides internet piracy,
Disney’s media and movie production businesses may suffer from online TV and
online movie rental growth. Subscription to online TV streaming and movie rental
websites costs much less than to usual cable television providers. In addition,
internet infrastructure is often managed by different companies, thus taking the
power away from cable network providers.
4. Currency change. Disney operates in many countries which not using the same
currency. Change in currencies might change their sales or the company will pushed
to keep updating the price in order to adjust it to their purchasing power. As we
know consumer behavior regarding price when it changes every time, it creates
uncertainty for the consumer to budget their own expense for entertainment that
might shift to other entertainment with stable price
5. Highly unpredictable market. The company derives the large majority of its revenue
from the volatile and unpredictable child market, as one day the world’s kids might
like one thing and next another character or story
PART B
1. Walt Disney’s growth rates in earnings:
(In millions )
2009 2010 2011 2012 2013
Net Income 3.609 4.313 5.258 6.173 6.636
Net Income Growth (25.3%) 19.50% 21.91% 17.4% 7.5%
Net income for 2008 was 4,427
The net income growth for 2009 is -25.3% it happens during the time they acquire Marvel
for $4 billion. Based on the reliable information on internet, Disney believe the acquisition
can boost their net income by putting all those superhero character into one place.
The trend of the net income for Walt Disney Co. is in expansion area based on their net
income that keep increasing in amount. Increase in net income and decrease in net income
growth from 2009-2013 also give us an idea that Walt Disney Co entering developed phase
in economic activity when growth remain in small change and sales are very stable

7. (assuming the company can follow the business trends and economy remain stable
globally).
Based on the net income growth trend, the company is entering recession area for next
couple years, when it keep decreasing for the last 2 years. It’s also gives a suggestion that
Walt Disney Co. close to the peak and might starting experience loss.
2. Walt Disney’s gross margin:
(in millions)
2009 2010 2011 2012 2013
Revenues/sales 36,149 38,063 40,893 42,278 45,041
COGS 30,452 31,377 33,122 33,415 35,591
Gross profit 5,697 6,686 7,771 8,863 9,450
Gross Margin (%) 15.76% 17.56% 19% 21% 20.98%
The trend for gross margin is increasing from 2009-2013 based on the data shown above.
The possible factors that effecting the trend is how the company manage gaining more sales
that leads to higher COGS, but they can push COGS to the minimum level to keep gross
profit as high as possible to produce high gross margin.
The gross margin represents the percent of total sales revenue that the company retains
after incurring the direct costs associated with producing the goods and services sold by a
company. The higher the percentage, the more the company retains on each dollar of sales
to service its other costs and obligations
3. The resources of the company:
2013 2012 2011
Total assets of the company invested in current assets 17% 18% 19%
Total assets of the company invested in long-term assets 31% 32% 31%
Average current assets percentage for all 3 years 18%
Average long-term assets percentage for all 3 years 31%
As current assets, Walt Disney Company has cash and cash equivalents, short term
investments, net receivables, inventory and other current assets; each of the current assets

8. values are stated in the assets part of the balance sheet given above. We can see as in table
given above, the company invested 19%, 18% and 19% of its total assets as current assets in
2011, 2012 and 2013. Each year is decreased by 1%. In contrast the investment in long-term
assets climb only 1% in the second year and then drop to the same level as in the original
year; 31% in 2011, 32% in 2012 and 31% in 2013. Walt Disney Company's long-term
investments are long-term investments, and property plant and equipment. Average current
assets percentage for 3 years is 18% and average long-term assets percentage of 3 years is
31%.
4. Depreciation method
Walt Disney uses straight-line method to calculate depreciation of long-term assets of plant
and equipment. Depreciation is computed on the straight-line method over estimated
useful lives as follows:
Attractions 25 – 40 years
Buildings and improvements 20 – 40 years
Leasehold improvements Life of lease or asset life if less
Land improvements 20 – 40 years
Furniture, fixtures and equipment 3 – 25 years
It also uses a straight-line basis over periods up to 40 years for other long-lived assets
including amortizable intangible assets.
5. Inventory
Carrying amounts of merchandise, materials and supplies inventories are generally
determined on a moving average cost basis and are recorded at the lower of cost or market.
The last three years inventory turnover is as follow.
2013 2012 2011
Inventory turnover ratio
23.12 21.70 21.51
In days 15.79 16.82 16.97
Using average inventory 1,539,667
Inventory turnover is a measure of how efficient a company can control its merchandise, so
it is important to have a high turn. This shows the company does not overspend by buying
too much inventory and wastes resources by storing non-salable inventory. It also shows
that the company can effectively sell the inventory its buys. Walt Disney Company has
inventory turnover ratio of 21.51 times (2011), 21.70 times (2012) and 23.12 times (2013).
It's increasing each year.
This ratio should be compared against industry averages which are 7.87 (2011), 7.93 (2012),
and 7.86 (2013). As can be seen the inventory turnover ratio is far above the industry

9. average. A high ratio implies either strong sales. As the inventory turnover ratio in this case
is far above industry average it can mean they have effective sale of inventory.
6. Breakdown of the company’s liabilities
2013 2012 2011
Percentage of current liabilities 33% 36% 35%
Percentage of long-term liabilities 67% 64% 65%
Average percentage of current liabilities 35%
Average percentage of current liabilities 65%
Walt Disney Company has total liabilities of $34,739,000 (2011), $35,139,000 (2012), and
$35,812,000 (2013). Its current liabilities are $12,088,000 (2011), $12,813,000 (2012), and
$11,704,000 (2013). Its long-term liabilities are $22,651,000 (2011), $22,326,000 (2012), and
$24,108,000 (2013). The percentage of current liabilities and long-term liabilities are as
shown in above. We can see the current liabilities reduced to 33% in 2013 and long-term
liabilities increased to 67% in 2013. This show the company invests more in long-term assets
by borrowing for long-term. This is confirmed when we see increase in value of long-term
assets in 2013. Average percentage of current liabilities is 35% and average percentage of
long-term liabilities of Walt Disney is 65%.
7. Major components of stockholder’s equity
2013 2012 2011
Common Stock 33,440,000,000 31,731,000,000 30,296,000,000
Retained Earnings 47,758,000,000 42,965,000,000 38,375,000,000
Treasury Stock
-
34,582,000,000
-
31,671,000,000
-
28,656,000,000
Other Stockholder Equity -1,187,000,000 -3,266,000,000 -2,630,000,000
Total Stockholder Equity 45,429,000,000 39,759,000,000 37,385,000,000
The stockholder's equity does changes significantly during the years, from $34,385,000,000
in 2011 to $45,429,000,000 in 2013. The increase is caused by increase in issuance of
common stock ($33,440,000,000 in 2013), retained earnings ($47,758,000,000 in 2013),
treasury stock ($34,582,000,000 in 2013), and other stockholder equity ($45,429,000,000 in
2013). Retained earnings increased due to the company earning of more income from
$4,807,000 in 2011 to $6,136,000 in 2013. This shows that the company is performing well
each year. The stockholder's equity is in increase.

10. FINANCIAL RATIO ANALYSIS
Current Ratio
_ Disney’s current ratio decreased slightly from 1.14 to 1.07 from 2011 to 2012 and
increased to 1.21 in 2013. There was an overall upward trend from 2011-2013, which
means Disney’s ability to cover the current debt with current asset increased.
_ Disney’s current ratios for 2011 and 2012 were below the industry average, which
means the ratios are not satisfactory. However, the current ratio 2013 rose above the
industry average, which indicates a satisfactory ratio. However, the ratio for all three
years are only a little above 1 so Disney only has just enough current asset to cover for
current liabilities.
_ Time Warner’s current ratios for all three years are higher than the current ratios of
Disney. In addition, the current ratios for 2011-2013 of Time Warner were all well above
the industry average. So the ability to cover current debt with current assets of Time
Warner is much better than Disney. However, this can also means that Disney is using the
most of its current assets in operation to generate profit.
Quick Ratio
_ Disney’s quick ratio remained constant at 0.77 from 2011-2012 and increased to 0.93 in
2013. There is an overall upward trend from 2011-2013, which means Disney’ ability to
cover current debts with immediate cash has increased.
_ Disney’s quick ratios for 2011- 2013 were above the industry average, which indicates a
satisfactory ratio. However, the quick ratios for all three years are below 1 so Disney can’t
generate enough immediate cash to cover for current liabilities. The possible reason is
because Disney has a lot of receivable in the current asset.
_ Time Warner’s quick ratios for all three years are higher than the quick ratios of Disney.
In addition, the quick ratios for 2011-2013 of Time Warner were all well above the
industry average and above 1. So the ability to cover current debt with immediate of
Time Warner is much better than Disney. However, this can also means that Disney is
using the most of its current assets in operation to generate profit.
Working Capital
_ Disney’s working capital decreased from 1,669 to 896 from 2011 to 2012 and increased
to 2,405 in 2013. There was an overall upward trend from 2011-2013
_ Disney’s WC has increased during 2011-2013 (the amount of WC in 2011 is almost
double the amount of WC in 2011). A high WC is good, however, it can also mean that
Disney is not operating in the most efficient manner because they have too much
inventory or they are not investing their excess cash.

11. _ Time Warner’s working capital for all three years are much higher than the working
capital of Disney. This can be a good sign; however, as stated above, a high WC is not
always good. Money is best in cash and excess cash should be used in investment to
generate more profit.
Return on Equity (ROE)
_ Disney’s ROE ratio increased from 13.35% to 15.17 from 2011 to 2012 and decreased to
14.73% in 2013. There was an overall upward trend from 2011-2013, which means
Disney’s ability to generate profit with the money shareholders invested has increased.
_ Disney’s ROE ratios for 2011-2013 were below the industry average, which means the
ratios are not satisfactory. Disney hasn’t generated a satisfying profit from the money of
the investors.
_ Time Warner’s ROE for all three years are lower than the ROE of Disney. In addition, the
ROE for 2011-2013 of Time Warner were all well below the industry average. So Time
Warner’s ability to generate a satisfying profit from the money of the investors is worse
than Disney.
Return on Assets (ROA)
_ Disney’s ROA increased gradually from 2011-2013 (7.44% in 2011, 8.40% in 2012, 8.50%
in 2013). There was an overall upward trend from 2011-2013, which means Disney’s
ability to use assets to generate profit has increased.
_ Disney’s ROA for 2011-2013 were all above the industry average, which indicates a
satisfactory ratio. Disney has generated a satisfying profit with their assets.
_ Time Warner’s ROA for all three years are lower than the ROA of Disney. In addition,
the ROA for 2011-2013 of Time Warner were all well below the industry average. So Time
Warner’s ability to generate a satisfying profit from the assets is worse than Disney.
Gross Profit Margin
_ Disney’s Gross Profit Margin decreased from 23.50% to 20.96% from 2011 to 2012 and
increased slightly to 20.98% in 2013. There was an overall downward trend from 2011-
2013, which means Disney’s profit generated from sales has decreased over the period.
This reason for this is because Disney’s sales have decreased.
_ Disney’s Gross Profit Margin for 2011-2013 were well above the industry average,
which indicates a satisfactory ratio. Disney is generating a much higher amount of profit
from sales compared to their peer companies.
_ Time Warner’s Gross Profit Margins for all three years are much higher than the Gross
Profit Margins of Disney. In addition, the Gross Profit Margin for 2011-2013 of Time
Warner were all well above the industry average. So Time Warner is generating more
profit from sales than Disney.

12. Receivable Turnover
_ Disney’s Receivable Turnover ratio decreased from 6.83 to 6.65 from 2011 to 2012 and
increased slightly to 6.67 in 2013. There was an overall downward trend from 2011-2013,
which means Disney’s ability to collect account receivable from customers has decreased.
_ Disney’s Receivable Turnover ratios for 2011-2013 were well below the industry
average, which means the ratios are not satisfactory. Disney is collecting receivables
much slower than their peer companies.
_ Time Warner’s Receivable Turnover ratios for all three years are lower than the
Receivable Turnover ratios of Disney. In addition, the Receivable Turnover ratios for
2011-2013 of Time Warner were all well below the industry average. So the ability to
collect receivables of Time Warner is not satisfactory and even worse than Disney.
Receivable Turnover in Days
_ Disney’s Receivable Turnover in Days increased from 53.44 to 54.89 days from 2011 to
2012 and decreased slightly to 54.72 days in 2013. There was an overall upward trend
from 2011-2013, which means Disney is taking longer to collect their receivables (longer
collection period).
_ Disney’s Receivable Turnover in Days ratios for 2011-2013 were well above the industry
average, which means the ratios are not satisfactory. Disney is collecting receivables
much slower than their peer companies.
_ Time Warner’s Receivable Turnover in Days ratios for all three years are higher than the
Receivable Turnover in Days ratios of Disney. In addition, the Receivable Turnover in Days
ratios for 2011-2013 of Time Warner were all well above the industry average. So Time
Warner is taking longer to collect receivables than Disney and most of other peer
companies.
Inventory Turnover
_ Disney’s Inventory Turnover ratio decreased slightly from 21.84 to 21.34 from 2011 to
2012 and increased to 23.54 in 2013. There was an overall upward trend from 2011-2013,
which means Disney’s sales have increased.
_ Disney’s Inventory Turnover ratios for 2011-2013 were well above the industry average,
which indicates a satisfactory ratio. Disney’s sales are much higher than their peer
companies.
_ Time Warner’s Inventory Turnover ratios for all three years are much lower than the
Inventory Turnover ratios of Disney. In addition, the Inventory Turnover ratios for 2011-
2013 of Time Warner all struggled to stay just slightly above the industry average. So
Time Warner’s sales are much lower than Disney’s.

13. Inventory Turnover in Days
_ Disney’s Inventory Turnover in Days ratio increased from 16.74 to 17.10 from 2011 to
2012 and decreased to 15.51 in 2013. There was an overall downward trend from 2011-
2013, which means Disney is taking a shorter time to sell their inventories.
_ Disney’s Inventory Turnover in Days ratios for 2011-2013 were well below the industry
average, which indicates a satisfactory ratio. Disney is selling their inventories much
faster than their peer companies.
_ Time Warner’s Inventory Turnover in Days ratios for all three years are much higher
than the Inventory Turnover in Days ratios of Disney. In addition, the Inventory Turnover
in Days ratios for 2011-2013 of Time Warner were all just below the industry average. So
Time Warner is selling their inventories much slower than Disney.
Debt to Asset Ratio
_ Disney’s Debt to Asset ratio decreased gradually during 2011-2013 (0.45 in 2011, 0.44
in 2012, 0.41 in 2013). There was an overall downward trend from 2011-2013, which
means Disney is financing less asset through liabilities.
_ Disney’s Debt to Asset ratios for 2011-2013 were above the industry average, which
means the ratios are not satisfactory. Disney is financing more assets through liabilities
than their peer companies.
_ Time Warner’s Debt to Asset ratios for all three years are higher than the Debt to Asset
ratios of Disney. In addition, the Debt to Asset ratios for 2011-2013 of Time Warner were
all above the industry average. So Time Warner is financing more assets through liabilities
than Disney.
Debt to Equity Ratio
_ Disney’s Debt to Equity ratio decreased gradually during 2011-2013 (0.87 in 2011, 0.83
in 2012, 0.73 in 2013). There was an overall downward trend from 2011-2013, which
means Disney is financing less asset through stocks.
_ Disney’s Debt to Equity ratios for 2011-2013 were above the industry average, which
means the ratios are satisfactory. Disney is financing more assets through stocks than
their peer companies.
_ Time Warner’s Debt to Equity ratios for all three years are higher than the Debt to
Equity ratios of Disney. In addition, the Debt to Equity ratios for 2011-2013 of Time
Warner were all above the industry average. So Time Warner is financing more assets
through stocks than Disney.
Times Interest Earned
_ Disney’s Times Interest Earned ratio increased gradually during 2011-2013 (22.74 in
2011, 24.40 in 2012, 39.01 in 2013). There was an overall upward trend from 2011-2013,
which means Disney’s ability to cover their interest expense has increased.

14. _ Disney’s Times Interest Earned ratios for 2011 and 2012 were well above the industry
average, which indicates a satisfactory ratio. Disney’s ability to cover the interest expense
is much higher than their peer companies.
_ Time Warner’s Times Interest Earned ratios for all three years are much lower than the
Times Interest Earned ratios of Disney. In addition, the Times Interest Earned ratios for
2011-2013 of Time Warner were all well below the industry average. So Time Warner’s
ability to cover the interest expense is much lower than Disney and the peer companies.
Earnings per Share (Basic)
_ Disney’s EPS has increased during 2011-2013 ($2.56 in 2011, $3.17 in 2012, $3.42) in
2013). There was an overall upward trend from 2011-2013, which means Disney’s
shareholders are earning more from their shares.
_ Time Warner’s EPS in 2012 was lower than Disney’s but their EPS in 2011 and 2013
were higher than Disney’s. So shareholders can earn more from Time Warner’s shares
than from Disney’s.
Price/Earnings Ratio (P/E)
_ Disney’s P/E ratios increased gradually during 2011-2013 (16.26 in 2011, 17.06 in 2012,
20.01 in 2013). There was an overall upward trend from 2011-2013, which means that
investors are paying more for each dollar of Disney’s earnings.
_ Disney’s P/E ratios for 2011 were below the industry average but the P/E ratios for
2012 and 2013 were above the industry average, which is a good sign. The investors are
paying more for each dollar of Disney’s earnings than for its peer companies.
_ Time Warner’s P/E ratios for 2011 and 2012 are lower than the P/E ratios of Disney and
the industry average (9.22 in 2011 and 15.64 in 2012). However, Time Warner’s P/E ratios
for 2013 shot up to 25.70, higher than Disney’s and the industry average. So Time
Warner’s P/E growth rate are higher than Disney and by 2013, its shares worth more than
Disney and investor are willing to pay more for Time Warner’s shares.
PART C
Profitability
1. _ Disney’sprofitabilityduringthe recentthree yearsisgoodbecause accordingtothe
financial ratioanalysis:
 Disney’sabilitytouse assetstogenerate profithasincreased.
 Disney’sabilitytogenerate profitwiththe moneyshareholdersinvestedhas
increased.

15.  Disney’sgrossprofitmarginhasdecreasedabitin2013 comparedto2011 but isstill
verywell above the industryaverage.
_ Disney’sprofitabilityisbetterthanthatof the industryaverage andTime Warnerbecause
accordingto the financial ratioanalysis,Disney’sROA,ROEandgrossprofitmarginratiosare
much higherthanthose of the industryaverage andTime Warner.
2. _ CashflowsfromoperatingactivitiesandNetincome:
2013 2012 2011
Cash fromOA 9,452 7,966 6,994
Netincome 6,636 6,173 5,258
Difference 2,816 1,793 1,734
_ Many factorscontribute tothe difference betweenthe cashflow fromoperatingactivities
and netincome inthe recentyears.
Some of the mainfactorsin Disney’scase are Depreciationexpense,Gainsondispositions
and acquisitionsof assets,Cashdistributionsreceivedfromequityinvestees,Equityinthe
income of investees,Equity-basedcompensation,andChangesinaccountsreceivableand
accounts payables.
Liquidity & Capital Structure
1. _ Yes,Disneywill be able tomeettheirobligationswhentheybecome due because
accordingto the financial ratioanalysis,Disney’sliquidityisgoodbecause:
 Disney’sabilitytocoverthe currentdebtwithcurrentratio has increased.
 Disney’abilitytocovercurrentdebtswithimmediatecashhasincreased.
_ Disney’sliquidityisbetterthanthatof the industryaverage because accordingtothe
financial ratioanalysis,Disney’scurrentratioandquickratioare higherthanthose of the
industryaverage.
_ Disney’sliquidityisnotasgoodas the liquidityof Time Warner because accordingtothe
financial ratioanalysis,Disney’scurrentratioandquickratioare lowerthanthose of Time
Warner.
2. The company’scapital structure
Walt Disney The percentage of assets financed
2013 2012 2011
Throughliabilities 40.73% 43.98% 45.30%
Throughstockholders’equity 55.92 % 53.08% 51.83%
3. Time Warner’scapital structure
Time Warner The percentage of assets financed
2013 2012 2011
Throughliabilities 56.02% 56.26% 55.82%
Throughstockholders’equity 43.98% 43.72% 44.18%
The capital structure of Time Warneris verydifferentfromDisney:

16. _ During2011-2013, Disney’sassetsare financedmore fromstockholder’sequitythanfrom
liabilities.Overall,the percentageof assetsfinancedthroughliabilitiesisdecreasingand
throughstockholder’sequityisincreasing.Thisisagoodsignbecause Disneyisgettingits
fundmore fromstocks thanfrom debts.
_ During2011-2013, Time Warner’sassetsare financedmore fromliabilitiesthanfrom
stockholder’sequity.Overall,the percentageof assetsfinancedthroughliabilitiesis
increasingandthroughstockholder’sequityisdecreasing.Thisisabad signbecause Time
Warner isgettingitsfundmore fromdebtsthan fromstocks.
Recommendations
1. _ Yes,I wouldgrantshort-termloanforDisneybecause accordingtothe financial ratio
analysis:
 Disney’sassetsthatare financedthroughliabilitiesforthe recentthree yearsare
below50% (45.30% in 2011, 43.98% in2012, 40.73% in2013).
 Disney’sliquidityisgoodsotheyhave the abilitytopayback the loanwhenit comes
to due.
 Disney’sinterestcoverage ratios are well aboveaverage (22.74in 2011, 24.40 in
2012, 39.01 in 2013) so theyhave the abilitytopay interest.
_ Yes,I wouldgrantlong-termloanforDisneybecause accordingtothe financial ratio
analysis:
 Disney’sassetsthatare financedthroughliabilitiesforthe recentthree yearsare
below50% andhave beendecreasing(45.30% in2011, 43.98% in 2012, 40.73% in
2013).
 Disney’sliquidityisgoodandgettingbetterbythe years(from2011-2013, current
ratioincreasedfrom1.14 to 1.21 and quickratio increasedfrom0.77 to 0.93) so
theymostlikelyhave the abilitytopayback the loanin the future.
 Disney’sinterestcoverage ratiosare well aboveaverage andhave beenincreasing
(22.74 in 2011, 24.40 in 2012, 39.01 in2013) and theirnetincome have alsobeen
increasing($5,258 millionin2011, $6,173 millionin2012, $6,636 millionin2013) so
theyhave the abilitytopayinterest.
2. _ AnindividualshouldholdDisney’ssharesbecausethe price willmostlikelyincrease inthe
future forthe followingreasons:
 The earningspershare of Disney’sstocksforthe recentyearsare growingrapidlyin
the recentthree years($2.52 in 2011, $3.13 in2012, $3.38 in2013) and Disneyis
rated# 2 inearningspershare categoryamong relatedcompanies.There’sahigh
probabilitythatthe earningpershare will keepgrowinginthe future if there isno
significantnegative change inthe market.
 Disney’sP/Eratiosfor2012 and 2013 are higherthanthe industryaverage andhave
beenincreasing(16.26in 2011, 17.06 in 2012, 20.01 in 2013), whichmeansthat

17. investorsare expectinghigherearningsgrowthinthe future comparedtothe overall
market.
 For the recent5 years,bothdividendspershare andearningspershare growth
increased.The positive trendindividendpaymentsisnoteworthysince veryfew
companiesinthe Broadcasting& Cable TV industrypaya dividend.