Research Paper on Walt Disney: A Financial Analysis of a Top Performing Entertainment Company

Introduction

Walt Disney Company remains one of the best performing entertainment companies in the United States based on its financials. The results from the financial states significantly reflect the positive progress of the company as it has always experienced an increase in revenue. This is because of the company's culture which and the objectives which are mainly focused on customer-satisfaction from all the market segments (Luis, 2015). To analyse the financials of the Walt Disney Company, Profitability, solvency and liquidity ratios determine its growth and development. Generally, there is an increase in these ratios, and this is an s result of a company's marketing and operational strategies.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Profitability Ratios

In profitability ratios, the company shows a clear measure of the ability to provide profitable sales and maximise the utilisation of its resources. The ratios on gross profit margin and operating profit margin are significantly stronger as compared to the average ratio. Gross profit margin (an increase from 39.6% to 47.14%) shows the percentage of the available revenue to cover the expenditures, which in this case, the ration increased from 2015 to 2019. Operating margin ratio also increased from 2015 to 2019 (20.79% to 24.13%) (Microtrends 2019) this increase in operating margin ratio reflects on the company's 10-year improvement.

Liquidity Ratios

Walt Disney Company has shown I slight decrease in liquidity ratios as from 2015 to 2019. Based on the two liquidity ratios, current ratio and quick ratio, the company's; liquidity ratio has deteriorated. The current ratio shows a slight deterioration from 2015 to 2019 to a ratio of 0.86, and the financial data shows that the current ratio is less liquid as compared to the average (Microtrends 2019), this is because of an increase in the current assets of the company and current liabilities as well. Quick ratio reduced from as from 2015 to 2019, in general, liquidity ratio is weak as the company's quick ratio and current ratio are slower as compared to the industry's average ratio. Therefore, the reason for this change is because the company's sales income increased from 2015 to 2019 (Microtrends 2019).

Solvency Ratio

Lastly, the solvency ratios as from 2015 to 2019, the company has shown improvement. Debt to equity ratio increased from 2015 to 2017. However, there was a slight decrease from 2018 to 2019 (Microtrends, 2019). Debt to capital ratio also had the same effect, the reason for these change in the solvency ratios is because the company's interest expenses, total assets, total liabilities decreased while the capital expenditures improved.

Financial data from the balance sheet shows continuous improvement; for instance, the company's total current assets increased from $15,588 billion to $23,527 billion in the last five years (Yang, 2019). The most significant trend that leads to an increase in revenue and the general expansion of the company is the contribution from the film, Avengers and Captain Marvel. These movies positively impacted the financial progress of the company.

Conclusion

The financial ratios provide a clear picture of how the company operates in the market, despite stiff completion and change in market share, the company has always shown positive progress. The financial ratios have helped the stakeholders and the management as well as the investors who have a significant interest in the company to make decisions based on the sustainability and profitability of the company. Based on the industry it operates on, based on its financials; therefore, the company has managed to secure its market share and maintain customer loyalty. The financial ratios have also helped the company in establishing marketing strategies concerning the competitors.

The company appears to be healthy; this is because, based on the last five years of financial analyses, the company has greatly improved in its management techniques and the amount of revenue. Despite the competition faced by Time Warner and other competitors, the company has maintained a considerate market share. It is therefore headed rightfully.

Time Warner and Walt Disney Companies are both in the middle of significant financial shifts. In comparison, Disney remains one of the best companies in the industry as it has several financial advantages over Time Warner. For instance, the current ration of Disney is 0.86, the debt of $20,4 billion, while Time Warner is 1.39, a debt of $24.3 billion. This implies that Disney has more cash and less debt in the balance sheet (Yang, 2019).

References

Luis, J. D. O. V. (2015). Equity valuation dissertation Walt Disney Company (Doctoral dissertation). https://doi.org/10.1007/978-3-531-90261-6_152

Microtrends (2019) Disney Financial Ratios for Analysis 2005-2019 | DIS. Retrieved from: https://www.macrotrends.net/stocks/charts/DIS/disney/financial-ratios

Microtrends, (2019). Disney Quick Ratio 2006-2019 | DIS. Retrieved from: https://www.macrotrends.net/stocks/charts/DIS/disney/quick-ratio

Yang, J. (2019, August). Analysis of Business Operation Management under the Harvard Analytical Framework: A Case Study of the Walt Disney Company. In 1st International Symposium on Economic Development and Management Innovation (EDMI 2019). Atlantis Press. https://doi.org/10.2991/edmi-19.2019.17