Company analysis: Revision

I will upload my report that I’m working on and i just need help on a small part of it .

go to ” Analysis of profit/loss/balance sheet ” on the report that I’m gonna upload and try to do the tasks under that title ,, you will find that i have done some of the ratios and i have also gave you the links of where i got those numbers from ,,,

please kindly do the rest of the ratios and briefly ( very brief ) explain each one of them

please let me know if you need more information

thank you and good luck

Introduction

 

This report will critically analyse The Walt Disney Company from a financial perspective, placing an emphasis on its major investment decisions over the past few years, sources of equity and debt funding, financing methods used by the company, and the implications of these financing decisions on the operation of the company. An analysis of the company’s financial statements will be made in order to gain a better understanding of its cash flows and financial position. In addition to this, a number of important financial ratios will be obtained and assessed.

Using a bottom-up approach to fundamental analysis, and also a technical analysis (…)

 

Company Background

 

The Walt Disney Company, listed on the New York Stock Exchange (NYSE) as DIS, is one of the most prominent companies in the Broadcasting & Entertainment industry. It is media giant not only because of its size and power, but also because it has become part of many people’s lives. Disney is the creator and producer of many live action and animated TV programs and movies, and has ownership of ten television channels, six of which are among the top ten in the U.S. (NYSE 2012). Its media assets include ABC Television, ESPN, the Disney Channel, Disney theme parks, Walt Disney Pics, Touchstone, Marvel and Lucasfilm. DIS has a market cap of $119 billion (Vodicka 2013), and a stock price of $64 as of 9th October 2013 (Yahoo7 Finance 2013). Robert A. Iger is currently Chairman and Chief Executive Officer of the company (The Walt Disney Company n.d).

 

The company began on 16th October 1923, operating under the name “Disney Brothers Studios”. The Disney brothers, named Walt Disney and Roy Disney, created various unique and memorable characters, which were featured in a number of animated films that saw critical success. The company continued to grow and expand its business operations throughout the years by releasing more successful films. In 1955, Disney opened its first theme park – Disneyland in California. Over the last few decades Disney has continued to grow by opening new theme parks and acquiring media companies including ABC, Lucasfilm and Pixar Animation Studios. Today, DIS runs five business segments including Media Networks, Parks and Resorts, Studio Entertainment (The Walt Disney Studios), Consumer Products and Interactive Media (The Walt Disney Company n.d).

 

The Media Networks segment has two divisions – Disney/ABC Television Group and ESPN – which contain a number of broadcasting, publishing, radio and cable businesses. The Parks and Resorts segment runs 11 theme parks and 43 resorts in North America, Europe and Asia, as well as the Disney Cruise Line and Adventures by Disney. The Walt Disney Studios creates feature films under a number of banners including Walt Disney Animation Studios, Pixar Animation Studios, Marvel Studios, Touchstone Pictures, Disney Nature and DreamWorks Studios. This segment also encompasses the Disney Music Group and the Disney Theatrical Group, which deliver music and live stage shows, respectively. The Disney Consumer Products segment delivers innovative products in the form of toys, books, art and apparel. It operates the Disney Store – a chain of retail stores around North America, Japan and Europe which sell Disney’s products. Lastly, Disney Interactive is one of the newer business segments, founded in 2008. It creates interactive entertainment across digital media platforms such as mobile, social and console games, and online media/games (The Walt Disney Company n.d)

 

There are number of factors that contribute towards the success of The Walt Disney Company. One of the strongest factors is the mission and vision statement of Disney Company. Values and principles mentioned in these statements are used as guidelines when making organisational decisions. Mission and visions of Disney are the most leading providers and producers of information and entertainment. (Hubpages 2013). Disney is highly committed to its policies and governance practices, which is a true representation of its commitment to its shareholder’s interests. The basic culture of Disney is comprised of values and ethics such as innovation, maintaining a high standard, positive commitment, timeless storylines, and honor and respect (The Walt Disney Company n.d).

 

Investment decisions taken

(capital investments required to run the business)

 

With so many different business segments, Disney’s investment types and amounts can vary. The company’s investing activities occur primarily in parks & resorts, property investments, acquisitions, and media networks. The total cash used for investing activities in 2012 was $4.76 billion – up from $3.29 billion in 2011 – of which the majority was in parks, resorts and other property.

 

Parks & Resorts

Capital expenditures in this area primarily go towards new rides and attractions at theme parks, resort expansions, cruise ships and systems infrastructure. In 2012, the company invested $2.24 billion in domestic parks and resorts and $641 million in international parks and resorts, reflecting development and construction costs for the Shanghai Disney Resort, resort expansions and new guest services at Walt Disney World Resort and Hong Kong Disneyland Resort, as well as payments on their new cruise ship – the Disney Dream (The Walt Disney Company 2013, p. 46).

Acquisitions

In 1996 DIS acquired ABC and in 2006 it bought its long-time partner Pixar. In 2010, cash used for acquisitions was $2.5 billion and included the acquisitions of the comic company Marvel Entertainment Inc. and Playdom Inc. Acquisition investments in 2012 totaled $1 billion after the partial acquisition of UTV and the Russian ‘Seven TV Network’, in addition to a $300 million equity contribution to AETN. (The Walt Disney Company 2013).

Media Networks

Capital expenditures in this segment consist of investments in production facilities, television station facilities, and facilities and equipment for the upgrade and expansion of broadcasting centres. In 2012 DIS invested a total of $170 million in cable networks, $85 million in broadcasting (The Walt Disney Company 2013, p. 46).

Other

In 2012 DIS invested $79 million in studio entertainment, $69 million in consumer products, $27 million in interactive and $471 million in corporate. The Corporate capital expenditures relate to investments in corporate facilities and information technology infrastructure.

 

Disney is highly focused on one of its core strategies of producing and issuing striking content for kids via TV channels. To maximise this content Disney has invested in new projects such as online video on demand. The migration from TV to new media was of critical importance for younger audiences who form part of Disney’s customer base, and this raised issues of piracy. Disney has also invested $350m for its own in house game developing capacities.

 

Sources of Funds

Including reference to markets, instruments and institutions used.

 

The total cash used in financing activities in 2012 was $2.98 billion, down from $3.23 billion in 2011.

 

There are number of areas that raise revenue for Disney. Large scale TV programs such as Olympics and advertising spending and affiliated fees are the major sources of revenues. Disney’s success is the quality of its events and size of the audience it appeals to. These affiliation fees are the major source of revenues that are provided by the satellite companies for a number of Disney’s programs. ESPN programing is the main cause of high affiliate fees by Disney. Movies and merchandising are another source of revenue funds. Successful movies generate large revenues for upcoming years. Disney theme parks and resorts are also a large source of revenues. These revenues depend directly upon the number of visitors to the parks.

 

More investment in technology has become necessary to attract audiences and obtain revenues. It has started to upload videos and clips on ESPN.com and Disney.com, replacing its presence on YouTube. These are considered a suitable future source of funds for the company. (The Walt Disney Company (NYSE: DIS))

Financial background of Disney is comprised of enormous figures and high personalities. Many richest men who remained the owner of pelt, oil, steel, rails and of course software, were the main finance provider to Disney Company. They all have kept one formula in their mind ‘lower cost and sell more’. So it can be said that shareholders and creditors of Disney company were all the birds with different feathers. As said by Walt Disney – “if you dream it, you can do it”, hence he himself had proved his saying in his life with the invention of Disney and dreaming and achieving a continuous series of success (Investopedia 2011)

 

 

Uses of funds – why did they borrow the money?

 

 

Analysis of the sources and uses of funds.

Where possible comments on the matching principle could be made. – give an opinion about their sources and uses of funds

 

  1. Business plan

–       Which industry?

–       How are we going to operate? Product, Service, Price – have a spectrum for each

 

 

Analysis of profit/loss/balance sheet – look at past 3 years

 

 

 

 

need to look at the Indicators of company performance

 

Capital structure/gearing ratio – debt/equity ratio

 

 

Liquidity ratios
– Ability to meet debt obligations
– Current Ratio, Quick Ratio
– Short-term
– Long-term

 

 

Debt servicing – interest cover

 

 

Profitability – EPS

 

 

Share price – P/E

 

  • Risk

 

D/E ratio, Current Ratio, Quick ratio, EPS,

 

Current Ratio Quick Ratio Debt/Equity Ratio
2010 2011 2012 2010 2011 2012 2010 2011 2012
1.1 1.1 1.1 0.98 1.1 0.95 0.84 0.93 0.88
Interest Cover Earnings Per Share (EPS) Price/Earnings Ratio
2010 2011 2012 2010 2011 2012 2010 2011 2012
15.53 19.49 20.62

These are the links that I used to get those ratios
http://ycharts.com/

http://www.wikinvest.com/stock/Walt_Disney_Company_(DIS)/Data/Quick_Ratio

Technical Analysis

This section will analyse Disney’s share price history over the past 5 years in order to identify possible future trends in share price based on past share price fluctuations.

 

The overall trend of Disney’s share price over the past three years has been positive. Based on these past trends it can be expected that the company’s share price will continue to increase, however it is suitable to expect there may be drops from time to time.

 

In 2009 there was a significant drop in share price. This could have been brought about by their acquisition of Marvel Inc. Mergers in the future could bring about a similar drop in share prices. (look into whether they are merging with any more companies in the near future)

 

 

Market capitalisation

 

 

 

Competitiveness in the market

 

Being one of the largest entertainment and media enterprises, DIS has branches out to many different business segments. As previously mentioned, one of Disney’s major businesses is their media network, producing box office movies yearly. Other major business segments are Parks & Resorts, and Consumer Products. With all different type of businesses Walt Disney is involved in, they have many different type of competitors but Disney still manage to acquire high revenues yearly. Some of the main competitors in the industry would be company such as 21st Century Fox Entertainment, Dreamworks Animation, AOL Time Warner, NBC and others. These companies not only challenge Disney in the media network field but also the merchandise. The competition found in the media and entertainment, tourism, park and resorts industry are very high, every year Disney faces more competitions from emerging companies producing new and innovative product as the industry is changing quickly.

 

Walt Disney major revenue earnings would be from the network media section, producing movies and television ownership and others. Some of the major competitors in the industry of Disney would be Time Warner and 21st Century Fox entertainment as they both generate high revenues yearly. “Year over year, The Walt Disney Company has been able to grow revenues from $40.9B USD to $42.3B USD”( Walt Disney Co). Comparing the three companies mentioned, in 2012, Disney generated a revenue of $42,278 million, while Time Warner and 21st Century Fox Entertainment generated a revenue of $28,729 and $27,675 million respectively (Walt Disney Co DIS). Although Walt Disney generated a much higher revenue in comparison to the other companies, it has a fairly low gross margin at 21% comparing to Time Warner and Fox Entertainment, which had 44% and 36% respectively. This shows that Walt Disney cost of revenue is much higher. The share prices for each company are all very similar to each other, this could be due to all 3 companies having very similar earnings per share of around 3.  From the financial numbers Disney generates every fiscal year, it shows that Disney is a very competitive company in the industry and can be said to be the leading company in its industry.

 

Walt Disney also is involved in other businesses other than network media entertainment. Parks and Resorts and Consumer products are also a big component of Walt Disney’s earnings. Some problems Walt Disney will face in the future in terms of competitiveness in the merchandise sale will be the local products other countries create causing the sales of Disney merchandise to decrease. Also with the increased internet users around the world piracy of movies and other merchandise will be a threat. “The advancements in technology allow copying, transmitting and distributing copyrighted material much easier” (SWOT Analysis of Walt Disney). This will result in a lack of sales and revenue. Even with all the various threats that Disney faces, Walt Disney still have many strategic strength that will help with its competiveness. Because of the vast acquisition that Disney have, recently taking over Pixar, and also having ownership of ESPN which is the most watched television channel in the world, “ESPN has nearly 300 million and Disney Channel 240 million subscribers” (SWOT Analysis of Walt Disney), Disney have a huge audience in the television industry alone. Merchandise such as toy story 3 products and others will also produce a revenue for Walt Disney. “The increase in licensing and publishing revenue reflected a 6% increase driven by the strong performance of Cars, Tangled and Toy Story merchandise and a 8% increase due to higher revenue from Marvel properties” (The Walt Disney Company). Walt Disney shows that the company is able to increase its sales in other business segment other than the media and network, further increasing the companies’ competitiveness in the industry.

 

Walt Disney is a company that is leading it the media industry and is a company that is still generating high revenue that is still increasing every fiscal year. Not only is the company dominating in the media industry, it is also expanding and entering other business segment such as consumer products and parks and resorts around the world. With such a varied business segment and business plan, Disney is able to sustained high revenue even in the downturn of an economy.

 

 

Other good articles to use for this section:

http://www.forbes.com/sites/quora/2012/11/08/is-disney-buying-lucasfilm-a-good-decision-or-not/

http://www.fool.com/investing/general/2013/07/15/why-disneys-investment-in-hulu-wont-hurt-netflix.aspx

 

 

Do Last:

 

Findings – buy/sell/hold, and reasons why?

 

k) Conclusion and recommendations [if any].

 

 

 

References

 

Follow this guide for the correct reference format: http://www.swinburne.edu.au/lib/studyhelp/harvard-quick-guide.pdf

 

The Walt Disney Company (NYSE: DIS). (n.d.). Walt Disney Company (DIS). Retrieved 09 2013, from wikiinvest: http://www.wikinvest.com/stock/Walt_Disney_Company_(DIS)

The Walt Disney Company 2013, ‘Fiscal Year 2012 Annual Financial Report And Shareholder Letter’, pp. 46-47, <http://cdn.media.ir.thewaltdisneycompany.com/2012/annual/10kwrap-2012.pdf>

The Walt Disney Company (n.d.), ‘Corporate Governance’, The Walt Disney Company, Viewed September 29 2013, <http://thewaltdisneycompany.com/investors/governance>

The Walt Disney Company (n.d.), Company Overview, The Walt Disney Company, Viewed 29 September 2013, <http://thewaltdisneycompany.com/about-disney/company-overview>

Halbrooks, G. (n.d.). The Walt Disney Company Profile, About.com Media, Viewed 29 September 2013, <http://media.about.com/od/media-company-profiles/p/The-Walt-Disney-Company-Profile.htm>

Hubpages 2013. Walt Disney Company’s Mission Statement and Vision: Formula for success, Hubpages, Viewed 29 September 2013, <http://simondixie.hubpages.com/hub/Walt-Disney-Companys-Mission-Statement-and-Vision-A-formula-for-success>

Beattie, A 2011, Walt Disney: How Entertainment Became An Empire, Investopedia, Viewed 9 September 2013, <http://www.investopedia.com/articles/financial-theory/11/walt-disney-entertainment-to-empire.asp>

ADVFN (n.d.), ‘Walt Disney Financials’, ADVFN, Viewed September 10, 2013, <http://www.advfn.com/exchanges/NYSE/DIS/financials>

 

 

Sanders A-L. (2013). The Walt Disney Company. Retrieved 09 10, 2013, from About.com Animation: http://animation.about.com/od/industryprofiles/p/waltdisney.htm

Vodicka, M 2013, ‘The Walt Disney Company (DIS): China and India are Keys to Growth’, iStockAnalystViewed 16 September 2013, <http://www.istockanalyst.com/finance/story/6526817/the-walt-disney-company-dis-china-and-india-are-keys-to-growth>

New York Stock Exchange 2012, ‘The Walt Disney Company’, NYSE, Viewed 16 September 2013, <http://www.nyse.com/listed/dis.html>

Yahoo7 Finance 2013, ‘The Walt Disney Company (DIS) – NYSE’, Viewed 9 October 2013, <http://au.finance.yahoo.com/q?s=DIS>

 

Yahoo! Finance 2013, ‘The Walt Disney Company Technical Analysis’, Yahoo Finance, Viewed 10 October 2013, <http://finance.yahoo.com/q/ta?s=DIS&t=5y&l=on&z=l&q=l&p=&a=&c=>

 

 

Walt Disney Co DIS 2013, Morningstar, viewed 09 October 2013, <http://financials.morningstar.com/income-statement/is.html?t=DIS&region=USA&culture=en-US>

SWOT Analysis of Walt Disney 2013, Strategic Management Insights, viewed 09 October 2013, <http://www.strategicmanagementinsight.com/swot-analyses/walt-disney-swot-analysis.html>

Walt Disney Co  2013, Bloomberg, viewed 09 October 2013<http://www.bloomberg.com/quote/DIS:US>

The Walt Disney Company 2013, ‘Fiscal Year 2012 Annual Financial Report And Shareholder Letter’, pp. 50, <http://cdn.media.ir.thewaltdisneycompany.com/2012/annual/10kwrap-2012.pdf>

 

http://media.about.com/od/media-company-profiles/p/The-Walt-Disney-Company-Profile.htm

http://www.advfn.com/exchanges/NYSE/DIS/financials

http://simondixie.hubpages.com/hub/Walt-Disney-Companys-Mission-Statement-and-Vision-A-formula-for-success

http://thewaltdisneycompany.com/investors/governance

http://www.investopedia.com/articles/financial-theory/11/walt-disney-entertainment-to-empire.asp

http://www.wikinvest.com/stock/Walt_Disney_Company_(DIS)

http://animation.about.com/od/industryprofiles/p/waltdisney.htm

 

 

 
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