Financial Analysis Walt Disney Company 1

Financial Statement Analysis: Walt Disney Company

Walt Disney Company is currently one of the largest entertainment companies in the

world. It started as a partnership, begun in the year 1923 by two brothers; Walt and Disney who

were producing short live films of action and animation named Alice Comedies (Langer, 2000).

The company started small but has expanded both in size and services produced thus many

branches of the same have been opened up in different regions o the United states.

The company has its headquarter in Burbank California. It operates under several

industries including: movie production, entertainment, theme parks and broadcasting. It also ha

many competitors within its market of operation. The main competitors are Time Warmer Inc.,

Comcast, Viacom and Twenty First Century Fox. The company is innovative and adapts to

changes quickly unlike it competitors (Nielson, 2014).

Financial Ratio Analysis

Financial ratios give a clear picture of the business regarding it operations and viability in

the market within which it operates. They help the management, shareholders and the investors

to make decisions with respect to profitability and sustainability of the company in the market in

future. Competitors also find ratio analysis to be essential to determine ways of making their

business better than their competitors.

The Walt Disney Company financial analysis will therefore include analysis of ratios

like: Liquidity ratio, quick ratio, debt ratio, debt equity ratio. These rations are relevant to

decision makers as they give them a clear view about the company’s financial position thus they

can make decisions regarding the finances about the business.

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Liquidity and quick ratio analysis

Liquidity ratio helps to find out whether or not a business can meet its short term

obligations. The quick ratios measure the ability of a given company to use quick assets to pay

the current liabilities. The quick assets may include cash, marketable securities and accounts

receivables (Penrose, B. (n.d) ).

Financial ratios 2016 as at July 2016 2015 2014 2013

Liquidity ratio
Current ratio= current Assets/current
liabilities
Current Asset 17617 16758 15169 14109
Current liabilities 18072 16334 13292 11704
Current ratio = 0.97 1.03 1.14 1.21

Quick ratio
Quick ratio =quick Assets/ current liabilities
Quick assets 14096 12288 15169 10898
Current liabilities 18072 16334 13292 11704
Quick ratio = 0.78 0.75 1.14 0.93

From the above ratio analysis information, we realize that Disney’s current ratio is in a

reducing trend from the year 2013 up to 2016. In this case, we conclude that the company has the

capacity of achieving optimum liquidity state. The reducing trend in the current ratio proves that

the company is growing and thus it is able to meet its short term obligations easily as the years

pass.

The quick ratios are lower than one since 2013. This shows that the company is using

other assets rather than quick assets to pay its short term liabilities. The company therefore,

needs to increase the efficiency of its quick assets and utilize them to pay short term liabilities.
 Financial Analysis Walt Disney Company 3

Debt and Debt Equity ratio analysis

Debt ratio analyses the ability of the organization to use its total assets to pay off its long

term liabilities. Debt equity ratio is used to measure the financial leverage of a company to

determine how much debt it is using to finance its assets relative to the amount of value

represented in the shareholders equity (Newman, 2015).

Financial ratios 2016 2015 2014 2013

Debt Ratios
Debt ratio= total liabilities/ total assets
Total liabilities 46721 39527 35963 33091
Total assets 90914 88182 84141 81241
Debt Ratio= 0.51 0.45 0.43 0.41

Debt Equity Ratio= total liabilities/ total equity

Total liabilities 46721 39527 35963 33091
Total equity 48793 48655 48178 48150
Debt Equity Ratio= 0.95 0.81 0.75 0.69

Disney Company has a debt below 50% from 2013 to 2016. This shows that the company

is conservative and takes less risk that may reduce the profitability due to lack of trade equity.

The low debt ratio also shows that the company has a low risk of bankruptcy.

The debt to equity ratio of the company has been seen to be increasing gradually each

year. This indicates the company has increase the debt to equity level hence it could benefit the

company by reducing the cost of capital.

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Conclusion

In conclusion, the financial analysis helps us determine the financial position of the

company thus the decision makers are easy to make decisions about the company regarding the

company’s performance and financial stability. The liquidity ratios are relevant in determining

the ability of meeting short term obligations thus investors and managers can use it to make

decisions regarding the type of investment to make. Debt ratio will help the company determine

whether or not it will be able to meet its long term liabilities thus make a decision regarding the

source of capital to use.

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References

Jones, B. (2014, June 17). Leadership Lesson From Walt Disney: Communicating A Vision.

Retrieved from The Disney Institute: https://disneyinstitute.com/blog/2014/06/leadership-

lesson-from-walt-disney-communicating-a-vision/274/

Langer, M. (2000, February ). Walt Disney. Retrieved from American National Biography

Online: http://www.anb.org/articles/18/18-00309.html

Newman, B. (2015, Nov. 06). The Vision: Why Use Financial Ratios? Retrieved from Citrin

cooperman Focus on What Counts: http://www.citrincooperman.com/News-

Events/Insights/Articles/The-Vision-Why-Use-Financial-Ratios.aspx

Nielson, S. (2014, January 10). Must-know guide to the Walt Disney Company’s competitors.

Retrieved from Market Realist: http://marketrealist.com/2014/01/disneys-competitors/

Penrose, B. (n.d.). Walt Disney: A leadership journey with a mouse. Retrieved from Leading

Learners: https://leadinglearners.wordpress.com/leading-learners-online-magazine/walt-

disney-a-leadership-journey-with-a-mouse/

The Walt Disney Company. (2013, 2014, 2015). Walt Disney Annual Report. Retrieved from

The Walt Disney Company: https://thewaltdisneycompany.com/investor-relations/