Financial Statements
● Use financial statement ratios
to identify a company’s primary
characterisics and diagnose its
strengths and weaknesses
Financial fraud is often uncovered by exploring financial
statements. This is easier with a public company than a private
one, as we will see by studying the fall of health technology cor-
poration Theranos.
This case study’s pre-work article takes a close look at the
startup Theranos which was founded and run by Elizabeth
Holmes. It is a tale of a 19 year old female startup founder that
led her company to a $6 billion evaluation by some in Silcon
Valley that turned into a story of lies and corruption.
This lesson is designed to help students become more fluent
in interpreting financial statement ratios in order to learn more
about a company. Using Theranos as a lens, the class activity
examines how to construct an income statement and balance
sheet. We’ll dive deeper into these statements and the value
they can bring to investors. You’ll learn through reading the
pre-work article the value of these statements to investors and
what happens when they are largely ignored.
The homework Case Study asks students to dissect the finan-
cial statements of The Walt Disney Company and describe
its structure and drivers. You will be tasked with using the
Bloomberg terminal to answer a set of 3 questions that are
meant to prove an understanding of financial statements and
how they can impact a person’s understanding of a comapny.
◼ FINANCIAL STATEMENTS / BLOOMBERG BUSINESSWEEK CASE STUDY
● DISNEY’S BUSINESS SUMMARY
The following text is an edited summary from Disney’s 2018
annual report (10-K) submitted by the company to the SEC.
The Walt Disney Company, together with its subsidiaries, is a
diversified worldwide entertainment company with operations
in four business segments:
̡̡ Media Networks
̡̡ Parks, Experiences & Consumer Products
̡̡ Studio Entertainment
̡̡ Direct-to-Consumer & International (DTCI)
● MEDIA NETWORKS
The Media Networks segment includes cable and broadcast tele-
vision networks, television production and distribution oper-
ations, domestic television stations and radio networks and
stations. The Company also has investments in entities that
operate programming, distribution and content management
services, including television networks, which are accounted
for under the equity method of accounting.
The businesses in the Media Networks segment principally
generate revenue from the following:
̡̡ Fees charged to cable, satellite, telecommunications
and digital over-the-top service providers
̡̡ The sale to advertisers of time in programs for commer-
cial announcements (“ad sales”)
̡̡ Licensing fees for the right to use Disney’s programs,
productions, and content (“program sales”)
Operating expenses primarily consist of programming and pro-
duction costs, participations and residuals expense, technical
support costs, operating labor and distribution costs.
● PARKS, EXPERIENCES & CONSUMER PRODUCTS
� Parks & Experiences
Disney owns and operates the Walt Disney World Resort in
Florida; the Disneyland Resort in California; Disneyland Paris;
Aulani, a Disney Resort & Spa in Hawaii; the Disney Vacation
Club; the Disney Cruise Line; and Adventures by Disney. The
Company manages and has effective ownership interests of 47%
in Hong Kong Disneyland Resort and 43% in Shanghai Disney
Resort, both of which are consolidated in our financial state-
ments. Disney also licenses intellectual property to a third party
to operate the Tokyo Disney Resort in Japan. The Company’s
Walt Disney Imagineering unit designs and develops new theme
park concepts and attractions as well as resort properties.
� Consumer Prodcuts
The Consumer Products sub-segment licenses Disney’s trade
names, characters and visual and literary properties to vari-
ous manufacturers, game developers, publishers and retail-
ers throughout the world. The sub-segment is also responsible
for the sale of branded merchandise through retail, online
and wholesale businesses. Disney also develops and publishes
books, magazines, comic books, and games. As of the end of
© Bloomberg L.P.
2
fiscal 2018, Disney had substantially exited the vertical games
development business.
The Parks, Experiences & Consumer Products segment gener-
ates revenue primarily from:
̡̡ Sale of tickets for admission to theme parks
̡̡ Merchandise, food and beverages at theme park resorts
and cruise ships
̡̡ Hotel rooms, cruise vacations, and sales and rentals of
vacation club properties
̡̡ Royalties from IP licensing and sales of merchandise at
The Disney Stores, branded internet shipping sites, and
wholesalers
̡̡ Revenues from sponsorships and co-branding oppor-
tunities, real estate rent and sales, and royalties from
Tokyo Disney Resort
Significant costs include labor, costs of goods sold, infrastruc-
ture, supplies, commissions, and entertainment offerings.
● STUDIO ENTERTAINMENT
The Studio Entertainment segment produces and distributes
under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm, and
Touchstone banners. The segment is also involved in the devel-
opment, production, and licensing of live entertainment events
on Broadway and around the world.
The businesses in the Studio Entertainment segment gener-
ate revenue from distribution of films in the theatrical distribu-
tion, home entertainment, and TV/SVOD markets. This includes
rentals from licensing motion pictures to theaters, sale of motion
pictures to retailers and distributors, and other revenues col-
lected from licensing and ticket sales.
Significant operating expenses include amortization of pro-
duction, participations and residuals costs, marketing and sales
costs, distribution expenses and costs of sales.
● DIRECT-TO-CONSUMER & INTERNATIONAL (DTCI)
The Direct-to-Consumer & International segment includes
Disney and ESPN branded international television networks
and channels, Direct-to-Consumer (DTC) businesses like ESPN+
Disney+, and Hulu streaming services, and equity investments.
The equity investments include a 21% effective ownership in
Vice Group Holdings.
The businesses in the DTCI segment generate revenue
from fees charged to MVPD’s for the right to deliver Disney’s
International Channels to their customers, ad sales on
International Channels, and subscription fees charged to cus-
tomers/subscribers for Disney’s DTC streaming services.
Operating expenses primarily consist of programming and
production costs, technical support costs, operating labor, and
distribution costs.
◼ FINANCIAL STATEMENTS / BLOOMBERG BUSINESSWEEK CASE STUDY 3

Case Questions
① Using the information on the previous page, identify how Disney makes money,
i.e. where it earns its revenue.

② Using the Terminal Tutorial at the end of the case study, calculate each
business segment’s contribution to Disney’s total revenue and operating income.

③ Using the information on the previous page and the data from question 2, what
is the primary driver of revenue for each of Disney’s segments.

© Bloomberg L.P.
◼ FINANCIAL STATEMENTS / BLOOMBERG BUSINESSWEEK CASE STUDY 4

Terminal Tutorial
● Use the Bloomberg Terminal to access Disney’s financials from 2016 to 2018.
● Use these directions as a guide or watch the accompanying video tutorial.
▶ Web: https://vimeo.com/303723606/b9262be64a
▶ Terminal: PLYR VOD 332917793 <GO>

① Log in to Bloomberg. In the command line type DIS, press ② We are looking for summary financial information on
the F8 equity sector key, type FA for financial analysis, and Disney’s operating segments. This can be found under the
press Enter or <GO>. This is the Disney financial statements Segments tab.
screen.

③ Under this tab there are a number of ways to view segment ④ Ensure you are viewing data on an annual basis. Due to the
data. We want to see some summary financial data on each merger with Fox, Disney has adjusted its financial statements
operating segment. Click By Segment. back to 2016 to reflect its new segmentation. All data before
2016 will be displayed according to its previous segmentation.

⑤ Now let’s download this into Excel by clicking on Export,
Excel, and Current Template.
⑥ When we download data, it stays linked to the Terminal.
Let’s make this data static since its historical, so it can open
on any computer. We can break the links to Bloomberg by
copying the whole sheet and pasting it back as values. Now
you can use this data to answer the Case Questions.

© Bloomberg L.P.