Debt Ratio Analysis Of Walt Disney Company

2) The higher ratio of Debt to Total Equity may result to the lower of the debt credit rating. The lower of the credit rating will result to increase of the interest rate which will cost more to the company.

Profitability ratios are used to measure the overall efficiency of thebusiness, as well as management effectiveness. Examples of profitability ratios include the gross margin ratio and the net margin ratios.

The profitability ration in a financial analysis is the ability of the organization to generate a profit. This ratio looks at areas such as net income, revenue, gross profit, earnings before taxes and interest and operating profit to name a few. Profitability shows the bottom line numbers for a company and is the goal that most organizations strive for. Ratios examined were gross profit margin and net profit margins

In 2011, Walmart's debt to equity ratio was that of 72.75 while the industry average was 55 and it exceeded the range of comparability by a significant amount(Stock-analysis)(Appendix B). The debt to equity ratio indicates how much debt a company has for every dollar of shareholders' equity. Walmart's value of 72.75 is high especially when considering the trend for the past three years. One reason for Walmart's high debt to equity ratio could be that they have been aggressive in financing their growth with

The profitability ratio shows the ability for a company to generate profits. Ratios that are used calculating profitability of a company are return on assets and return on equity. The return on assets calculates the ability of a company to effectively use assets to generate income, the percentages per quarter in year one are; 76%, 22%, 34%, 37%. This shows profit during each quarter. In years two, three, and four the percentages are; 68%, 54%, 49%, 38%. These ratios show a slight decline but still a solid profit. The return on equity shows the amount of money earned per dollar investing into the company by shareholders. By quarter, year one return on equity is .81 .61 .28 .29, years two, three and four are all .32. These numbers show an above average return, the average return in the United States is between .10-.15, and over .20 is considered above average (Kennon, 2011.)

Profitability ratios provide insight into how much profit a company generates with the money that shareholders have invested in the company. Profit margin, return on equity, and earnings per share are all forms of profitability ratios (Stocks Simplified, 2011).

Introduction: The Walt Disney Company is on the threshold of a new era. Michael Eisner has stepped down from his position as CEO and turned over the reigns to Robert Iger. A lot of turmoil has been brewing through the company over the last four years; many people are hoping that this change in leadership will put Disney back on the road to success. Issues began around mid-2002; when declining earnings, fleeing shareholders, and

Profitability ratios are basically figures to measure if the company is doing well in the terms of profit[13]. ROCE ratio has increased in 2011 but in 2012 it deteriorates by 3%. This fall indicates that company was not successfully getting high returns as a percentage of its resources available, compared to 2011.

The debt-to-capital ratio gives users an idea of a company's financial structure, or how it is financing its operations, along with some insight into its financial strength. The higher the debt-to-capital ratio, the more debt the company has compared to its equity. Star River has always depended much on debt for its financing and the trend shows this ratio may get higher in future. Star River, with high debt-to-capital ratios, compared to a general or industry average, may show weak financial strength because the cost of these debts may weigh on the company and

The Debt-Equity Ratio shows that most of the capital was in terms of ordinary shares and is becoming more reliant on Shareholders Equity than on debt to finance operations.

The Walt Disney Company (DIS) has a history marked with ups and downs. Taking numerous risks, expanding internationally, acquiring various businesses and diversifying its operations; the company has emerged stronger than ever. Ranking #53 on the Fortune 500, DIS has experienced continuous growth for the past 5 years, with bright prospects. Detailed analysis shows the market undervaluing the stock despite its healthy performance, indicating potential future gains.

With the first opening of Tokyo Disneyland operated by an independent Japanese company and the inflow of Yen royalty receipts, the foreign exchange rate risk began to emerge. As the Yen depreciated, the revenues from the royalties were shrinking from 1980 to 1985. Therefore, the weak Yen had a negative influence on Disney’s total net income. We also know the goal of the firm’s management is to make the firm as valuable as possible, and then the firm should pick the debt-equity ratio that makes the pie as big as possible. Usually, the total value of the firm equals the sum of the total debt and total equity. (V=D+E). As shown in the right chart, we can clearly get a conclusion that an increase in total value of debt will increase the total value of Disney from 1983 to 1984. We can maximize Disney’s value by creating more value of the debt. If we expose the Yen debt to the risk of the fluctuation in Yen-dollar exchange rates, it would also have great impact on the total value of our debt and

The financial ratio analysis of a company is a useful indicator to measure the success of a company. By comparing financial ratios between companies in the same industry (competitors) it is a useful way for investors and shareholders to determine the financial health and/or the sustainability of a company. Disney’s main competitors within the industry include Time Warner and 21st Century Fox. There are five key areas of comparison that provide excellent financial analysis of a company. They are short-term solvency, long-term solvency, asset management, profitability, and market value.

Profitability (performance) ratios are used to assess a company’s ability to create equity as compared to its debt and other appropriate expenses created during a particular time frame. A favorable analysis of profitability ratios will reveal that a company’s value is higher than a competitor’s value.

Microsoft’s times interest earned ratio is 87.7, showing that this firm is very successful especially before any interest or tax is deducted from its overall earnings. Apple’s times interest earned ratio could not be calculated due to the fact that their data didn’t indicate a specific interest expense to complete the equation. Another solvency ratio is the debt to equity ratio (I); taking the firms total liabilities and dividing that total by owners’ equity. Currently Microsoft’s debt to equity ratio is 0.8, showing that there is less risk among the firm’s financials. This also means that the company doesn’t rely too much on external lenders. Apple’s debt to equity ratio seems to also be within good standing because it is .5, so it doesn’t rely too much on external lenders either. Overall, both liquidity and solvency ratios represent how financially stable this company is within converting its current debt into cash as well as its long-term debt. In most cases Apple Inc. falls behind Microsoft Corp. within its short and long term debt solvency.