Disney Financial Analysis Paper

Analysis Section

A company’s capital structure is how they are able to finance its operations and expansion through the use of various sources of funds. Gitman (2017), defines capital structure as a mix of long term debt and equity maintained by the company. Capital structure decisions if done right can lower the cost of capital, leading to an increase of the company’s value. Debt and equity are important factors to raise capital and are useful when analyzing a company’s capital structure. Disney’s capital structure is currently made up of $42,531,000 of equity and $22,187,000 of debt.

Disney’s choice of capital structure is also important because it can influence a company’s leverage, which can affect its returns and risks. A common way

It is the same as the current ratio but excludes inventory which is generally the least liquid current asset. The quick ratio for 2016, 2105, 2014, 2013 are as followed: .81, .75, .85, .93. This shows that Disney will not be able to satisfy short term obligations without having to sell inventory. Selling inventory can be problematic because many types of inventory cannot be sold for the following reasons: being partially completed, inventory is typically sold on credit, and when the company needs cash its generally when business is bad and selling inventory is more difficult. (Gitman, 2017) It’s good that Disney’s quick ratio has improved since last year and is significantly higher than the industry’s average of .56. Out of Disney’s largest competitors, its ratio is only better than Comcast’s ratio of .52. Disney’s other top competitors, Time Warner Inc. and Twenty First Century fox, have ratios of 1.06 and

The higher the percentage the better. Disney’s return on assets for 2016, 2015, 2014, 2013 are as followed: 10.42%, 9.73%, 9.07%, 7.86%. The trend suggest that the company’s profitability is progressing. The industry average for 2016 is 7.86% and the media sector’s average is 6.40%. Not only has it been improving but it has been significantly higher than the industry’s and sector’s average. In 2016, Disney’s ROA was about 10% higher than its largest competitors, leading me to believe that its managers have been able to efficiently turn its assets into profit.

Disney inventory is made of various items that include merchandise, vacation units, supplies, and food. In 2016, inventory was recorded at 1,390 million. It has decreased from the previous two years. In 2015, it was 1,571 million and in 2014 it was 1,574 million. Inventory turnover allows us to measure the activity and liquidity of a firm’s inventory. (Gitman, 2017) Disney inventory turnover for 2016, 2015, 2014, 2013 are as followed: 21.58%, 18.05%, 16.79%, 16.84%. Since 2013, its inventory turnover has improved. It’s also larger than the industry’s inventory turnover of 8.33% and the sectors turnover of