Question

In July 2011, the finale to the Harry Potter movie series, Harry Potter and the Deathly Hallows— Part 2, from Time Warner Inc.’s Warner Bros. Pictures, earned an estimated $ 307 million in 59 countries overseas for the opening week, topping the previous best international debut of $ 260.4 million set in May 2011 by Disney’s Pirates of the Caribbean: On Stranger Tides. Time Warner Inc. and Walt Disney Co. both run diversified lines of entertainment and are major competitors with each other in many areas. According to Disney’s annual report of fiscal 2010: “The Walt Disney Company, together with its subsidiaries, is a diversified worldwide entertainment company with operations in five business segments: Media Networks, Parks and Resorts, Studio Entertainment, Consumer Products and Interactive Media.” And in the annual report of Time Warner: “Time Warner Inc., a Delaware corporation, is a leading media and entertainment company. The Company classifies its businesses into the following three reporting segments: Networks, Filmed Entertainment, and Publishing.” Except for parks and resorts, Time Warner runs almost the same business lines as Disney. 13
Below are the financial statements for the two firms. Time Warner’s fiscal year ends on December 31; thus, the statements are for end- of- year 2009 and 2010. Disney, on the other hand, has a fiscal year ending on the Saturday closest to September 30; fiscal year 2009 ended on October 3, 2009, and fiscal year 2010 ended on October 2, 2010. As a result, Disney’s financials are 3 months earlier than the financials for Time Warner.
a. How did Time Warner’s profit margins change from 2009 to 2010? To what would you attribute the differences? Answer the same questions for Disney.
b. Compare the profit margins between Time Warner and Disney. How are they different? How would you explain these differences?
c. What differences do you notice in the common- sized balance sheets that might indicate that one of the firms is doing better than the other?


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  • CreatedSeptember 11, 2015
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