• Financial Statements: Explain the various financial statements needed to calculate a business's working capital. Also explain how to use each financial statement for the calculation. Give examples to support your claims.
• Working Capital's Role: Discuss how businesses that manage their working capital well stay healthy.
• Working Capital Interpretation: Use the correct formula to calculate working capital. Then discuss the business's current financial liquidity position.
  • For example, does the business have enough working capital ready to address bills to suppliers? Will there be potential cash inflow at the end of the year?
• Working Capital Management Trend: Discuss the business's trend in how they manage their working capital.
  • Remember that financial statements reflect a specific period of time and the value of the business's working capital during that period. Use Mergent Online to find financial statements for earlier periods. This will give you a better sense of the business's trend.

Financial Statements

To calculate working capital for The Disney Company, the company must calculate various financial statements to identify the difference between current assets and current liabilities. Companies would normally look into both cash flow and working capital to identify downturns or crises and address the issues as needed. However, though cash flow measures how much of the money is being generated or consumed into said company, working capital is the difference between current assets and current liabilities. Working capital calculates current assets and current liabilities, that is reports on the company's balance sheet which is one of the three primary financial statements; income statements and cash flow statements are the other financial statements. Disney Co. must list their assets like "cash, inventory and property and equipment owned, as well as marketable securities, prepaid expenses and money owed from payers" (Corporate Relations and Business Strategy Staff, 2005). Disney Co. is also responsible for listing its liabilities by the due dates like "loans, accounts payable, mortgages, deferred revenues, bonds, warranties and accrued expenses" (Hayes, 2023).

Working Capital's Role

There are many different strategies for businesses to utilize to maintain a healthy working capital. Doing so would help with operations, employee payments and securing the financing. In the case of The Disney Co., understanding the competition and undervalued stocks with similar characteristics of the competition's or even determining other stocks that would be a good addition to their portfolio could help maintain metrics of similar competition to understand growth. Also, sustainability practices could be beneficial to identify proper investments strategies by utilizing the triple bottom line: people, planet, and profit. This strategy is critical for not just the management, but also the investors and analysts. To receive a high net working capital calculation can also be achieved by reducing slow-moving inventory and increasing the turnover of inventory. Possessing enough liquidity to help finance the current operations without risk will help increase working capabilities .

Working Capital Interpretation

To calculate the current Disney (Walt) Co. working capital is Current Assets-Current Liabilities. Also, to identify Disney (Walt) Co.'s current ratio by using the formula: Current Assets/Current Liabilities.

Disney (Walt) Co., 07/01/2023

Total current assets: $30,174,000-Total current liabilities: $28,234,000= $1,940,000 working capital.

Total current assets : $30,174,000/ Total current liabilities: $28,234,000= 1.07 current ratio.

This indicates that Disney (Walt) Co. has a positive working capital in this period. With a current ratio over one, Disney (Walt) Co. has enough current assets to meet current liabilities with $1,940,000 going into the next quarter.

Disney (Walt) Co., 07/02/2022

Total current assets: $31,422,000-Total current liabilities: $30,704,000= $718,000 working capital.

Total current assets : $31,422,000/ Total current liabilities: $30,704,000= 1.02 current ratio.

This indicates that Disney (Walt) Co. also had a positive working capital in this period. Though slightly lower than the previous quarter, the company still had a ratio at one and enough current assets to meet the liabilities with $718,000 going into the current quarter.

Working Capital Management Trend

After analyzing and calculating the working capital for Disney (Walt) Co., the current ratio from the current year in the third quarter listed from the previous third quarter listed has shown a slight decrease in current ratio and then a consistent climb from the 2^nd quarter to the 3^rd and current quarter. 07/02/2022: current ratio, 1.02, 12/31/2022:TCA= $26,912,000/TCL=$27,070,000 =1.00 current ratio, 04/01/2023: TCA= $28,263,000/TCL=$28,056,000=1.01 current ratio, and 07/01/2023: current ratio 1.07. Though in the 1^st quarter of 2022 has just reached its current ratio, it indicates that it was just capable to pay its short-term obligations. By managing its inventory control, receivables, and accrued management, the Disney Co. shows improvements in productivity and profits. If you notice on the balance sheet, from 07/02/2022- 07/01/2023, quarter three to quarter three, the current assets have always been above the current liabilities, besides the 1^st quarter, 12/31/2022 leading to its current ratio being the lowest of its analysis.

Answer rating: 100% (QA)

To calculate working capital for The Walt Disney Company various financial statements are needed inc... View the full answer