Is Disney liquid compared to its peers? Does Disney manage its assets effectively compared to its peers?
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Is Disney liquid compared to its peers?
Does Disney manage its assets effectively compared to its peers?
Does Disney’s debt load suggest trouble paying its creditors?
Compare Disney’s profitability to its peers.
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HOW DISNEY MAKES MONEY A previous Disney Case used the company's financial statements to determine how Disney makes money. A few pertinent points have been summarized here as they relate to this Disney Case. Disney has four operating segments--Media Networks, Parks, Experiences & Consumer Products, Studio Entertainment, and Direct-to-Consumer & International. The table below shows the proportion of Disney's total revenues and operating income that come from each segment. Disney Segment Revenues and Operating Income All Data from Fiscal Year 2018 in Millions, Except Percentages Revenues % of Total Operating Income % of Total 21,922 36.5% 46.7% Media Networks 7,338 PECP 24,701 41.1% 6,095 38.8% Studio Entertainment 10,065 3,004 19.1% DCTI 3,414 -738 -4.7% Eliminations -668 -10 Total 59,434 15,689 Source: The Walt Disney Company Annual Report (10-K) 16.7% 5.7% A NOTE ON RATIOS AND COMPARISONS During routine medical examinations, patients often have their blood drawn and tested. Blood test results are displayed in a table of numbers. Each number is a ratio that specifies how much of a particular substance was found in a particular mea- sured volume of blood. In isolation the results are not partic- ularly useful. To make better use of the data, test results are compared to data from other similar healthy individuals as a reference and benchmark. Financial ratios act like a blood test for a company. They often give analysts advance notice of operating or financial dan- gers being experienced by companies when compared against their healthy peers. But what exactly constitutes a peer. Disney has four discrete operating segments. No other com- pany in the world has a similar structure. Consequently, we are not likely to find a strict comparable company to serve as a benchmark for ratio comparison. Very few companies have peers that are strictly similar. CASE CLUES The four case questions are tied to particular ratio segments and can be answered by limited assessment of Disney's ratios. The following clues may be useful in answering the final case question. The Walt Disney Company has four operating segments: Media Networks, Parks, Experiences & Consumer Products, PARKS, EXPERIENCES & CONSUMER PRODUCTS Parks, Experiences & Consumer Products revenue includes ticket sales to Disney theme parks and cruises, merchandise sold at The Disney Store retail locations, and more. The segment's revenues have been on a general upward trend. It seems rea- sonable that this segment is subject to the success of the other three segments, with the Studio Entertainment segment's suc- cess having the greatest imapct. Data shows that popular charac- ter movies, like Finding Nemo, significantly increase purchases of products related to the film. Disney also centers most of its new theme park and experience entertainment on recent movie success like the Star Wars park in Disneyworld. In your analy- sis, consider the changes in operating margins in this sector. MEDIA NETWORKS The company owns and operates a number of media networks, including ESPN, Disney, and ABC. With the advent of Netflix, Hulu, and Amazon Prime, consumers have completely changed how they view and consume media content. Using ratios like operating margin and asset turnover, think about how you believe Disney may be able to compete in this changing market. STUDIO ENTERTAINMENT This is the company's movie making business. Movie making is often considered an "eat what you kill" business. This means that movie makers are judged on the value of their current cre- ation. A number of trends in this segment significantly impact the company as a whole. Revenue growth is spotty with notice- able periods of up and down. Assets have increased through three purchases of competitive studios: Pixar, Marvel, and Lucas Films. For this segment, focus on three things: the number of films produced, the operating margin, and the average reve- nue per film. DIRECT-TO-CONSUMER & INTERNATIONAL The Direct-to-Consumer & International segment includes busi- nesses like ESPN+, Disney+, and Hulu streaming services. These businesses generate revenue from subscription fees charged to customers/subscribers for Disney's DTC streaming services. For this segement, focus on programming and production costs, as well as technical support costs. HOW DISNEY MAKES MONEY A previous Disney Case used the company's financial statements to determine how Disney makes money. A few pertinent points have been summarized here as they relate to this Disney Case. Disney has four operating segments--Media Networks, Parks, Experiences & Consumer Products, Studio Entertainment, and Direct-to-Consumer & International. The table below shows the proportion of Disney's total revenues and operating income that come from each segment. Disney Segment Revenues and Operating Income All Data from Fiscal Year 2018 in Millions, Except Percentages Revenues % of Total Operating Income % of Total 21,922 36.5% 46.7% Media Networks 7,338 PECP 24,701 41.1% 6,095 38.8% Studio Entertainment 10,065 3,004 19.1% DCTI 3,414 -738 -4.7% Eliminations -668 -10 Total 59,434 15,689 Source: The Walt Disney Company Annual Report (10-K) 16.7% 5.7% A NOTE ON RATIOS AND COMPARISONS During routine medical examinations, patients often have their blood drawn and tested. Blood test results are displayed in a table of numbers. Each number is a ratio that specifies how much of a particular substance was found in a particular mea- sured volume of blood. In isolation the results are not partic- ularly useful. To make better use of the data, test results are compared to data from other similar healthy individuals as a reference and benchmark. Financial ratios act like a blood test for a company. They often give analysts advance notice of operating or financial dan- gers being experienced by companies when compared against their healthy peers. But what exactly constitutes a peer. Disney has four discrete operating segments. No other com- pany in the world has a similar structure. Consequently, we are not likely to find a strict comparable company to serve as a benchmark for ratio comparison. Very few companies have peers that are strictly similar. CASE CLUES The four case questions are tied to particular ratio segments and can be answered by limited assessment of Disney's ratios. The following clues may be useful in answering the final case question. The Walt Disney Company has four operating segments: Media Networks, Parks, Experiences & Consumer Products, PARKS, EXPERIENCES & CONSUMER PRODUCTS Parks, Experiences & Consumer Products revenue includes ticket sales to Disney theme parks and cruises, merchandise sold at The Disney Store retail locations, and more. The segment's revenues have been on a general upward trend. It seems rea- sonable that this segment is subject to the success of the other three segments, with the Studio Entertainment segment's suc- cess having the greatest imapct. Data shows that popular charac- ter movies, like Finding Nemo, significantly increase purchases of products related to the film. Disney also centers most of its new theme park and experience entertainment on recent movie success like the Star Wars park in Disneyworld. In your analy- sis, consider the changes in operating margins in this sector. MEDIA NETWORKS The company owns and operates a number of media networks, including ESPN, Disney, and ABC. With the advent of Netflix, Hulu, and Amazon Prime, consumers have completely changed how they view and consume media content. Using ratios like operating margin and asset turnover, think about how you believe Disney may be able to compete in this changing market. STUDIO ENTERTAINMENT This is the company's movie making business. Movie making is often considered an "eat what you kill" business. This means that movie makers are judged on the value of their current cre- ation. A number of trends in this segment significantly impact the company as a whole. Revenue growth is spotty with notice- able periods of up and down. Assets have increased through three purchases of competitive studios: Pixar, Marvel, and Lucas Films. For this segment, focus on three things: the number of films produced, the operating margin, and the average reve- nue per film. DIRECT-TO-CONSUMER & INTERNATIONAL The Direct-to-Consumer & International segment includes busi- nesses like ESPN+, Disney+, and Hulu streaming services. These businesses generate revenue from subscription fees charged to customers/subscribers for Disney's DTC streaming services. For this segement, focus on programming and production costs, as well as technical support costs.
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aIs Disney liquid compared to its peers Disney has a current ratio of 146 which is higher than the industry average of 125 This indicates that the com... View the full answer
Related Book For
Foundations of Finance The Logic and Practice of Financial Management
ISBN: 978-0132994873
8th edition
Authors: Arthur J. Keown, John D. Martin, J. William Petty
Posted Date:
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