Question

Retrieve the Annual Report for a firm and analyze financial ratios for two consecutive years.

Analyze the ratios and describe the change of the financial condition over two years.

Additionally, the student should examine the IFRS standards on U. S. financial accounting and compare and contrast its position with that of U.S. GAAP. Also do vertical and horizontal analysis.

Disney 2016 and 2017

Cost of Goods Sold Ratio 2016 58.62% 2017 59.99%

Gross Profit 2016 22.94 billion                  2017 21.98 billion

Operating Ratio 2016 15.8% 2017 14.89%

Operating Income Ratio 2016 25.18% 2017 24.72%

Profit Margin 2016 16.96% 2017 16.35%

Working Capital 2016 $-1.08 2017 -$4.99

Current Ratio 2016 93.59% 2017 74.54%

Receivable turnover 2016 6.14% 2017 6.39%

Inventory turnover 2016 21.58% 2017 22.07%

Profit Margin 2016 16.96% 2017 16.35%

debt equity ratio 2016 1.033% 2017 1.20%

shareholder equity ratio 2016 47.08% 2017 43.14%

Return on equity 2016 21.7% 2017 21.73%

Return on assets 2016 10.42% 2017 9.56%

P/E ratio 2016 17.43 2017 18.43%

Cash	--
Cash & Equivalents	4,017.0
Short Term Investments	--
Cash and Short Term Investments	4,017.0
Accounts Receivable - Trade, Net	7,826.0
Notes Receivable - Short Term	--
Receivables - Other	807.0
Total Receivables, Net	8,633.0
Total Inventory	1,373.0
Prepaid Expenses	445.0
Other Current Assets, Total	1,421.0
Total Current Assets	15,889.0
Property/Plant/Equipment, Total - Gross	57,443.0
Accumulated Depreciation, Total	(29,037.0)
Property/Plant/Equipment, Total - Net	28,406.0
Goodwill, Net	31,426.0
Intangibles, Net	14,476.0
Long Term Investments	3,202.0
Note Receivable - Long Term	1,688.0
Other Long Term Assets, Total	702.0
Other Assets, Total	--
Total Assets	95,789.0
Accounts Payable	6,490.0
Payable/Accrued	--
Accrued Expenses	1,819.0
Notes Payable/Short Term Debt	0.0
Current Port. of LT Debt/Capital Leases	6,172.0
Other Current liabilities, Total	5,114.0
Total Current Liabilities	19,595.0
Long Term Debt	19,119.0
Capital Lease Obligations	--
Total Long Term Debt	19,119.0
Total Debt	25,291.0
Deferred Income Tax	4,480.0
Minority Interest	4,837.0
Other Liabilities, Total	6,443.0
Total Liabilities	54,474.0
Redeemable Preferred Stock, Total	--
Preferred Stock - Non Redeemable, Net	0.0
Common Stock, Total	36,248.0
Additional Paid-In Capital	--
Retained Earnings (Accumulated Deficit)	72,606.0
Treasury Stock - Common	(64,011.0)
ESOP Debt Guarantee	--
Unrealized Gain (Loss)	8.0
Other Equity, Total	(3,536.0)
Total Equity	41,315.0
Total Liabilities & Shareholders' Equity	95,789.0
Shares Outs - Common Stock Primary Issue	1,500.00
Shares Outstanding - Common Issue 2	--
Shares Outstanding - Common Issue 3	--
Shares Outstanding - Common Issue 4	--
Total Common Shares Outstanding	1,500.00
Total Preferred Shares Outstanding	Revenue 55,137.0 Other Revenue, Total -- Total Revenue 55,137.0 Cost of Revenue, Total 30,306.0 Gross Profit 24,831.0 Selling/General/Admin. Expenses, Total 8,176.0 Research & Development -- Depreciation/Amortization 2,782.0 Interest Expense, Net - Operating -- Interest/Investment Income - Operating -- Interest Expense(Income) - Net Operating -- Unusual Expense (Income) 20.0 Other Operating Expenses, Total -- Total Operating Expense 41,284.0 Operating Income 13,853.0 Interest Expense, Net Non-Operating (507.0) Interest/Invest Income - Non-Operating 442.0 Interest Income(Exp), Net Non-Operating -- Gain (Loss) on Sale of Assets -- Other, Net -- Net Income Before Taxes 13,788.0 Provision for Income Taxes 4,422.0 Net Income After Taxes 9,366.0 Minority Interest (386.0) Equity In Affiliates -- U.S. GAAP Adjustment -- Net Income Before Extra. Items 8,980.0 Accounting Change -- Discontinued Operations -- Extraordinary Item -- Tax on Extraordinary Items -- Net Income 8,980.0 Preferred Dividends -- General Partners' Distributions -- Miscellaneous Earnings Adjustment -- Pro Forma Adjustment -- Interest Adjustment - Primary EPS -- Income Available to Com Excl ExtraOrd 8,980.0 Income Available to Com Incl ExtraOrd 8,980.0 Basic Weighted Average Shares 1,568.00 Basic EPS Excluding Extraordinary Items 5.727 Basic EPS Including Extraordinary Items 5.727 Dilution Adjustment -- Diluted Weighted Average Shares 1,578.00 Diluted EPS Excluding ExtraOrd Items 5.691 Diluted EPS Including ExtraOrd Items 5.691 DPS - Common Stock Primary Issue 1.560 Gross Dividends - Common Stock 2,445.0 Total Special Items 20.0 Normalized Income Before Taxes 13,808.0 Effect of Special Items on Income Taxes 6.4 Inc Tax Ex Impact of Sp Items 4,428.4 Normalized Income After Taxes 9,379.6 Normalized Inc. Avail to Com. 8,993.6 Basic Normalized EPS 5.736 Diluted Normalized EPS 5.699 Net Income/Starting Line 9,366.0 Depreciation/Depletion 2,782.0 Amortization -- Deferred Taxes 334.0 Non-Cash Items (29.0) Changes in Working Capital (110.0) Cash from Operating Activities 12,343.0 Capital Expenditures (3,623.0) Other Investing Cash Flow Items, Total (488.0) Cash from Investing Activities (4,111.0) Financing Cash Flow Items (1,125.0) Total Cash Dividends Paid (2,445.0) Issuance (Retirement) of Stock, Net (9,092.0) Issuance (Retirement) of Debt, Net 3,703.0 Cash from Financing Activities (8,959.0) Foreign Exchange Effects 31.0 Net Change in Cash (696.0) --

Answer 1

Financial ratio analysis -

The ratios which have changed over the span of 2 years are - Working capital, current ratio and debt equity ratio.

The working capital has decreased from -$1.08 to -$4.99 which shows that the current liabilites has increased or current assets has decreased or both over the span of 2 years and because of the same reason we can see that the current ratio has decreased.

The debt equity ratio has increased from 1.03 to 1.20 which means that the debt has increased or equity has decreased over two years. And we can see that the share holders equity has decreased by 4 % over the span of 2 years which is the main reason for increase in D/E eario.

The gross profit has decreased by 1 billion $. One of the reason for that can be because COGS has increased by 1.5% in 2017.

All the other ratios have remained same or changed only a small percentage.

The income statement analysis is done below -

Heads	Figures
Revenue	55137	100%
Total Revenue	55137	100%
Cost of Revenue, Total	30306	55%
Gross Profit	24831	45%
Selling/General/Admin. Expenses, Total	8176	15%
Depreciation/Amortization	2782	5%
Unusual Expense (Income)	20	0%
Total Operating Expense	41284	75%
Operating Income	13853	25%
Interest Expense, Net Non-Operating	-507	-1%
Interest/Invest Income - Non-Operating	442	1%
Net Income Before Taxes	13788	25%
Provision for Income Taxes	4422	8%
Net Income After Taxes	9366	17%
Minority Interest	-386	-1%
Net Income Before Extra. Items	8980	16%
Net Income	8980	16%
Income Available to Com Excl ExtraOrd	8980	16%
Income Available to Com Incl ExtraOrd	8980	16%
Basic Weighted Average Shares	1568
Basic EPS Excluding Extraordinary Items	5.727
Basic EPS Including Extraordinary Items	5.727
Diluted Weighted Average Shares	1578
Diluted EPS Excluding ExtraOrd Items	5.691
Diluted EPS Including ExtraOrd Items	5.691
DPS - Common Stock Primary Issue	1.56
Gross Dividends - Common Stock	2445
Total Special Items	20
Normalized Income Before Taxes	13808
Effect of Special Items on Income Taxes	6.4
Inc Tax Ex Impact of Sp Items	4428.4
Normalized Income After Taxes	9379.6
Normalized Inc. Avail to Com.	8993.6
Basic Normalized EPS	5.736
Diluted Normalized EPS	5.699
Net Income/Starting Line	9366
Depreciation/Depletion	2782
Deferred Taxes	334
Non-Cash Items	-29
Changes in Working Capital	-110
Cash from Operating Activities	12343
Capital Expenditures	-3623
Other Investing Cash Flow Items, Total	-488
Cash from Investing Activities	-4111
Financing Cash Flow Items	-1125
Total Cash Dividends Paid	-2445
Issuance (Retirement) of Stock, Net	-9092
Issuance (Retirement) of Debt, Net	3703
Cash from Financing Activities	-8959
Foreign Exchange Effects	31
Net Change in Cash	-696

• Total operating expense accounts for 75% which is very large for any company.
• Net income is 16% of revenues which is a decent number

The balance sheet analysis-

Fixed asset account for 60% of the total assets. That is justified for disney

Goodwill is nearly 33% that is also justified beacuse Disney is a globally renowned name.

Disney has a long term debt of 20% due to which it has to give high interest charges.

Overall we can say that Disney is in good financial condition.

Balance sheet -

Heads	Figure
Cash & Equivalents	4017	4.2%
Cash and Short Term Investments	4017	4.2%
Accounts Receivable - Trade, Net	7826	8.2%
Receivables - Other	807	0.8%
Total Receivables, Net	8633	9.0%
Total Inventory	1373	1.4%
Prepaid Expenses	445	0.5%
Other Current Assets, Total	1421	1.5%
Total Current Assets	15889	16.6%
Property/Plant/Equipment, Total - Gross	57443	60.0%
Accumulated Depreciation, Total	-29037	-30.3%
Property/Plant/Equipment, Total - Net	28406	29.7%
Goodwill, Net	31426	32.8%
Intangibles, Net	14476	15.1%
Long Term Investments	3202	3.3%
Note Receivable - Long Term	1688	1.8%
Other Long Term Assets, Total	702	0.7%
Total Assets	95789	100.0%
Accounts Payable	6490	6.8%
Accrued Expenses	1819	1.9%
Notes Payable/Short Term Debt	0	0.0%
Current Port. of LT Debt/Capital Leases	6172	6.4%
Other Current liabilities, Total	5114	5.3%
Total Current Liabilities	19595	20.5%
Long Term Debt	19119	20.0%
Total Long Term Debt	19119	20.0%
Total Debt	25291	26.4%
Deferred Income Tax	4480	4.7%
Minority Interest	4837	5.0%
Other Liabilities, Total	6443	6.7%
Total Liabilities	54474	56.9%
Preferred Stock - Non Redeemable, Net	0	0.0%
Common Stock, Total	36248	37.8%
Retained Earnings (Accumulated Deficit)	72606	75.8%
Treasury Stock - Common	-64011	-66.8%
Unrealized Gain (Loss)	8	0.0%
Other Equity, Total	-3536	-3.7%
Total Equity	41315	43.1%
Total Liabilities & Shareholders' Equity	95789	100.0%
Shares Outs - Common Stock Primary Issue	1500
Total Common Shares Outstanding	1500