Question

How will this covid-19 situation impact on Disney's business areas including revenues, expenses and asset values?

Answer 1

During the fiscal second quarter of 2020, as the pandemic took hold around the world, Parks, Experiences and Products segment impacted especially hard by the global shutdown.

Impact on Revenue: Main source of Income for the Disney business is Advertisement and other operating income from studio group. Revenue from Advertisiment is decreased as a result of lower than typical viewership as live sports went off the air, Movies have sat unrealeased and parks have remain closed. However, due to this pandemic user base has increased this will result in higher operating in future if everything is goes normal.

Impact on expenses: Though there is a global shut down, business has to pay fixed expenses such as Rents, Salaries and other fixed expenses. In order to reduce the fixed expenses, business is reducing salaries of most of the employees and following lot of cost cutting procedures.

Impact on Asset values: Due to global shut down all the operations of the business have been shut down but due to wear and tear of the assets depreciation has to be charged in the books of accounts. This will result in decrease in value of the fixed assets. apart from fixed assets, there will be some current assets on which business has to receive amount from Debtors. But becasue of this global shut down most of the businesses are impacted. so there is an uncertainity in receiving bill amounts from the debtors/clients.

However, though value of fixed assets is decreased, value of Intangible assets will be more. This is as a result of increase in customer base, subscribers. Due to this lockdown in entire world, everyone is staying at home and obviously sunscribers increased for the Disney business areas.