Question

Walt Disney Corporation owns the following companies: ESPN, ABC News, and Pixar.
Based on the materials in chapter 7, what is the management tool that Walt Disney can use to assess and determine the financial performance of each firm including market growth to assist with its funding decision for these firms?

Answer 1

Management tool that Walt Disney can use to access the financial performance of each firm including market growth to assist funding decision would be Financial Ratios.

Financial ratios are quantitative ratio about the performance of the company regarding its operation and profitability including its growth.

These ratios are key performance indicators for various kinds of companies which are hold by Disney. It will help in assessing the the company- wise growth and individual analysis of this company by ascertainment of various capital financial ratios attached with the performance of the each company.

These financial ratios include various kinds of operating ratios and profitability ratio which will provide with a better idea of the growth of the company like profit to earning growth ratio or gross profit ratio which would be used for calculating the profit margins and it can be compared with the figure of previous year to ascertain the rate of growth of the overall company and specific units as well.

Funding decision can also be made through various type of capital solvency ratios which includes debt to equity ratio and other solvency ratios which will help in overall ascertainment of an optimum mix of debt capital and equity capital in order to to maximize the overall rate of return of the company.

So Financial Ratios as key performance indicators, can be used by Disney corporation for its various companies to assess and determine the financial performance of each firm including market growth.