Walt Disney Company free essay sample

The Walt Disney Company is a diversified international family entertainment and media enterprise business. They have five business segments which are media network, parks and resorts, studio entertainment, consumer products and interactive media. Disney Media Network consists of broadcast, cable, radio, publishing and digital businesses within the Disney/ABC Television Group and ESPN, Inc. Walt Disney Parks and Resorts is comprised of family oriented parks and resorts all around the world. They are the world’s largest provider for family travel. The Walt Disney Studios is the foundation in which The Walt Disney Company was built. It provides movies and music to consumers. Disney Consumer Products is the business segment in which Disney brand merchandise is sold. It consists of apparel, toys, home decor, books, animation art, etc. Disney Interactive is the business segment that provides digital media entertainment to consumers such as console games, online virtual worlds, and websites. These five diverse areas bring great success to Disney. We will write a custom essay sample on Walt Disney Company or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page The Company started as a cartoon studio in 1923 when Walt Disney signed a contract with M.J. Winkler to produce a series of Alice comedies. The Company was first known as The Disney Brothers Studio. November 18, 1928 marks the release of the first Mickey Mouse Cartoon. The 1930’s brought the first color cartoon, Donald Duck and Disney’s first feature-length film Snow White and the Seven Dwarfs. In the 1940’s, Disney issues its first stock and Walt Disney Music Company is formed. In 1955 the first Disney Park opened in Anaheim, California. In 1971, Walt Disney World Resort opened in Orlando, Florida. In 1983, the Disney Channel began broadcasting. On May 6, 1991 the Company joined the Dow Jones Industrial Average. Throughout the 2000’s Disney acquired Fox Family, renaming it ABC Family, Pixar Animation Studios, Club Penguin and launched a new cable network, Disney XD. While only a few highlights of Disney’s history have been mentioned, it is obvious that Disney has continued to grow through their existence and has a monopoly on family entertainment. They also have cruise ships, Disney stores, radio stations, websites and many other Disney ventures. Disney’s gross revenue has increased dramatically over the years. The 2002 Annual Report reports $25.3 million of gross revenue and the 2012 Annual Report reports $42. 2 million. That is a $16. 9 million dollar increase in revenue over 10 years. Each year their revenue increases between $1. 5 million and $3 million a year. That is an extremely large increase in revenue each year. Disney is doing something right with all their ventures. As Disney’s gross r evenue increases, their net income also increases. Their 2012 net income after taxes was $5. 6 million. In most recent years, Disney has been growing faster than ever thanks to smart decisions by management such as the addition of Marvel Entertainment. Disney’s brand, image and ability to stay diverse are what have caused their continued growth. Disney is a recognized and well-known brand. The characters (Mickey, Mini, Donald Duck, etc. ) that have been created under the Disney brand help their image. Such characters have assisted in the ability for Disney to capitalize the market of children. While the brand and character recognized have played into the continued growth of Disney, their largest asset of being and staying diverse is what has sustained their growth. They have a solid domination in the entertainment and theme park industries. While the theme parks have helped in the growth of Disney, they hold exceptionally high costs. They have the cost of maintenance and updating. If you have ever been to a Disney Park, they are exceptionally clean. This is wonderful but costly. If the guest volume at the parks was to suddenly decrease, then their revenue would decrease, but the costs would not decrease and then such high costs could get in the way of future financial abilities for Disney. To continue their growth in business and revenue, Disney has begun to globalize. They have been working to expand in France and Japan building Disneyland Paris and Tokyo Disney Resort. Having the opportunities to expand in other countries creates and allows more opportunities for sales and an increase in performance. Even though Disney has a solid and successful existence in the entertainment industry, they do have some threats that could negatively impact their profitability in the future. The major threat is competition. There is high competition and growth of other industry giants such as Time Warner which may create a problem for Disney to sustain as the leader in the industry. If Disney was to lose the status of leader, it could negatively affect their sales and performance. While Disney’s has had revenue growth, it appears they have also been taking on more debt. The good news is the increased growth justifies the added leverage of debt. If we look at their liquidity ratios (See Exhibit 1), their current ratio, which measures the ability to pay short-term obligations is 1. 06. Because the ratio is more than 1, Disney has enough assets to cover their liabilities. Their quick ratio, which measures the ability to meet short-term obligation with most liquid assets is 0. Being that this ratio is less than 1, Disney is not able to cover their liabilities with their most liquid assets. However the ratio is just below 1, so they will be able to pay most of their liabilities. Looking at leverage ratios, the debt to equity ratio, which indicates what portion of equity and debt is used to finance assets, is 37%. This means that Disney uses more equity to finance assets than liabilities. They are less aggressive when it comes to financing growth with debt, which reduces the company’s risk. Now let’s look at profitability ratios. Disney’s return on assets, which measures how profitable a firm is relative to its total assets is 7. 59%. Their return on equity, which measures the profitability a firm is relative to the money shareholders invest, is 14. 29%. The net profit margin, which indicates how much of every dollar of sales is kept, is 13. 44%. Over the last three years this percentage has increased each year. This indicates that Disney has an increasing level of earnings. Disney has overall average asset management ratios as well. Their inventory turnover, which illustrates how often inventory is sold and replaced, is 27.51%. This percentage implies that Disney has strong sales and effective buying. Receivable turnover measures the effectiveness of collecting debt. Disney’s receivable turnover is 6. 46% which has decreased from the prior year and implies that inefficient collection of accounts receivable. Total asset turnover is the amount of sales generated for every dollar worth of assets. Disney’s total asset turnover ratio is . 56 which indicates they could do more to efficiently use its assets to produce more sales. My analysis of Disney’s financial ratios is that they are in a good position. They have consistently increased their earnings, have enough assets to cover their liabilities and they use more equity then debt to financing their growth. They could work on their receivable turnover, but overall have good ratios in my opinion. It seems that Disney has been making smart management and financial decisions and is a very profitable company. Disney went public on November 12, 1957. Their first day public, stock closed at $13. 88. On March 1, 2013 Disney’s stock closed at $55. 33. Over the last six months, their stock prices have ranged from $47 to $55. Disney’s stock has a history of remarkable performance with strong, healthy dividends and has split numerous times. They have had four 2 for 1 splits, two 4 for 1 splits and one 3 for 1 split. Disney’s issues dividends on an annual basis at a designated price for share to shareholders. In December 2012, they issued a $0. 75 dividend per share. While Disney has great financial and stock data, a potential stockholder may want additional information that is not included in the financial reports such as ideas of new business ventures and future acquisitions. Disney has had great success with both new ventures and acquisitions but they are risky and capable of having a negative impact. An investor may want to know of such before making the decision to invest. I personally would invest in Disney for a few reasons. First of all, they are the largest entertainment company and have proven to be very successful in all their ventures. Disney has a diversified portfolio of companies and brands with overall high profits. The stock prices continue to rise as well as the dividend for share price. I think that as Disney continues to grow and take on new ventures, their stock prices will continue to rise, leaving room for a gain if shareholders decide to sell their stock. I think Disney is an overall good stock to acquire. Another part of Disney that I personally found interesting and most probably don’t even know is that Disney owns ABC, ABC Family and ESPN. I was shocked about ESPN because it really does not have anything to do with Disney or family. Disney has also owns the Anaheim Angels. It’s amazing how many different ventures Disney has either created or acquired. With increasing revenues each year, Disney has obviously made some smart decisions. They are a huge company with a monopoly on the entertainment industry. Based on the increasing revenues and net income and successful stocks, my assessment of Disney’s future performance in the short term and long term is that they will continue to grow and be successful. Disney has had a long successful history of being innovative and able to adapt to changes in the industry. They have continuously created new ideas, products and ways to be diverse. Such success and innovation poises a very well future. Sources The Walt Disney Company. The Walt Disney Company. N. p. , n. d. Web. 24 Feb. 2013 Walt Disney Co. (DIS) | Corporate Profile. Stock Analysis on Net. N. p. , n. d. Web. 24 Feb. 2013 The Walt DisneyA Company. About. com Animation. N. p. , n. d. Web. 24 Feb. 2013 Beyman, Michael J. The History of Disney Stock. EHow. Demand Media, 07 May 2009. Web. 02 Mar. 2013. 3 Reasons Beginning Investors Should Buy Disney. (DIS). N. p. , n. d. Web. 02 Mar. 2013