For my financial analysis, I chose to analyze Walt Disney Co. This company has long been one of the most well-known companies in the entertainment industry. They currently have the highest market capitalization in the entertainment industry, with a market cap of $1804.6 billion.
The first calculation to look at is ROE. ROE is the percentage return of net income on shareholder’s equity. ROE tells shareholders how much income the company has received on their investment. Walt Disney Co.’s ROE is 12.74%. As of January 2014, the entertainment industry average is 17.7%, so Walt Disney’s ROE is lower than average.
The next calculation was Disney’s ROA, which is 12.13%. ROA gives a percentage of how much income a company generates from its assets. Therefore, Walt Disney Co. earned approximately $12.13 for each dollar of assets it has. The asset turnover for Walt Disney Co. is 55.44%. The asset turnover tells the amount of profit generated by its assets. The higher the percentage, the better because asset turnover is a measure of efficiency.
Walt Disney Co. has an interest coverage ratio of 41.93. This means Disney is very capable of paying back its outstanding debt. Walt Disney Co.’s debt-to-equity ratio is .68, which is good because it is low. A company with a high debt-to-equity ratio can have volatile earnings, since they are financing with so much debt. Inventory turnover for Walt Disney Co. is 23.93, which is the number of times in the year Walt Disney Co.’s inventory has been sold and replaced.
The next calculation is the current ratio, which is the ability of a company to pay off short-term liabilities. A company wants it to be over 1 because that indicates it will more than likely be able to pay off its short-term debt. Walt Disney Co.’s current ratio is 1.21. This indicates that if Walt Disney Co.’s short-term debts came due today, they would more than likely be able to pay them off. The next calculation is the quick ratio. The quick ratio measures a...