Disney Financial Report and Financial Analysis: 2016 to 2020

Walt Disney Financial Report and Financial Analysis started with an in-depth review of Disney's 10k Annual report, specifically, Disney's income statement and balance sheet. 

Next Paul Borosky, MBA., summarized their financial information and input it into a proprietary financial model, which shows their income statement and balance sheet trends as well as calculations for Disney's financial ratios, and financial ratio trends covering 5 years.  

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Disney 2020 Financial Report by Paul Borosky, MBA.
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  • Summarized income statement for the last 5 years.
  • Summarized balance sheet for the last 5 years.
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  • Five year’s worth of over twenty common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
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Disney Summary

The Walt Disney Company stock price ended December 2019 at approximately $145.  Over the next several months, the company stock price would fluctuate between $145 and $138 until the beginning of March 2020.  At this point, the Covid 19 virus had started to wreak havoc on the US economy.  Inevitably, Disney's stock price suffered, falling over the next several months to $88 ending March 2020.  Fortunately, over the next several months, Disney's stock price would increase substantially, in no small part due to their incredible success with their streaming service.  This resulted in a stock price growth to $173 ending December 2020.

Disney Income Statement Summary

SG&A

Disney's SG&A, or fixed costs, ended 2016 at $8.7 billion.  In the next year, the organization would slightly reduce its fixed costs ending the year at $8.1 billion.  However, in the next three years, the company's fixed costs would balloon substantially, ending 2020 at $12.3 billion.  As compared to revenues, Disney's fixed costs were 15.7% in 2016.  In 2017, the company's fixed costs would fall to 14.8% as compared to revenues.  From this point, the company's SG&A would substantially climb over the next three years ending 2020 at 18.9%.

Operating expenses

Disney's operating expenses ended 2016 at $11.2 billion.  In the next year, the organization's operating costs would fall slightly to $10.9 billion.  However, in the next three years, the company's operating expenses would climb substantially, ending 2020 at $17.7 billion.  As compared to sales, from 2016 to 2018, the organization's operating costs were about 20% of sales.  However, in 2019, the company's operating expenses would climb to 22.6% of sales.  Unfortunately, in 2020, the operating expenses as compared to sales would balloon to 27.1%. 

Disney 2020: Income Statement Summaries

Column1

2020

2019 2018 2017

2016

Revenues                    65,388                    69,570                    59,434                    55,137                      55,632
COGS                    43,880                    42,018                    32,726                    30,306                      29,993
Gross Profit                    21,508                    27,552                    26,708                    24,831                      25,639
 
SG&A                    12,369                    11,541                      8,860                      8,176                        8,754
Depreciation                      5,345                      4,160                      3,011                      2,782                        2,527
R & D                            -                            -                            -                            -                             -
Other                            -                            -                            -                            -                             -
Operating Expenses                    17,714                    15,701                    11,871                    10,958                      11,281
EBIT                      3,234                    14,459                    14,837                    13,873                      14,358
Other Income                            -                            -                         601                           78                             -
Interest Expense                      1,491                         978                         574                         385                           260
EBT                      1,743                    13,944                    14,729                    13,788                      14,868
Taxes                         699                      3,026                      1,663                      4,422                        5,078
Net Income                   (2,474)                   11,584                   13,066                     9,366                      9,790
Tax Rate 40.1% 21.7% 11.3% 32.1% 34.2%

Disney Balance Sheet Summary

Accounts Payable

Disney's accounts payable ended 2016 at $9.1 billion.  In the next two years, the organization would maintain this level.  However, in 2019 and 2020, the organization's Accounts Payable would increase substantially, ending 2020 at $16.8 billion.

The substantial increase in Disney's accounts payable indicates that the organization is taking longer and longer to pay its suppliers.  This is beneficial for Disney because the company is able to use funds earmarked for suppliers for other purposes like operating costs.  However, by taking longer to pay suppliers, the organization may be detrimentally impacting their suppliers' cash flow.  This may lead to unintended consequences like higher raw material costs due to slow pay or supplier turnover due to disloyalty or cash flow issues.  A better strategy for Disney would be to pay their suppliers on a consistent basis.  This consistency will allow suppliers to maintain adequate cash flows.  Also, by maintaining a consistent Accounts Payable practice, the organization may be able to negotiate raw material costs at a lower rate.  Goodness knows that Disney is doing a dismal job with their cost of goods controls.  This may help with the problem.

Disney 2020: Summary Balance Sheet

Column1

2020

2019 2018 2017

2016

Cash

                     17,914

                   5,418                    4,150                    4,017

                   4,610

Short Term Investment                         -                         -                         -                         -
Account Receivable

                     12,708

                 15,418                    9,334                    8,633

                   9,065

Inventory

                       1,583

                   1,649                    1,392                    1,373

                   1,390

Other                              -                         -                         -                         -                         -
Current Assets

                   35,251

               28,124                16,825                15,889

               16,966

Net PPE

                     32,078

                 31,603                  29,540                  28,406

                 27,349

Goodwill

                     77,689

                 80,293                  31,269                  31,426

                 27,810

Other                              -                         -                         -                         -                         -
Total Assets

                 201,549

             193,984                98,598                95,789

               92,033

Accounts Payable

                     16,801

                 17,942                    9,479                    8,855

                   9,130

Accrued Expense                              -                         -                         -                         -                         -
Accrued Taxes                              -                         -                         -                         -                         -
Notes Payable                              -                         -                         -                         -                         -
LT Debt - Current

                       5,711

                   8,857                    3,790                    6,172

                   3,687

Other                              -                         -                         -                         -                         -
Total Current Liabilities

                     26,628

                 31,521                  17,860                  19,595

                 16,842

LT Debt

                     52,917

                 31,521                  17,084                  19,119

                 16,483

Other                         -                         -                         -                         -
Total Liabilities

                 113,286

             100,095                45,766                50,785

               44,710

Common Stock

                     54,497

                 53,907                  36,779                  36,248

                 35,859

Treasury

                          907

                      907                  67,588                  64,011

                 54,703

Retained Earnings

                     38,315

                 42,494                  82,679                  72,606

                 66,088

Other                         -                         -                         -                         -
Total Equity

                   88,263

               93,889                52,832                45,004

               47,323

Total Equity & Liability

                 201,549

             193,984                98,598                95,789

               92,033

Disney Financial Ratio Summary and Analysis

Cash Ratio

The company's cash ratio ended 2016 at .27.  In the next three years, the organization would continually reduce its cash ratio ending 2019 at .17.  However, in 2020, the firm would shift its cash strategy to include elevated liquid assets.  This resulted in the company's cash ratio being .67 in 2020. 

Inventory Turnover

The Walt Disney Company's inventory turnover in 2016 was 40.0.  In the next three years, the company would improve its inventory turnover ending 2019 at 42.1.  However, in 2020, the company's inventory turnover would fall slightly, ending the year at 41.3. 

Net Profit Margin

Disney's net profit margin ended 2016 at 17.6%.  In the next two years, the company would moderately increase their net profit margin ended 2018 at 21.9%.  However, in the next two years, again, Disney would substantially fall in its net profit margin ending 2020 at -3.7%.  Once the Covid 19 issue subsides, investors should anticipate substantial growth in net profits.  However, if these expectations are not reached in the moderate term, then Disney needs to take significant actions to optimize operations through lower operating costs and selling off underutilized fixed assets.

Disney 2020 Liquidity Ratios

Ratios

2020

2019 2018 2017

2016

Current Ratio

                          1.32

                   0.89                    0.94                    0.81

                   1.01

Cash Ratio

                          0.67

                   0.17                    0.23                    0.21

                   0.27

Quick Ratio

                          1.26

                   0.84                    0.86                    0.74

                   0.92

Net Working Capital

                      15,404

                 4,543                  5,397                  5,168

                 5,935

 

Disney 2020 Asset Utilization

Ratios

2020

2019 2018 2017

2016

Total Asset Turnover

                          0.32

                   0.36                    0.60                    0.58

                   0.60

Fixed Asset Turnover

                          2.04

                   2.20                    2.01                    1.94

                   2.03

Days Sales Outstanding

                        70.94

                 80.89                  57.32                  57.15

                 59.48

Inventory Turnover

                        41.31

                 42.19                  42.70                  40.16

                 40.02

Accounts Receivable Turnover

                          5.15

                   4.51                    6.37                    6.39

                   6.14

Working Capital Turnover

                          4.24

                 15.31                  11.01                  10.67

                   9.37

AP Turnover

                          3.89

                   3.88                    6.27                    6.23

                   6.09

Average Days Inventory

                        13.17

                 14.32                  15.53                  16.54

                 16.92

Average Days Payable

                      139.75

               155.86                105.72                106.65

               111.11

 

Disney 2020 Profitability Ratios

Ratios

2020

2019 2018 2017

2016

Return on Assets

-1.23%

5.97% 13.25% 9.78%

10.64%

Return on Equity

-2.80%

12.34% 24.73% 20.81%

20.69%

Net Profit Margin

-3.78%

16.65% 21.98% 16.99%

17.60%

Gross Profit Margin

32.89%

39.60% 44.94% 45.04%

46.09%

Operating Profit Margin

4.95%

20.78% 24.96% 25.16%

25.81%

Basic Earning Power

1.60%

7.45% 15.05% 14.48%

15.60%

ROCE

1.85%

8.90% 18.38% 18.21%

19.10%

Capital Employed

                    174,921

             162,463                80,738                76,194

               75,191

ROIC

4.08%

31.32% 37.67% 28.07%

28.40%

 

Disney 2020: Long-term Debt

Ratios

2020

2019 2018 2017

2016

Debt Ratio

26.26%

16.25% 17.33% 19.96%

17.91%

Debt/Equity

59.95%

33.57% 32.34% 42.48%

34.83%

Times Interest Earned

                          2.17

                 14.78                  25.85                  36.03

                 55.22