Financial Accounting Project
Progress Report 2
In 2011, the profit margin of Walt Disney Company was 0.1176(11.76%). Due to the company’s huge net sales value, it shows a solid profit margin for a large company just as Walt Disney. In 2010, the profit margin was 0.1041(10.41%), which was 1.35% lower than 2011. The higher profits margin rate in 2011 indicates that the profit margin will increase in the future. Furthermore, the Walt Disney’s return on equity was 0.129(12.9%) in 2011, and the return on equity was 2.9% higher than the previous year, which showed that the Walt Disney keep steady profitability. Compared to its competitor DreamWorks Animation’s 0.123 profit margin, Walt Disney had lower profit margin that was 0.1041 (Appendix 2D). However, the ROE of DreamWorks Animation was 0.064(6.4%), which was much lower than Walt Disney (Appendix 1A&2A). Thus, Walt Disney made more profits than its competitor.
The net income of Walt Disney in 2011 was $ 4,807,000,000, and it net sales was $40,893,000,000 (Appendix 1D). There are huge amount differences between net income and net sales. Because Walt Disney doesn’t have cost of good sold, the main reason is high cost and expense that was $ 33,112,000,000. In addition, income tax and interest expense were other factors determined the discrepancy.
Liquidity and Capital Structure:
As we know that a quick ratio can measure the ability of a company to pay its current obligations, and also, a high quick ratio normally suggests good liquidity. From the Appendix 1F shows below, Disney’s quick ratio in 2011 was 1.006, which has a little increased from 0.980 in 2010. Therefore, Disney will be able to meet its obligations as they become due. Compared with the quick ratio of its competitor, DreamWorks, which shows in the Appendix 2F, the quick ratio was 1.045 in 2011 and 0.963 in 2010 that was also rises. Hence, both the Disney and DreamWorks have made a progress and done better in their liquidities.
Furthermore, according to the Appendix 1L and 1M, it obviously shows that in the year of 2011, there are almost 46.23% of the total assets of Disney are financed through liabilities, and nearly 52.90% of those of Disney are financed through stockholders’ equity, which also indicates that Disney used debt and equity almost equally to acquire assets.
On the other hand, different form the Walt Disney Company, and according to the Appendix 2L and 2M, we can clearly found that there are only 23.89% of the total assets of DreamWorks are financed through liabilities, and almost 76.76% of those of DreamWorks are financed through stockholders’ equity in 2011. This indicates that DreamWorks finances more assets in stockholders’ equity than that in liabilities. It is significantly different from that of Disney. As we all know DreamWorks is a company that only makes films when they started to do business, hence, DreamWorks chose to rely on a more equity-based strategy, because they might find it difficult to repay the debt during the early stages until they achieved the reliable cash flow, or they also need more investors to invest. However, Disney Company not only makes films, but also occupies other areas, such as the amusement park “Disneyland” and some Disney stores. Therefore, Disney has ability to take the risks and to repay some debts, and they would like to use both debt-based and equity-based strategy.
Corporate Governance and Executive Compensation (From Proxy Statement):
Proxy statement is a document required by SEC, which includes necessary information for shareholders to make informed decision at annual or important meeting of the company. The statements include several contents. First of all, it tells us some information about how they vote candidates. Then, it introduces some background information about company’s directors. Thirdly, it states some compensation about Board and Executive, such