STEP ONE: Evaluation
(Samples to use as a guide)
(a)
Sample Core Business Activity Statement (Using Disney)
The Walt Disney Company is a diversified worldwide entertainment company. It operates
in the US, Canada, Europe, Asia Pacific, Latin America, and other countries. Together with its
subsidiaries and affiliates, the Walt Disney Company acquired a dominant market position in
which it operates in five business segments: media networks, parks and resorts, studio
entertainment, consumer products and interactive media (Business Insights, 2019).
(b)
Sample SWOT Analysis (Using Disney)
History:
The Walt Disney Co. was founded by Walt Disney and Roy O. Disney in Los Angeles,
CA, in 1923 (Business Insights, 2019). The company listed on the NYSE on November
12, 1957 (Business Insider, 2013). It is now ranked as the 53rd largest company in the world by
the market value of 152.1 billion US dollars (Statista, 2018).
SWOT Analysis:
Strength: The company has a strong brand
Opportunity: The global
portfolio. It has built a collection of some of the
broadcasting and cable TV market has
world's best media brands, including Disney, ESPN,
been growing dramatically and will
Freeform, Pixar, Marvel, Lucasfilm and Touchstone
continue to grow strongly through to the
that provide enormous opportunities for the company
end of the forecast period in 2020.
to continue to create high-quality content .
Weakness: Walt Disney 's current ratio was
Threat: The company operates in
0.8 at the end of FY2017. A lower current ratio than
highly competitive markets. Each of its 3
the competitors indicates weaker liquidity position of
business segments competes with big
the company and its inability in meeting short term
competitors around the globe.
obligations than its peers.
(The Walt Disney Company SWOT Analysis, 2019)
Current situation and future plans:
Here we explain how Disney is able to execute its strategic plan informed by the SWOT
analysis above.
Maintain strength: On March 20, 2019, Walt Disney Company closed its $71.3 billion
acquisition of 21st Century Fox assets, and now become an entertainment colossus the size of
which the world has never seen. Disney’s plans to use Fox content to forcefully move into
streaming could slow the growth of Netflix and force smaller studios to merge as they scramble
to compete (NY Times, 2019).
Improve weakness: Walt Disney distributes home entertainment releases directly under
each of its motion picture banners in the domestic market and both directly and through
independent distribution companies in international markets. Its latest streaming services,
Disney+, would enable the company to drive growth in the subscriber base and generate higher
revenues in the future (Business Insights, 2019).
Capture opportunity: Walt Disney distributes programming through its networkbranded websites and licenses programming for distribution through online video distributors. It
also has an equity interest of approximately 30% in Hulu. Disney + will be lunched later this
year which will provide it an opportunity to expand its market share and revenues in the coming
years (Business Insights, 2019).
Defend threat: The company is focusing on creating products and services with
expanding array of choices facilitated by technological development to meet the changing
preferences of the broad consumer market. For example, visitors can choose different kinds of
foods from different region around the globe at Disney world (Walt Disney Co., 2019).
References
Barnes, B. (2019, March 20). Disney Moves From Behemoth to Colossus With Closing
of Fox Deal. Retrieved from https://www.nytimes.com/2019/03/20/business/media/walt-disney21st- century-fox-deal.html.
Business Insights. (2019). The Walt Disney Co. Retrieved from https://bi-galecom.jwupvdz.idm.oclc.org/global/company/302512?u=prov43712#
Staista. (2018). Walt Disney Company. Retrieved from https://www-statistacom.jwupvdz.idm.oclc.org/study/20840/walt-disney-company-statista-dossier/
Taylor, B. (2013, November 17). Disney Reminds Us Of A Time When Anyone Could
Invest Early And Really Make A Lot Of Money. Retrieved from
https://www.businessinsider.com/disneys- shareholders-happiest-on-earth-2013-11.
The Walt Disney Company SWOT Analysis. (2019). Walt Disney Company SWOT
Analysis, 1–8. Retrieved from
http://search.ebscohost.com.jwupvdz.idm.oclc.org/login.aspx?direct=true&db=buh&AN=138263
485&site=bsi-live
Walt Disney Co. (2019, September 24). News. Retrieved from
https://www.thewaltdisneycompany.com/news/.
(c)
Evaluation (Using Jet Blue)
Short Term Liquidity
The quick ratio is a way to view liquidity. One way a business owner can improve their
quick ratio is to put more of their net profits into cash, cash equivalents and marketable
securities. A higher quick ratio indicates that a borrower will be able to make principal and
expense payments even if the business encounters unexpected expenses or revenue reduces
(What Is Quick Ratio? n.d.).
Table 1:1 Quick Ratio (in millions)
Company
Cash
Marketable
Securities
JetBlue
$959
$369
Delta
$2,882
$0
Industry
Accounts
Receivables
$231
$2,854
Quick
Ratio
.59
.28
.61
Based on these finding below JetBlue is doing better thank Delta and is tracing closer to
the industry standard whereas Delta is running at less than half the industry average.
Capital Structure and Solvency
The capital structure of a company is a combination of debt and equity used by a
company to finance its overall operations and growth. (Tuovila, 2020) The total debt to equity
ratio equals all long-term debt plus all short-term debt, divided by stockholders’ equity. This
ratio is a measure the company’s ability to generate sufficient cash to repay long term obligations
(Easton et al., 3-20). The higher a company’s total debt to equity ratio, the riskier investment a
stockholder is making.
Table 2.1: Total Debt to Equity Ratio (in millions)
Company
Long
Short
Stockholders’
Total
Term Debt
Term Debt
Equity
Debt to
Equity Ratio
JetBlue
$1,990
$2,663
$4,799
.97
Delta
$8,873
$2,287
$15,358
.73
Industry
.71
Table 2.2: Operating vs. Non-Operating Return
Company
ROE
RNOA
JetBlue
Delta
Industry
12.1%
31.0%
10.4%
22.5%
18.3%
Table 2.3: Debt to Assets Ratio (in millions)
Non-Operating
Return
1.7%
8.5%
Company
Total
Assets
JetBlue
Delta
Debt to
EBIT
39.0
17.3
$833
$6,499
Assets
$11,918
$64,532
Interest
Expense
65
301
Table 2.4: EBITDA Coverage Ratio
Company
JetBlue
Delta
Depreciation
+ Amortization
EBIT
$525
$2,581
$833
$6,499
Table 2.5: Liabilities to Equity Ratio
Company
JetBlue
Delta
(in millions)
Total
Liabilities
$7,119
$49,174
Interest
Expense
EBITDA
Coverage Ratio
$65
$301
20.9
30.2
(in millions)
Stockholders’
Liabilities to Equity Ratio
$4,799
$15,358
1.5%
3.2%
Equity
Asset Utilization
Asset utilization is the way the company calculates the total revenue earned for
every dollar of assets the company owns. A way to measure this is by using the Net
Operating Asset Turnover formula (NOAT). The formula is sales divided by average net
operating asset; Sales/Average Net Operating Asset. To have an optimal ratio would mean
that the company is being efficient with each dollar of assets held for example for every $1
of asset it generates $1 of revenue. A high ratio is a good indication that the company is
having a better use of its assets. JetBlue has a NOAT of 0.81 and Delta’s is 1.03. This
indicates Delta has a higher return on assets than JetBlue.
Table 3.1: Net Operating Asset Turnover (in millions)
Company
Sales
Average NOA
JetBlue
Delta
$8,094
$47,007
$10,001.5
$45,429.5
NOAT
0.81
1.03
Profitability
A company uses profitability ratios to determines its business ability to produce a return
on its investments. To do so we can use the profit margin, return on net operating assets (RNOA)
and return on equity (ROE) formulas. Profit margin ratio measures the amount of net income
earned with each dollar of sales generated by comparing the net income and net sales, Net
Income/Net Sales. Return on Net Operating Asset formula is Revenue/Average NOA. Return on
Equity formula is Net Income/ Shareholders Equity. As we can see from the asset utilization
ratio and the profitability ratios, Delta is using it assets more successfully than JetBlue.
Table 4.1: Profit Margin, RNOA and ROE
Company
NOPAT
Profit Margin
RNOA
ROE
JetBlue
602,360
7.02%
10.4%
12.1%
Delta
5,095,860
9.6%
22.5%
31.0%
Industry
7%
12.1%