Bus 411
Assignment 3
Due Feb 24 at the beginning of class (2:00 PM)
CHAPTER 4
ASSURANCE OF LEARNING EXERCISE 4C: PERFORM A FINANCIAL RATIO
ANALYSIS FOR WALT DISNEY
PURPOSE:
Financial ratio analysis is one of the best techniques for identifying and evaluating
internal strengths and weaknesses. Potential investors and current shareholders look
closely at firms’ financial ratios, making detailed comparisons to industry averages and to
previous periods of time. Financial ratio analyses provide vital input information for
developing an IFE Matrix.
INSTRUCTIONS:
1. On a separate sheet of paper, number from 1 to 20. Referring to Disney’s
income statement and balance sheet (pp. 26–27), calculate 20 financial ratios
for 2011 for the company. Use Table 4-6 as a reference.
2. Step 2 In a second column, indicate whether you consider each ratio to be a
strength, a weakness, or a neutral factor for Walt Disney.
TEACHING NOTES:
Ratio (2011)
Liquidity Ratios
Current
Quick
Leverage Ratios
Debt to total assets
Debt to equity
Long-term debt to equity
Times-interest-earned ratio
Activity Ratios
Fixed Assets Turnover
Total Assets Turnover
Inventory Turnover
Profitability Ratios
Gross profit margin
Operating profit margin
Net profit margin
Return on total assets
Return on Stockholders’ equity
Price-earnings ratio
Walt Disney
Evaluation
EPS
Growth Ratios
Sales Growth % (3-year)*
Net Income Growth % (3-year)*
Earnings per share Growth % (3-year)*
Dividends per share Growth % (3-year)*
*Use 2008, 2009, 2010 & 2011 Data
ASSURANCE OF LEARNING EXERCISE 4D: CONSTRUCTING AN IFE MATRIX
FOR DISNEY CORPORATION
PURPOSE:
This exercise will give you experience in developing an IFE Matrix. Identifying and
prioritizing factors to include in an IFE Matrix fosters communication among functional
and divisional managers. Preparing an IFE Matrix allows human resource, marketing,
production/operations, finance/accounting, R&D, and management information systems
managers to articulate their concerns and thoughts regarding the business condition of the
firm. This results in an improved collective understanding of the business.
INSTRUCTIONS:
1. Develop a IFE Matrix for Walt Disney. Use the complied SWOT generated in
class.
1. What strategies do you think would allow Disney to capitalize on its major
strengths? What strategies would allow Disney to improve upon its major
weaknesses?
TEACHING NOTES:
The steps for completing an IFE Matrix are as follows:
1. List key internal factors as identified in the internal-audit process. Use a total of ten to
twenty internal factors, including both strengths and weaknesses. List strengths first and
then weaknesses.
2. Assign a weight that ranges from .0 (not important) to 1.0 (all important) to each factor.
The weight assigned to a given factor indicates the relative importance of the factor to
being successful in the firm’s industry. The sum of all weights must equal 1.0.
3. Assign a 1-4 rating to each factor to indicate whether that factor represents a major
weakness (1), a minor weakness (2), minor strength (3), or major strength (4). Strengths
must receive a 3 or 4 and weaknesses must receive a 1 or 2.
4. Multiply each factor’s weight by its rating to determine its weighted score for each
variable.
5. Sum the weighted scores for each variable to determine the total weighted score for the
organization.