FIN 320 Project Two Financial Analysis Report_Bryanna Olson

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Feb 20, 2024

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FIN 320 Project Two Financial Analysis Report Financial Analysis and Financial Evaluation 1. Financial Analysis A. Financial Calculations Calculate accurate financial formulas to figure out the business’s current financial health. Specifically, calculate the ratios listed below using the Ratios Most Recent Fiscal Quarter (Qtr) and Ratios Same Fiscal Quarter 1 Year Ago worksheets in the Project Two Financial Formulas workbook (linked in the What to Submit section of the Project Two Guidelines and Rubric). i. Working capital The working capital of Disney in the last recorded fiscal year is $1,940,000. By having this much working capital, it says that the business has enough to cover its day-to-day business expenses and it is in good financial health. ii. Current ratio The current ratio in the latest fiscal quarter is 1.07, rounded. This says that company is in good financial health and would be able to pay off its current debts at least one time over with its current liabilities. iii. Debt ratio With a debt ratio of 0.52, rounded, this says that Disney currently has a lot of debt compared to their assets. This says that they will be a greater risk to lenders. iv. Earnings per share The earnings per share are roughly $1.23. v. Price/earnings ratio I wasn’t able to find the current stock price, so I was unable to figure out the price/earnings ratio. vi. Total asset turnover ratio Disney’s total asset turnover ratio is 0.11, rounded. This says that the company’s assets are not generating enough revenue at the end of the fiscal quarter. vii. Financial leverage With a financial leverage of 2.09, rounded, for every 1% change in its earnings before taxes and interest, Disney’s earnings per share will change by 2.09%. viii. Net profit margin Disney’s net profit margin is 0.12, rounded. A profit margin of this number says that the company is using poor pricing strategies or having high costs. 1

ix. Return on assets The company’s return on assets is 0.01, rounded. This says that Disney has over- invested in assets that didn’t turn out so well and aren’t making them back any money. This could show that the company is in a bit of financial trouble. x. Return on equity I could not find the numbers needed to answer this question. B. Working Capital Management Working capital management is integral for any and all businesses. If you don’t manage how you use your working capital, you won’t be keeping track of where tis going and will most likely lose money on small things or fees that could have been avoided. It’s important to keep an eye on and track the working capital a business has so they can see how much money they are making, how much they are spending, and if they need to cut any costs in order to meet financial goals and be a better run business. C. Financing Businesses finance their operations and expansions most often with grants and loans. This money is paid back over time and allows the company to pay for what they need to up front, adding to their liabilities each month. This money gives the company an opportunity to grow their business without spending all of their money upfront. D. Short-Term Financing Short-term financing sources could help the business raise funds for improving its financial health. By getting a short-term loan, the business would be able to pay off any outstanding debt to help their debt ratio, lower their liabilities, and make their working capital higher. E. Bond Investment Of course, there are always risks when it comes to investing money into anything. While they may be easier to work with due to their liquidity, they usually result in lower returns over time. They are the yin to the yang of stocks, but can still be just as risky, even if they are less volatile. F. Capital Equipment When it comes to capital equipment, businesses could very easily invest in new and better equipment and make their process smoother and quicker. They could also lower their costs by doing so and this is a reason why many businesses choose to invest in capital equipment. Of course, the equipment may not work or may break easier than the old, trusty equipment and the business may be out more money when needing to fix or replace the machines. 2

G. Building Investing in a building can be a great thing for a company because they will have long- term space that they can work in. it’s a place where they can house their equipment, offices, etc. and be able to work from one location if the space is enough for them. On the other hand, if the business goes belly up before the lease is over, they are still responsible for the costs of that building and depending on how the contract is when they sign, they may not be able to break the lease early without a large penalty, if at all. If the building is purchased instead of leased, it could still be bad seeing as the business would be responsible for the mortgage and any loans that the building or property has. 2. Financial Evaluation A. Bond Investment I believe the business could be okay with a small bond investment. Since the company has plenty of capital and is making a large amount of revenue each year, they would be able to invest into plenty of bonds, but to test the waters and see how risky it is for them, I believe they would be okay investing in a small bond, even if they end up losing some money. B. Capital Equipment Capital equipment investment is a good investment for the company to make. They have plenty of money currently that they could use to invest and continue to make enough revenue each year to cover any losses they may suffer from the investment. C. Building While they may have the capital to invest in a building, I don’t believe they should. D. Future Financial Considerations I believe, just like the past few fiscal quarters, the company’s financial health with continue to fluctuate for a while before it finally evens out, if not grow once more. I don’t believe any major growth with happen for a few years when the company’s new products and assets are released to the public. 3

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