Deciphering Financial Statements (The Walt Disney Company)
Locate the 2004 financial statements for The Walt Disney Company on the Internet.
1. Did Disney have any below the line items in 2004? Explain.
2. Disney’s net income increased from $1,267 million in 2003 to $2,345 million in 2004.
Identify the major reasons for the increase.
3. Imagine that you are a financial analyst asked to generate a forecast of Disney’s net income for 2005.You know that generally the best place to start in forecasting next year’s net income is this year’s net income. Given this starting point, look at the items in Disne ’s 2004 income statement and make a forecast of 2005 net income.
4. In its income statement, Disney separates reported net income into earnings or loss attributed to Disney common stock and to the Internet Group common stock. However, Disney reports the following in its 10 K filing: “During the year the Company converted all of its outstanding Internet Group common stock into Disney common stock and changed the reporting structure of the various components of the Internet Group. Accordingly, the Company no longer reports separate results for the Internet Group.” This statement can be confirmed by looking at Disney’s balance sheet; the September 30, 2004, balance for Internet Group common stock is zero. Why do you think that Disney reported separate results for the Internet Group? Why do you think that Disney decided to stop reporting the separate results?
5. What was Disney’s comprehensive income for 2004?
6. Of Disney’s four major segments—media networks, parks and resorts, studio entertainment, and consumer products—which generated the most revenue in 2004? The most operating income? Which had the highest operating profit margin (operating income/revenue)?
7. What percent of total revenue does Disney generate within the United States and Canada?
8. How does Disney recognize revenue from broadcast advertising? From advance theme park ticket sales?
9. Does Disney expense its film and television costs using direct matching, systematic and rational allocation, or immediate recognition?
10. How does Disney expense its parks, resorts, and other properties?