Question

Please explain the financial investors Ratios in Walt Disney excel sheet. Need a summary of the 5 ratios as in the sheet as it compared to the industry standards. A detailed explanation if possible in “essay format”detailing the investors ratios position.

A35X V Jx Operating Profit Ratio 1 2 3 Walt Disney's Investors Ratios Selected Financial Data Millions Ratios Per Year Investors Ratios 2017 110.83 2016 100.8 2014 91.2 4.31 21.16 57.65 7 P/E Ratios 4.95 24.66 19.34 175 16.86 2017 2016 95,78992,033 1,31541,274 2322.23 2014 88,18284,141 44,525 44,958 198 1.87 81,197 45,429 14 15 Current Assets Ratios 17 2013 45,041 81,197 0.55 2017 2014 2,45648,813 88,182 84,141 21 55,137 55,632 95,78992,033 058 0.60 23 Assets Turn over Ratio 0.59 27 2014 2,465 48,813 2015 2016 55,13755,632 8,754 46,961 46,878 9,366 9,790 0.21 2017 45,041 8,365 36,676 6,636 0.18 8,176 44,10040,248 8,852 8,004 32 0.20 0.20 35 Operating Profit Ratio 1994 20.88 20.07 19.89 18.09 37 2016 9,790 95,78992,033 10.23 9.40 2017 9,366 2014 8852 8,004 88,18284,186 2013 6,636 81,241 12.24 39 41 Return of Assets

Answer 1

Answer:-

P/E ration

The price/earnings ratio (often shortened to the P/E ratio or the PER) is the ratio of a company's stock price to the company's earnings per share.

For a layman, P/E ratio is a valuation measure, which can be used to know whether the stock is overvalued or undervalued with respect to its earnings growth. The ratio can be calculated by dividing the current market price with earnings per share. Basically, price-to-earnings ratio shows what the market or an investor is willing to pay for a stock based on its current earnings. An industry PE ratio can be calculated dividing its market capitalisation by its total net profit.

The price-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings. The price-earnings ratio is also sometimes known as the price multiple or the earnings multiple.

general, a high P/E suggests that investors are expecting higher earnings growth in the future compared to companies with a lower P/E. A low P/E can indicate either that a company may currently be undervalued or that the company is doing exceptionally well relative to its past trends. When a company has no earnings or is posting losses, in both cases P/E will be expressed as “N/A.” Though it is possible to calculate a negative P/E, this is not the common convention.

The price-earnings ratio can also be seen as a means of standardizing the value of one dollar of earnings throughout the stock market. In theory, by taking the median of P/E ratios over a period of several years, one could formulate something of a standardized P/E ratio, which could then be seen as a benchmark and used to indicate whether or not a stock is worth buying.

Current asset ration

The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations. To calculate the ratio, analysts compare current assets to current liabilities. Current assets include cash, accounts receivable, inventory and other assets that are expected to be turned into cash in less than a year. Current liabilities include accounts, wages, taxes payable, and the current portion of long-term debt. The formula for calculating a company’s current ratio is as follows:

Current Ratio = Current Assets / Current Liabilities

A current ratio that is in line with the industry average or slightly higher is generally considered acceptable. A current ratio that is lower than the industry average may indicate a higher risk of distress or default. Similarly, if a company has a very high current ratio compared to their peer group, it indicates that management may not be using their assets efficiently.

Asset Turnover ration

The asset turnover ratio measures the value of a company's sales or revenues relative to the value of its assets. The asset turnover ratio can be used as an indicator of the efficiency with which a company is using its assets to generate revenue.

Total Sales Average Total Assets Asset Turnover

The higher the asset turnover ratio, the better the company is performing, since higher ratios imply that the company is generating more revenue per dollar of assets. The asset turnover ratio tends to be higher for companies in certain sectors than in others. Retail and consumer staples, for example, have relatively small asset bases but have high sales volume – thus, they have the highest average asset turnover ratio. Conversely, firms in sectors such as utilities and real estate have large asset bases and low asset turnover.

Since this ratio can vary widely from one industry to the next, comparing the asset turnover ratios of a retail company and a telecommunications company would not be very productive. Comparisons are only meaningful when they are made for different companies within the same sector.

operating profit ration

Operating margin measures how much profit a company makes on a dollar of sales, after paying for variable costs of production such as wages and raw materials, but before paying interest or tax. It is calculated by dividing a company’s operating profitby its net sales.

Operating Profit Margin = Operating Income / Sales Revenue

Operating income is often called earnings before interest and taxes (EBIT). Operating income or EBIT is the income that is left on the income statement, after all operating costs and overhead, such as selling costs, administration expenses and cost of goods sold(COGS) are subtracted:

Operating Income (EBIT) = Gross Income - (Operating Expenses + Depreciation & Amortization)

Operating margin should only be used to compare companies that operate in the same industry, and ideally have similar business models and annual sales. Companies in different industries with wildly different business models have very different operating margins. So comparing them would be meaningless.

To make it easier to compare profitability between companies and industries, many analysts use a profitability ratio which eliminates the effects of financing, accounting and tax policies: earnings before interest, taxes, depreciation and amortization(EBITDA). For example, by adding back depreciation, the operating margins of big manufacturing firms and heavy industrial companies are more comparable.

EBITDA is sometimes used as a proxy for operating cash flow, because it excludes non-cash expenses, such as depreciation. But EBITDA does not equal cash flow! That’s because it does not adjust for any increase in working capital or account for capital expenditure that is needed to support production and maintain a company’s asset base – as operating cash flow does.

Return of assets

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's management is at using its assets to generate earnings. Return on assets is displayed as a percentage and its calculated as:

ROA = Net Income / Total Assets

Note: Some investors add interest expense back into net income when performing this calculation because they'd like to use operating returns before cost of borrowing.

Sometimes, the ROA is referred to as "return on investment".

INVESTING  FINANCIAL ANALYSIS

Return on Assets - ROA

REVIEWED BY WILL KENTON

Updated Nov 20, 2017

What is Return on Assets - ROA

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a company's management is at using its assets to generate earnings. Return on assets is displayed as a percentage and its calculated as:

ROA = Net Income / Total Assets

Note: Some investors add interest expense back into net income when performing this calculation because they'd like to use operating returns before cost of borrowing.

Sometimes, the ROA is referred to as "return on investment".

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Return On Assets (ROA)

BREAKING DOWN Return on Assets - ROA

In basic terms, ROA tells you what earnings were generated from invested capital (assets). ROA for public companies can vary substantially and will be highly dependent on the industry. This is why when using ROA as a comparative measure, it is best to compare it against a company's previous ROA numbers or against a similar company's ROA.

Remember that a company's total assets is the sum of its total liabilities and shareholder's equity. Both of these types of financing are used to fund the operations of the company. Since a company's assets are either funded by debt or equity, some analysts and investors disregard the cost of acquiring the asset by adding back interest expense in the formula for ROA. In other words, the impact of taking more debt is negated by adding back the cost of borrowing to the net income, and using the average assets in a given period as the denominator. Interest expense is added because the net income amount on the income statement excludes interest expense. An analyst that chooses to ignore the cost of debt will use this formula:

ROA = (Net Income + Interest Expense) / Average Total Assets

The ROA figure gives investors an idea of how effective the company is in converting the money it invests into net income. The higher the ROA number, the better, because the company is earning more money on less investment. Let's evaluate the ROA for three companies in the retail industry - Macy's, J.C. Penney, and Sears. The data in the table is for the fiscal year ended January 28, 2017.

Company	Net Income	Total Assets	ROA
Macy's	$611 million	$19.85 billion	3.08%
J.C. Penney	$1 million	$9.31 billion	0.011%
Sears	$ –2.22 billion	$9.36 billion	–23.72%

Due to the increasing popularity of e-commerce, brick-and-mortar retail companies have taken a hit in the level of profits they generate using their available assets. Every dollar that Macy's invested in assets in 2016 generated 3 cents of net income. On the other hand, every dollar used to purchase assets in Sears translated into a 24-cent loss for the company. Sears' negative ROA coupled with its high total debt of $13.19 billion means that the company is receiving little income, even though its investing a high amount of capital into its operations. Given that the company is not generating any positive income per invested capital, this investment might not be a good option for investors.

It appears that Macy's is better at converting its investment into profits, and J.C.Penney may need to re-evaluate its business strategy as it's ROA is very low. When you really think about it, management's most important job is to make wise choices in allocating its resources. Anybody can make a profit by throwing a ton of money at a problem, but very few managers excel at making large profits with little investment.

ROA is most useful for comparing companies in the same industry, as different industries use assets differently. For example, the ROA for service-oriented firms, such as banks, will be significantly higher than the ROA for capital intensive companies, such as construction or utility companies.