Twenty-First Century Fox Inc. (NASDAQ:FOX)

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Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

Twenty-First Century Fox Inc., effective income tax rate (EITR) reconciliation

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
U.S. federal income tax rate	28.00%	35.00%	35.00%	35.00%	35.00%	35.00%
Impact of U.S. tax reform	-35.00%	0.00%	0.00%	0.00%	0.00%	0.00%
Purchase (sale) of interest in subsidiaries	0.00%	0.00%	0.00%	0.00%	0.00%	-4.00%
State and local taxes	2.00%	1.00%	0.00%	1.00%	1.00%	1.00%
Effect of foreign operations	0.00%	-2.00%	-3.00%	-2.00%	-5.00%	-2.00%
Adjustments for tax matters, net	-3.00%	0.00%	1.00%	2.00%	0.00%	-1.00%
Valuation allowance movements	2.00%	1.00%	2.00%	-20.00%	0.00%	-7.00%
Nontaxable income attributable to noncontrolling interests	-2.00%	-2.00%	-2.00%	-1.00%	-2.00%	-1.00%
Domestic production activities deduction	-2.00%	-3.00%	-2.00%	-1.00%	-2.00%	-1.00%
Other	2.00%	0.00%	-4.00%	-1.00%	-2.00%	-1.00%
Effective tax rate for income from continuing operations	-8.00%	30.00%	27.00%	13.00%	25.00%	19.00%

The effective income tax rate for income from continuing operations exhibited significant volatility between 2013 and 2018, fluctuating from a low of 13% in 2015 to a peak of 30% in 2017, before concluding the period at -8% in 2018. This instability was driven primarily by one-time tax reform adjustments and periodic movements in valuation allowances, rather than steady operational shifts.

Statutory Rate and Legislative Impact: The U.S. federal income tax rate remained constant at 35.00% from 2013 through 2017. A notable transition occurred in 2018, where the statutory rate decreased to 28.00%. This period also saw a substantial one-time negative impact of 35.00% resulting from U.S. tax reform, which served as the primary catalyst for the negative effective tax rate of -8.00% recorded in 2018.
Valuation Allowance Movements: Valuation allowance adjustments acted as a major source of volatility in the effective tax rate. A significant downward adjustment of 20.00% in 2015 contributed heavily to that year's low effective rate of 13.00%. In contrast, positive adjustments of 1.00% to 2.00% were observed from 2016 to 2018, exerting upward pressure on the tax burden during those years.
Recurring Tax Reductions: Several consistent factors provided regular reductions to the effective tax rate across the analysis period. The domestic production activities deduction consistently lowered the rate by 1.00% to 3.00% annually. Similarly, nontaxable income attributable to noncontrolling interests provided a steady reduction of 1.00% to 2.00% each year. The effect of foreign operations also generally lowered the rate, peaking at a 5.00% reduction in 2014.
Other Variable Adjustments: Minor fluctuations were introduced by state and local taxes, which remained stable at 1.00% for most of the period before increasing to 2.00% in 2018. Adjustments for tax matters remained relatively marginal, though a 3.00% reduction was noted in 2018. Other miscellaneous factors typically provided small reductions, with the exception of a 2.00% increase in 2018.

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Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

Twenty-First Century Fox Inc., components of deferred tax assets and liabilities

US$ in millions

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
Net operating loss carryforwards	460)	437)	432)	380)	284)	1,109)
Capital loss carryforwards	35)	36)	35)	36)	1,360)	1,676)
Foreign tax credit carryforwards	170)	132)	—)	173)	561)	474)
Accrued liabilities	249)	741)	755)	981)	733)	653)
Other	320)	586)	259)	222)	293)	231)
Deferred tax assets before valuation allowance	1,234)	1,932)	1,481)	1,792)	3,231)	4,143)
Valuation allowance	(821)	(714)	(575)	(453)	(2,338)	(3,284)
Deferred tax assets after valuation allowance	413)	1,218)	906)	1,339)	893)	859)
Basis difference and amortization	(1,019)	(2,333)	(2,295)	(2,418)	(2,898)	(2,449)
Revenue recognition	(437)	(553)	(504)	(511)	(528)	(505)
Sports rights contracts	(773)	(917)	(717)	(383)	(135)	(128)
Deferred tax liabilities	(2,229)	(3,803)	(3,516)	(3,312)	(3,561)	(3,082)
Net deferred tax assets (liabilities)	(1,816)	(2,585)	(2,610)	(1,973)	(2,668)	(2,223)

The financial data reveals a consistent net deferred tax liability position from 2013 through 2018, with the net liability fluctuating between a high of 2,668 million USD in 2014 and a low of 1,816 million USD in 2018. A significant transformation in the composition of deferred tax assets and liabilities occurred over this six-year period, characterized by a reduction in tax carryforwards and a substantial decrease in the valuation allowance.

Deferred Tax Asset Components: Gross deferred tax assets experienced a sustained decline, falling from 4,143 million USD in 2013 to 1,234 million USD in 2018. This was primarily driven by the depletion of capital loss carryforwards, which plummeted from 1,676 million USD in 2013 to 35 million USD by 2018. Net operating loss carryforwards showed more volatility, dropping sharply in 2014 before stabilizing and slightly increasing to 460 million USD by 2018. Foreign tax credit carryforwards also declined from a peak of 561 million USD in 2014 to 170 million USD in 2018.
Valuation Allowance Trends: There was a marked reduction in the valuation allowance, which decreased from 3,284 million USD in 2013 to 821 million USD in 2018. This downward trend suggests an increased management expectation regarding the realizability of deferred tax assets. Consequently, the deferred tax assets after valuation allowance remained relatively stable between 2013 and 2017, before dropping to 413 million USD in 2018.
Deferred Tax Liability Composition: Total deferred tax liabilities remained substantial, peaking at 3,803 million USD in 2017 before decreasing to 2,229 million USD in 2018. The most significant contributor was the basis difference and amortization, which stayed between 2,300 million USD and 2,900 million USD for most of the period before a sharp reduction to 1,019 million USD in 2018. Conversely, liabilities related to sports rights contracts grew significantly, increasing from 128 million USD in 2013 to a peak of 917 million USD in 2017, reflecting expanding commitments in that sector. Revenue recognition liabilities remained relatively constant, ranging between 437 million USD and 553 million USD.
Net Deferred Tax Position: The net deferred tax position remained negative throughout the analyzed period, indicating that deferred tax liabilities consistently outweighed deferred tax assets. The net liability reached its maximum in 2014 at 2,668 million USD and showed a general trend toward reduction by 2018, ending at 1,816 million USD, largely due to the simultaneous reduction in both gross deferred tax assets and total deferred tax liabilities in the final year.

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Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

Twenty-First Century Fox Inc., deferred tax assets and liabilities, classification

US$ in millions

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
Current deferred tax assets	—)	—)	—)	28)	—)	9)
Current deferred tax liabilities	—)	—)	—)	220)	—)	—)
Non-current deferred tax assets	76)	197)	278)	301)	61)	48)
Non-current deferred tax liabilities	1,892)	2,782)	2,888)	2,082)	2,729)	2,280)

The financial position regarding deferred taxes is characterized by a substantial predominance of deferred tax liabilities over deferred tax assets throughout the analyzed period. The overall posture indicates significant temporary differences between accounting and tax treatments of assets and liabilities, resulting in a consistent net deferred tax liability position.

Non-current Deferred Tax Liabilities: A volatile trend is observed in non-current deferred tax liabilities, with balances fluctuating between $1.89 billion and $2.89 billion. The balance peaked in 2016 at $2,888 million before experiencing a significant decline to $1,892 million by June 30, 2018, representing a reduction of approximately 34% from the 2016 high.
Non-current Deferred Tax Assets: Non-current deferred tax assets exhibited a sharp increase in 2015, rising to $301 million from $61 million in 2014. Following this peak, a consistent downward trajectory was observed over the subsequent three years, with the balance receding to $76 million by June 30, 2018.
Current Deferred Tax Classification: Current deferred tax components are reported infrequently. A current deferred tax liability of $220 million was recorded in 2015, while current deferred tax assets remained marginal, reaching a maximum of $28 million in 2015. The lack of consistent reporting for these items suggests that the vast majority of deferred tax timing differences are classified as non-current.
Net Deferred Tax Position: The net deferred tax position remains heavily weighted toward liabilities. While the non-current deferred tax assets peaked in 2015, they were insufficient to significantly offset the non-current deferred tax liabilities, which consistently remained in the multi-billion dollar range. The narrowing of the gap in 2018 is primarily attributable to the reduction in non-current deferred tax liabilities.

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Twenty-First Century Fox Inc., Financial Data: Reported vs. Adjusted

Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

Twenty-First Century Fox Inc., adjustments to financial statements

US$ in millions

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
Adjustment to Current Assets
Current assets (as reported)	19,333)	16,286)	14,949)	17,376)	15,376)	15,567)
Less: Current deferred tax assets, net	—)	—)	—)	28)	—)	9)
Current assets (adjusted)	19,333)	16,286)	14,949)	17,348)	15,376)	15,558)
Adjustment to Total Assets
Total assets (as reported)	53,831)	50,724)	48,365)	50,051)	54,793)	50,944)
Less: Current deferred tax assets, net	—)	—)	—)	28)	—)	9)
Less: Noncurrent deferred tax assets, net	76)	197)	278)	301)	61)	48)
Total assets (adjusted)	53,755)	50,527)	48,087)	49,722)	54,732)	50,887)
Adjustment to Current Liabilities
Current liabilities (as reported)	8,244)	7,238)	7,068)	7,262)	8,856)	8,435)
Less: Current deferred tax liabilities, net	—)	—)	—)	220)	—)	—)
Current liabilities (adjusted)	8,244)	7,238)	7,068)	7,042)	8,856)	8,435)
Adjustment to Total Liabilities
Total liabilities (as reported)	32,269)	33,092)	32,932)	31,244)	33,351)	30,300)
Less: Current deferred tax liabilities, net	—)	—)	—)	220)	—)	—)
Less: Noncurrent deferred tax liabilities, net	1,892)	2,782)	2,888)	2,082)	2,729)	2,280)
Total liabilities (adjusted)	30,377)	30,310)	30,044)	28,942)	30,622)	28,020)
Adjustment to Total Twenty-First Century Fox, Inc. Stockholders’ Equity
Total Twenty-First Century Fox, Inc. stockholders’ equity (as reported)	19,564)	15,722)	13,661)	17,220)	17,418)	16,998)
Less: Net deferred tax assets (liabilities)	(1,816)	(2,585)	(2,610)	(1,973)	(2,668)	(2,223)
Total Twenty-First Century Fox, Inc. stockholders’ equity (adjusted)	21,380)	18,307)	16,271)	19,193)	20,086)	19,221)
Adjustment to Net Income Attributable To Twenty-First Century Fox, Inc. Stockholders
Net income attributable to Twenty-First Century Fox, Inc. stockholders (as reported)	4,464)	2,952)	2,755)	8,306)	4,514)	7,097)
Add: Deferred income tax expense (benefit)	(903)	89)	466)	171)	(39)	480)
Net income attributable to Twenty-First Century Fox, Inc. stockholders (adjusted)	3,561)	3,041)	3,221)	8,477)	4,475)	7,577)

The removal of deferred taxes from the financial statements results in a consistent and significant modification of the balance sheet structure, primarily characterized by a reduction in reported liabilities and a corresponding increase in stockholders' equity. While current assets remain largely unaffected, the adjustments to total assets and total liabilities reveal a systematic shift in the representation of the company's financial position over the six-year period ending June 30, 2018.

Impact on Asset Valuation: Reported current assets and adjusted current assets show negligible variance, with the most notable deviation occurring in 2015. Total assets exhibit a consistent downward adjustment across all years. The gap between reported and adjusted total assets is relatively small compared to other balance sheet items, indicating that deferred tax assets constitute a minor portion of the total asset base.
Analysis of Liabilities: A substantial reduction is observed in adjusted total liabilities compared to reported values. This reduction is most pronounced between 2013 and 2017, where the difference consistently exceeds 2.5 billion US dollars. The removal of deferred tax liabilities significantly lowers the reported debt profile, suggesting that a large portion of the reported total liabilities is comprised of future tax obligations rather than immediate operational debts.
Adjustment of Stockholders' Equity: Stockholders' equity shows a consistent and significant increase upon adjustment. This positive variance mirrors the reduction in total liabilities, reflecting a shift in the accounting treatment of deferred taxes from a liability to an equity component. For instance, in 2016, adjusted equity increased by approximately 2.6 billion US dollars over reported equity, enhancing the perceived solvency and net worth of the entity.
Net Income Fluctuations: The effect of deferred tax removal on net income is variable. In 2013, 2015, 2016, and 2017, adjusted net income exceeded reported net income, indicating that deferred tax adjustments provided a positive impact on the bottom line. However, in 2014 and 2018, adjusted net income was lower than reported figures, particularly in 2018 where a significant decrease of approximately 903 million US dollars is observed, suggesting a reversal or different recognition pattern of deferred tax items in those specific periods.

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Twenty-First Century Fox Inc., Financial Ratios: Reported vs. Adjusted

Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

Twenty-First Century Fox Inc., adjusted financial ratios

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
Current Ratio
Reported current ratio	2.35	2.25	2.12	2.39	1.74	1.85
Adjusted current ratio	2.35	2.25	2.12	2.46	1.74	1.84
Net Profit Margin
Reported net profit margin	14.68%	10.36%	10.08%	28.65%	14.17%	25.64%
Adjusted net profit margin	11.71%	10.67%	11.79%	29.24%	14.04%	27.38%
Total Asset Turnover
Reported total asset turnover	0.56	0.56	0.56	0.58	0.58	0.54
Adjusted total asset turnover	0.57	0.56	0.57	0.58	0.58	0.54
Financial Leverage
Reported financial leverage	2.75	3.23	3.54	2.91	3.15	3.00
Adjusted financial leverage	2.51	2.76	2.96	2.59	2.72	2.65
Return on Equity (ROE)
Reported ROE	22.82%	18.78%	20.17%	48.23%	25.92%	41.75%
Adjusted ROE	16.66%	16.61%	19.80%	44.17%	22.28%	39.42%
Return on Assets (ROA)
Reported ROA	8.29%	5.82%	5.70%	16.60%	8.24%	13.93%
Adjusted ROA	6.62%	6.02%	6.70%	17.05%	8.18%	14.89%

The adjustment of financial ratios through the removal of deferred taxes reveals distinct variances between reported and adjusted performance metrics from 2013 to 2018. While liquidity and operational efficiency ratios remain largely unaffected by these adjustments, significant discrepancies are observed in solvency and profitability metrics, particularly regarding leverage and equity returns.

Liquidity and Asset Efficiency: The current ratio demonstrates a general upward trend, increasing from 1.74 in 2014 to 2.35 by 2018. The impact of removing deferred taxes on this ratio is negligible, with reported and adjusted values remaining nearly identical across the period. Similarly, total asset turnover remained remarkably stable, hovering between 0.54 and 0.58, with virtually no variance between reported and adjusted figures.
Profitability Margins and Returns: Net profit margins exhibited high volatility, peaking in 2015. In most years, the adjusted net profit margin exceeded the reported margin, although this trend reversed in 2018. Return on Assets (ROA) followed a similar pattern of volatility, generally showing an improvement in the adjusted figures compared to reported values, particularly from 2016 onward.
Solvency and Financial Leverage: A consistent and significant gap exists between reported and adjusted financial leverage. Reported leverage was systematically higher than adjusted leverage throughout the entire period, with a notable peak in 2016 at 3.54 before declining to 2.75 in 2018. This indicates that deferred tax accounting significantly inflates the reported leverage of the organization.
Return on Equity (ROE): Return on Equity displayed the most pronounced volatility, with a peak in 2015. Unlike ROA, the reported ROE was consistently higher than the adjusted ROE across all observed years. This divergence suggests that the inclusion of deferred taxes serves to artificially enhance the reported return to shareholders.

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Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
As Reported
Selected Financial Data (US$ in millions)
Current assets	19,333)	16,286)	14,949)	17,376)	15,376)	15,567)
Current liabilities	8,244)	7,238)	7,068)	7,262)	8,856)	8,435)
Liquidity Ratio
Current ratio¹	2.35	2.25	2.12	2.39	1.74	1.85
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets	19,333)	16,286)	14,949)	17,348)	15,376)	15,558)
Adjusted current liabilities	8,244)	7,238)	7,068)	7,042)	8,856)	8,435)
Liquidity Ratio
Adjusted current ratio²	2.35	2.25	2.12	2.46	1.74	1.84

2018 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= 19,333 ÷ 8,244 = 2.35

² Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= 19,333 ÷ 8,244 = 2.35

The company's liquidity position exhibited a general upward trajectory between June 30, 2013, and June 30, 2018. After an initial decline in the current ratio in 2014, the organization maintained a stronger capacity to cover short-term obligations, with the ratio remaining consistently above 2.0 from 2015 through 2018.

Asset and Liability Trends: Adjusted current assets showed a growth trend over the period, rising from 15,558 million USD in 2013 to a peak of 19,333 million USD in 2018. Adjusted current liabilities were most volatile between 2013 and 2015, decreasing from 8,435 million USD to a low of 7,042 million USD in 2015, before gradually increasing to 8,244 million USD by 2018. These movements indicate a strategic expansion of the current asset base relative to short-term debt.
Adjusted Current Ratio Analysis: The adjusted current ratio improved from 1.84 in 2013 to 2.35 in 2018. A notable divergence between reported and adjusted figures occurred in 2015, where the adjusted current ratio reached its highest point of 2.46, compared to a reported ratio of 2.39. This variance was primarily driven by a reduction in adjusted current liabilities. In the years 2014, 2016, 2017, and 2018, the adjusted current ratio aligned perfectly with the reported ratio, suggesting that adjustments to balance sheet items had a negligible impact on liquidity metrics during those specific fiscal years.

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Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Twenty-First Century Fox, Inc. stockholders	4,464)	2,952)	2,755)	8,306)	4,514)	7,097)
Revenues	30,400)	28,500)	27,326)	28,987)	31,867)	27,675)
Profitability Ratio
Net profit margin¹	14.68%	10.36%	10.08%	28.65%	14.17%	25.64%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Twenty-First Century Fox, Inc. stockholders	3,561)	3,041)	3,221)	8,477)	4,475)	7,577)
Revenues	30,400)	28,500)	27,326)	28,987)	31,867)	27,675)
Profitability Ratio
Adjusted net profit margin²	11.71%	10.67%	11.79%	29.24%	14.04%	27.38%

2018 Calculations

¹ Net profit margin = 100 × Net income attributable to Twenty-First Century Fox, Inc. stockholders ÷ Revenues
= 100 × 4,464 ÷ 30,400 = 14.68%

² Adjusted net profit margin = 100 × Adjusted net income attributable to Twenty-First Century Fox, Inc. stockholders ÷ Revenues
= 100 × 3,561 ÷ 30,400 = 11.71%

The financial results from 2013 to 2018 demonstrate significant volatility in both net income and profit margins. Profitability reached a peak in 2015 before experiencing a sharp contraction in 2016, followed by a period of relative stabilization and modest recovery through 2018.

Net Income Trajectory: Reported net income exhibited wide fluctuations, moving from US$ 7,097 million in 2013 to a high of US$ 8,306 million in 2015, before falling to its lowest point of US$ 2,755 million in 2016. Adjusted net income followed a similar pattern, peaking at US$ 8,477 million in 2015 and ending the period at US$ 3,561 million in 2018.
Adjusted Net Profit Margin Trends: The adjusted net profit margin showed a cyclical trend, beginning at 27.38% in 2013 and peaking at 29.24% in 2015. A significant downward shift occurred in 2016, where the margin dropped to 11.79%. For the remainder of the period, the adjusted margin remained constrained, ending at 11.71% in 2018, representing a substantial decrease from the 2013-2015 average.
Analysis of Reported versus Adjusted Metrics: A consistent variance is observed between reported and adjusted figures, with adjusted net income and margins generally exceeding reported values. This discrepancy was most pronounced in 2016 and 2018, suggesting that non-recurring expenses or specific accounting adjustments negatively impacted the reported earnings. In 2016, the adjusted net profit margin was 1.71 percentage points higher than the reported margin, indicating that one-time items had a notable effect on the bottom line during that fiscal year.

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Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
As Reported
Selected Financial Data (US$ in millions)
Revenues	30,400)	28,500)	27,326)	28,987)	31,867)	27,675)
Total assets	53,831)	50,724)	48,365)	50,051)	54,793)	50,944)
Activity Ratio
Total asset turnover¹	0.56	0.56	0.56	0.58	0.58	0.54
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Revenues	30,400)	28,500)	27,326)	28,987)	31,867)	27,675)
Adjusted total assets	53,755)	50,527)	48,087)	49,722)	54,732)	50,887)
Activity Ratio
Adjusted total asset turnover²	0.57	0.56	0.57	0.58	0.58	0.54

2018 Calculations

¹ Total asset turnover = Revenues ÷ Total assets
= 30,400 ÷ 53,831 = 0.56

² Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= 30,400 ÷ 53,755 = 0.57

An analysis of the financial position between June 30, 2013, and June 30, 2018, reveals a period of fluctuation in total assets coupled with a high degree of stability in asset efficiency ratios. The movement of assets does not show a linear growth or decline pattern, but rather a cyclical trend over the six-year period.

Asset Base Fluctuations: Reported total assets experienced an initial increase from 50,944 million US$ in 2013 to a peak of 54,793 million US$ in 2014. This was followed by a two-year decline, reaching a period low of 48,365 million US$ by June 30, 2016. A recovery trend emerged in the final two years, with assets rising to 53,831 million US$ by 2018. Adjusted total assets closely mirrored these movements, maintaining a consistent correlation with reported figures.
Total Asset Turnover Performance: The reported total asset turnover ratio demonstrated limited volatility, rising from 0.54 in 2013 to 0.58 in 2014 and 2015, before stabilizing at 0.56 from 2016 through 2018. The adjusted total asset turnover ratio showed similar stability, fluctuating marginally between 0.54 and 0.58. The consistency of these ratios suggests that the company maintained a steady rate of revenue generation relative to its asset base, despite the fluctuations in the absolute value of those assets.
Impact of Adjustments: A comparison between reported and adjusted metrics indicates that the adjustments applied to total assets were minimal. Consequently, the variance between reported and adjusted total asset turnover is negligible, often differing by only 0.01. This suggests that the adjustments did not materially alter the interpretation of the company's asset utilization efficiency.

Overall, the data indicates a stable operational efficiency. The ability to maintain a nearly constant asset turnover ratio while the asset base fluctuated by several billion dollars suggests a proportional scaling of revenue in alignment with asset changes.

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Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
As Reported
Selected Financial Data (US$ in millions)
Total assets	53,831)	50,724)	48,365)	50,051)	54,793)	50,944)
Total Twenty-First Century Fox, Inc. stockholders’ equity	19,564)	15,722)	13,661)	17,220)	17,418)	16,998)
Solvency Ratio
Financial leverage¹	2.75	3.23	3.54	2.91	3.15	3.00
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets	53,755)	50,527)	48,087)	49,722)	54,732)	50,887)
Adjusted total Twenty-First Century Fox, Inc. stockholders’ equity	21,380)	18,307)	16,271)	19,193)	20,086)	19,221)
Solvency Ratio
Adjusted financial leverage²	2.51	2.76	2.96	2.59	2.72	2.65

2018 Calculations

¹ Financial leverage = Total assets ÷ Total Twenty-First Century Fox, Inc. stockholders’ equity
= 53,831 ÷ 19,564 = 2.75

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Twenty-First Century Fox, Inc. stockholders’ equity
= 53,755 ÷ 21,380 = 2.51

An analysis of the financial position from 2013 to 2018 reveals a period of fluctuation in total assets and stockholders' equity, with a notable trend toward a lower leverage profile by the end of the period. Total reported assets fluctuated between a minimum of US$ 48,365 million in 2016 and a maximum of US$ 54,793 million in 2014. Concurrently, stockholders' equity experienced a significant contraction in 2016, falling to US$ 13,661 million, before recovering to a six-year peak of US$ 19,564 million by June 30, 2018.

Reported Financial Leverage: The reported leverage ratio exhibited volatility, increasing from 3.00 in 2013 to a peak of 3.54 in 2016. This spike correlates directly with the observed decline in reported stockholders' equity during that fiscal year. Following 2016, a consistent downward trend is observed, with the ratio decreasing to 2.75 by 2018, indicating a reduction in the reliance on debt relative to equity.
Adjusted Financial Leverage: The adjusted financial leverage ratio remained consistently lower than the reported ratio throughout the analyzed timeframe. It mirrored the trajectory of the reported figures, peaking at 2.96 in 2016 and reaching its lowest point of 2.51 in 2018. The adjusted ratio is consistently lower because the adjusted stockholders' equity is maintained at a higher value than the reported equity across all periods.
Impact of Adjustments on Risk Profile: The variance between reported and adjusted financial leverage suggests that the adjustments—associated with the treatment of income taxes—result in a more favorable interpretation of the company's solvency. By inflating the equity base through these adjustments, the financial leverage is reduced, presenting a lower risk profile than the figures presented in the reported financial statements.

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Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Twenty-First Century Fox, Inc. stockholders	4,464)	2,952)	2,755)	8,306)	4,514)	7,097)
Total Twenty-First Century Fox, Inc. stockholders’ equity	19,564)	15,722)	13,661)	17,220)	17,418)	16,998)
Profitability Ratio
ROE¹	22.82%	18.78%	20.17%	48.23%	25.92%	41.75%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Twenty-First Century Fox, Inc. stockholders	3,561)	3,041)	3,221)	8,477)	4,475)	7,577)
Adjusted total Twenty-First Century Fox, Inc. stockholders’ equity	21,380)	18,307)	16,271)	19,193)	20,086)	19,221)
Profitability Ratio
Adjusted ROE²	16.66%	16.61%	19.80%	44.17%	22.28%	39.42%

2018 Calculations

¹ ROE = 100 × Net income attributable to Twenty-First Century Fox, Inc. stockholders ÷ Total Twenty-First Century Fox, Inc. stockholders’ equity
= 100 × 4,464 ÷ 19,564 = 22.82%

² Adjusted ROE = 100 × Adjusted net income attributable to Twenty-First Century Fox, Inc. stockholders ÷ Adjusted total Twenty-First Century Fox, Inc. stockholders’ equity
= 100 × 3,561 ÷ 21,380 = 16.66%

The financial performance from June 30, 2013, to June 30, 2018, is characterized by significant volatility in profitability and a general downward trend in adjusted return on equity (ROE). While the company experienced a peak in efficiency in 2015, the subsequent years show a contraction in adjusted returns despite an overall increase in the adjusted equity base.

Adjusted ROE Trajectory: Adjusted ROE exhibited substantial fluctuations, starting at 39.42% in 2013, dipping to 22.28% in 2014, and reaching a period peak of 44.17% in 2015. Following this peak, a sharp decline occurred, with the ratio falling to 19.80% in 2016 and stabilizing at approximately 16.6% in 2017 and 2018. This indicates a diminished capacity to generate profit relative to adjusted shareholder equity in the latter half of the period.
Adjusted Net Income Volatility: The fluctuations in adjusted ROE are primarily driven by instability in adjusted net income. Adjusted net income peaked at 8,477 million USD in 2015 but fell precipitously to 3,221 million USD in 2016 and 3,041 million USD in 2017. Although a slight recovery to 3,561 million USD was noted in 2018, the income levels remained significantly below the 2013 and 2015 benchmarks.
Adjusted Stockholders' Equity Trends: Adjusted stockholders' equity showed a general upward trend over the six-year period, increasing from 19,221 million USD in 2013 to 21,380 million USD in 2018. The expansion of the equity base, combined with lower adjusted net income in the later years, contributed to the downward pressure on the adjusted ROE.
Comparison of Reported and Adjusted Metrics: A consistent divergence is observed between reported and adjusted ROE. In the final two years of the analysis, the gap widened; for instance, in 2018, reported ROE was 22.82% while adjusted ROE was only 16.66%. This suggests that the adjustments made to net income and equity had a materially negative impact on the perceived efficiency of capital utilization compared to the reported figures.

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Based on: 10-K (reporting date: 2018-06-30), 10-K (reporting date: 2017-06-30), 10-K (reporting date: 2016-06-30), 10-K (reporting date: 2015-06-30), 10-K (reporting date: 2014-06-30), 10-K (reporting date: 2013-06-30).

	Jun 30, 2018	Jun 30, 2017	Jun 30, 2016	Jun 30, 2015	Jun 30, 2014	Jun 30, 2013
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to Twenty-First Century Fox, Inc. stockholders	4,464)	2,952)	2,755)	8,306)	4,514)	7,097)
Total assets	53,831)	50,724)	48,365)	50,051)	54,793)	50,944)
Profitability Ratio
ROA¹	8.29%	5.82%	5.70%	16.60%	8.24%	13.93%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net income attributable to Twenty-First Century Fox, Inc. stockholders	3,561)	3,041)	3,221)	8,477)	4,475)	7,577)
Adjusted total assets	53,755)	50,527)	48,087)	49,722)	54,732)	50,887)
Profitability Ratio
Adjusted ROA²	6.62%	6.02%	6.70%	17.05%	8.18%	14.89%

2018 Calculations

¹ ROA = 100 × Net income attributable to Twenty-First Century Fox, Inc. stockholders ÷ Total assets
= 100 × 4,464 ÷ 53,831 = 8.29%

² Adjusted ROA = 100 × Adjusted net income attributable to Twenty-First Century Fox, Inc. stockholders ÷ Adjusted total assets
= 100 × 3,561 ÷ 53,755 = 6.62%

The financial performance from 2013 to 2018 is characterized by significant volatility in net income and return on assets (ROA), despite a relatively stable asset base. A pronounced peak in profitability occurred in 2015, followed by a sharp decline in 2016 and a gradual recovery toward 2018.

Net Income Trends: Reported net income exhibited substantial variance, peaking at 8,306 million USD in 2015 before dropping to 2,755 million USD in 2016. Adjusted net income followed a similar trajectory, peaking at 8,477 million USD in 2015. The adjustments generally resulted in higher net income figures compared to reported values, particularly between 2016 and 2018, indicating the removal of non-recurring expenses or specific tax impacts.
Asset Base Stability: Total assets remained consistently within the range of 48,087 million USD to 54,793 million USD throughout the period. The minimal variance between reported and adjusted total assets suggests that balance sheet adjustments had a negligible impact on the overall asset scale compared to the influence of income adjustments on profitability ratios.
Return on Assets (ROA) Analysis: The Adjusted ROA mirrored the volatility of net income, reaching a high of 17.05% in 2015. Following this peak, a significant contraction occurred, with the ratio falling to 6.70% in 2016 and remaining in the low single digits through 2017 and 2018. Notably, the Adjusted ROA consistently exceeded the Reported ROA from 2016 onward, suggesting that underlying operational efficiency was higher than reported figures indicated during the period of lower profitability.

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