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Analysis of Equity Method Investment
Difficulty: Advanced
- Selected Financial Data
- Summarized Financial Information
- Adjustments to Financial Data: Proportionate Consolidation
- Adjusted Ratios: Proportionate Consolidation (Summary)
- Adjusted Current Ratio
- Adjusted Net Profit Margin
- Adjusted Total Asset Turnover
- Adjusted Financial Leverage
- Adjusted Return on Assets (ROA)
Selected Financial Data
Walt Disney Co.’s selected financial data
USD $ in millions
| Sep 29, 2018 | Sep 30, 2017 | Oct 1, 2016 | Oct 3, 2015 | Sep 27, 2014 | Sep 28, 2013 | ||
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| Equity in the income (loss) of investees, net | |
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| Investments, equity basis | |
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| ROA (equity method investments only)1 | |
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Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-20).
2018 Calculations
1 ROA (equity method investments only) = 100 × Equity in the income (loss) of investees, net ÷ Investments, equity basis
= 100 × ÷ =
| Item | Description | The company |
|---|---|---|
| Equity in the income (loss) of investees, net | This item represents the entity’s proportionate share for the period of the net income (loss) of its investee (such as unconsolidated subsidiaries and joint ventures) to which the equity method of accounting is applied. Such amount typically reflects adjustments similar to those made in preparing consolidated statements, including adjustments to eliminate intercompany gains and losses, and to amortize, if appropriate, any difference between cost and underlying equity in net assets of the investee at the date of investment. | Walt Disney Co.’s equity in the income (loss) of investees, net declined from 2016 to 2017 and from 2017 to 2018. |
| Investments, equity basis | This item represents the carrying amount on the entity’s balance sheet of its investment in common stock of an equity method investee. This is not an indicator of the fair value of the investment, rather it is the initial cost adjusted for the entity’s share of earnings and losses of the investee, adjusted for any distributions (dividends) and other than temporary impairment losses recognized. | Walt Disney Co.’s investments, equity basis declined from 2016 to 2017 and from 2017 to 2018. |
| ROA (equity method investments only) | A profitability ratio calculated as equity in the income (loss) of investees, net divided by investments, equity basis. | Walt Disney Co.’s ROA of equity method investments deteriorated from 2016 to 2017 and from 2017 to 2018. |
Summarized Financial Information
Summarized financial information for Walt Disney Co.’s affiliates, subsidiaries, associates, and joint ventures
USD $ in millions
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-20).
| Item | Description | The company |
|---|---|---|
| Shareholders’ equity | Amount of equity, excluding noncontrolling interest, attributable to the equity method investment of the entity. | Shareholders’ equity of Walt Disney Co.’s affiliates, subsidiaries, associates, and joint ventures declined from 2016 to 2017 and from 2017 to 2018. |
| Net income | The amount of net income (loss) reported by an equity method investment of the entity. | Net income of Walt Disney Co.’s affiliates, subsidiaries, associates, and joint ventures declined from 2016 to 2017 and from 2017 to 2018. |
Adjustments to Financial Data: Proportionate Consolidation
Recognition of Walt Disney Co.’s proportionate share of affiliates, subsidiaries, associates, and joint ventures assets and liabilities instead of net equity.
Walt Disney Co., adjustments to financial data
USD $ in millions
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-20).
Walt Disney Co., Financial Data: Reported vs. Adjusted
Adjusted Ratios: Proportionate Consolidation (Summary)
Walt Disney Co., adjusted ratios
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-20).
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. | Walt Disney Co.’s adjusted current ratio deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
| Adjusted net profit margin | An indicator of profitability, calculated as net income divided by adjusted revenue. | Walt Disney Co.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
| Adjusted total asset turnover | An activity ratio calculated as adjusted total revenue divided by adjusted total assets. | Walt Disney Co.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
| Adjusted financial leverage | A measure of financial leverage calculated as adjusted total assets divided by total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Walt Disney Co.’s adjusted financial leverage increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Walt Disney Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Walt Disney Co., Ratios: Reported vs. Adjusted
Adjusted Current Ratio
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-20).
2018 Calculations
1 Current ratio = Current assets ÷ Current liabilities
= ÷ =
2 Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted current ratio | A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. | Walt Disney Co.’s adjusted current ratio deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-20).
2018 Calculations
1 Net profit margin = 100 × Net income attributable to The Walt Disney Company (Disney) ÷ Revenues
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Net income attributable to The Walt Disney Company (Disney) ÷ Adjusted revenues
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as net income divided by adjusted revenue. | Walt Disney Co.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-20).
2018 Calculations
1 Total asset turnover = Revenues ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Adjusted revenues ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as adjusted total revenue divided by adjusted total assets. | Walt Disney Co.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-20).
2018 Calculations
1 Financial leverage = Total assets ÷ Total Disney Shareholder’s equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Total Disney Shareholder’s equity
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted financial leverage | A measure of financial leverage calculated as adjusted total assets divided by total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income. |
Walt Disney Co.’s adjusted financial leverage increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-19), 10-K (filing date: 2013-11-20).
1 ROA = 100 × Net income attributable to The Walt Disney Company (Disney) ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Net income attributable to The Walt Disney Company (Disney) ÷ Adjusted total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Walt Disney Co.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |