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Analysis of Investments

Difficulty: Advanced


Investment Accounting Policy

Debt securities that Disney has the positive intent and ability to hold to maturity are classified as "held-to-maturity" and reported at amortized cost. Debt securities not classified as held-to-maturity and marketable equity securities are considered "available-for-sale" and recorded at fair value with unrealized gains and losses included in accumulated other comprehensive income/(loss) (AOCI). All other equity securities are accounted for using either the cost method or the equity method.

Disney regularly reviews its investments to determine whether a decline in fair value below the cost basis is other-than-temporary. If the decline in fair value is determined to be other-than-temporary, the cost basis of the investment is written down to fair value.

Source: 10-K (filing date: 2018-11-21).


Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Walt Disney Co., adjustment to Net Income Attributable To The Walt Disney Company (Disney)

USD $ in millions

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12 months ended Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014 Sep 28, 2013
Net income attributable to The Walt Disney Company (Disney) (as reported) 12,598  8,980  9,391  8,382  7,501  6,136 
Add: Market value adjustments for investments (18) 13  (87) 137 
Net income attributable to The Walt Disney Company (Disney) (adjusted) 12,605  8,962  9,404  8,295  7,506  6,273 

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).


Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Walt Disney Co., adjusted ratios

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Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014 Sep 28, 2013
Net Profit Margin
Reported net profit margin 21.20% 16.29% 16.88% 15.98% 15.37% 13.62%
Adjusted net profit margin 21.21% 16.25% 16.90% 15.81% 15.38% 13.93%
Return on Equity (ROE)
Reported ROE 25.83% 21.74% 21.71% 18.83% 16.68% 13.51%
Adjusted ROE 25.84% 21.69% 21.74% 18.63% 16.70% 13.81%
Return on Assets (ROA)
Reported ROA 12.78% 9.37% 10.20% 9.51% 8.91% 7.55%
Adjusted ROA 12.78% 9.36% 10.22% 9.41% 8.92% 7.72%

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 net profit margin An indicator of profitability, calculated as adjusted net income divided by 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 ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. Walt Disney Co.'s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by 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 Net Profit Margin

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Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014 Sep 28, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to The Walt Disney Company (Disney) 12,598  8,980  9,391  8,382  7,501  6,136 
Revenues 59,434  55,137  55,632  52,465  48,813  45,041 
Ratio
Net profit margin1 21.20% 16.29% 16.88% 15.98% 15.37% 13.62%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to The Walt Disney Company (Disney) 12,605  8,962  9,404  8,295  7,506  6,273 
Revenues 59,434  55,137  55,632  52,465  48,813  45,041 
Ratio
Adjusted net profit margin2 21.21% 16.25% 16.90% 15.81% 15.38% 13.93%

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 × 12,598 ÷ 59,434 = 21.20%

2 Adjusted net profit margin = 100 × Adjusted net income attributable to The Walt Disney Company (Disney) ÷ Revenues
= 100 × 12,605 ÷ 59,434 = 21.21%

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by 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 Return on Equity (ROE)

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Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014 Sep 28, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to The Walt Disney Company (Disney) 12,598  8,980  9,391  8,382  7,501  6,136 
Total Disney Shareholder's equity 48,773  41,315  43,265  44,525  44,958  45,429 
Ratio
ROE1 25.83% 21.74% 21.71% 18.83% 16.68% 13.51%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to The Walt Disney Company (Disney) 12,605  8,962  9,404  8,295  7,506  6,273 
Total Disney Shareholder's equity 48,773  41,315  43,265  44,525  44,958  45,429 
Ratio
Adjusted ROE2 25.84% 21.69% 21.74% 18.63% 16.70% 13.81%

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 ROE = 100 × Net income attributable to The Walt Disney Company (Disney) ÷ Total Disney Shareholder's equity
= 100 × 12,598 ÷ 48,773 = 25.83%

2 Adjusted ROE = 100 × Adjusted net income attributable to The Walt Disney Company (Disney) ÷ Total Disney Shareholder's equity
= 100 × 12,605 ÷ 48,773 = 25.84%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. Walt Disney Co.'s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Return on Assets (ROA)

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Sep 29, 2018 Sep 30, 2017 Oct 1, 2016 Oct 3, 2015 Sep 27, 2014 Sep 28, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income attributable to The Walt Disney Company (Disney) 12,598  8,980  9,391  8,382  7,501  6,136 
Total assets 98,598  95,789  92,033  88,182  84,186  81,241 
Ratio
ROA1 12.78% 9.37% 10.20% 9.51% 8.91% 7.55%
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income attributable to The Walt Disney Company (Disney) 12,605  8,962  9,404  8,295  7,506  6,273 
Total assets 98,598  95,789  92,033  88,182  84,186  81,241 
Ratio
Adjusted ROA2 12.78% 9.36% 10.22% 9.41% 8.92% 7.72%

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 = 100 × Net income attributable to The Walt Disney Company (Disney) ÷ Total assets
= 100 × 12,598 ÷ 98,598 = 12.78%

2 Adjusted ROA = 100 × Adjusted net income attributable to The Walt Disney Company (Disney) ÷ Total assets
= 100 × 12,605 ÷ 98,598 = 12.78%

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Walt Disney Co.'s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.