CORPORATE FINANCE

Corporate Finance

Corporate Finance

Introduction

The two companies which I have chosen to perform the financial analysis are Walt Disney (NYSE:DIS) and CBS corporation (NYSE: CBS). The report will be analyzing the financial ratios of the two companies and depending on those ratios the companies share value and future recommendations are set.

Walt Disney

The Walt Disney Company (NYSE: DIS) (also known as Disney Enterprises, Inc., or simply Disney (Group SA) is the leading media and entertainment in the world. Founded on October 16 of 1923 by Walt Disney and Disney Roy , over time became one of the most profitable studios Hollywood , is the operator and licensee of theme parks and several television channels and cable networks such as ABC , ESPN and various children's channels branded Disney . The corporate offices are concentrated mainly in the Walt Disney Studios in Burbank, California.

Ratio Analysis

Valuation Ratios

P/E Ratio= Market Value per Share

Earnings per Share

2008

2009

2010

2011

Market Value Per Share

2.05

1.83

1.64

1.5

Earnings Per Share

2.34

1.76

2.07

2.52

P/E Ratio

0.87

1.03

0.79

0.59

P / E ratio (market price / earnings) - is the relation of price to earnings and is formed by comparing the prices to be paid per share to earnings in the accounting period falling in these shares. This indicator is one of the most popular indicators used to measure because it reflects the attitude of investors to the company (Buckley, 2003, pp. 23).

Book to Market= Book Value of Firm Market Value of Firm

2008

2009

2010

2011

Book Value

2.05

1.83

1.64

1.5

Market Value

14.32

19.24

19.48

18.15

Book to market

0.14

0.09

0.08

0.08

This ratio is calculated in order to determine the actual value of the company by comparing the market value of the firm to its book value. For stock valuation, this ratio is very important because if the ratio is calculated to be below 1 then the stock is said to be undervalued and if the ratio is calculated to be more than 1 then the stock is said to be overvalued. In the case of Walt Disney, the book to market ratio is at increasing trend as in 2008 the book to market ratio was 0.14 as compared to the ratio of 2011 which is 0.08 (Watson, 2009, pp. 111 ).

Profitability Ratios

2008

2009

2010

2011

Operating Margin %

15.9

10.91

13.36

15.21

Net Profit margin %

6.82

6.01

5.18

7.19

Return on Equity %

12.87

11.15

9.85

14.08

Operating Margin

The operating margin also called operating margin is a ratio that relates the operating income and revenue of a company. The operating margin used to assess the ability of a firm to generate profits without regard to its financial results or its non-recurring revenues (exceptional items). Operating margin is a measure of what proportion of profits from the sale of the company remains after paying variable costs of production as employee salaries, materials, etc. According to the theory of fundamental analysis, you need a high level of operating margin business, so the company was able to pay the fixed costs of its activities. The operating margin in 2008 was 15.9% which decreased to 15.21% in 2011 (Megginson, 2005, pp. 78).

Net Profit Margin

Fundamental analysis ratio of net profit margin is calculated by dividing the ultimate profit of the company by ...