Below are the financial statements for two firms, Time Warner and Walt Disney, for 2012 and 2013.

a. How did Time Warner's profit margins change from 2012 to 2013? To what would you attribute the differences? Answer the same question for Disney.

b. Compare the profit margins between Time Warner and Disney. How are they different? How would you explain these differences?

c. What differences do you notice in the common-sized balance sheets that might

indicate that one of the firms is doing better than the other?

Time Warner, Inc. Balance Sheet and Common-Sized Balance Sheet for Years Ending December 31, 2012 and December 31, 2013 ($ millions)

Walt Disney Co. Annual Income Statement for Years Ending September 28, 2012 and September 29, 2013 (in $ millions except earnings per share)

Walt Disney Co. Balance Sheet for Years Ending September 28, 2012 and September 29, 2013 ($ millions)

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2012 2013 DollarsPercentage of Sales Dollars Percentage of Sales Cost of goods sold Gross protits Selling, general, and administrative expenses Depreciation and amortization Other operating expenses Operating income Interest expense Nonoperating income (losS) Earnings before taxes Income taes Net income $12,795 (22.0%) (0.9%) $13,565 6,465) (251) (21.7%) 248) 5,918 (1,253) 6,605 (1.190) (44%) 4,448 15.5% 5,303 17.8% Common shares outstanding Earnings per share 932.00 $ 3.14 942.00 $ 3.92 December 31, 2012 December 31, 2013 Dollars Dollars Percentage of Assets 42% 10.8% Percentage ot Assets 2.7% 11.6% Cash and short-term investments 7,868 2,028 7,385 Other current assets Total current assets Gross fxed assets Accumulated depreciation Net fued assets Other assets 13,264 57,607 19.5% 84.6% $12,844 $57,849 18.9% 85.1% 52,779 775% $52,660 17.4% LIABILITIES Accounts payable and accruals Short-term motes payable Other current liabilities Total current liabilities Long-term debt Deferred taxes Other liabilities TOTAL LIABILITIES EQUITY Common stock Par value Capital surplus Total common stock sold Less: Treasury stock (accumulated deficit) Total common stock Retained eamings Total common equity TOTAL LIABILITIES AND EQUITY 8,039 11.8% 7.322 10.8% 0.1% $9,799 19,122 2,127 14.4% 28,1% 8,383 20,099 2,642 12.3% 29.6% 38,292 562% $38,090 속幟 $154,594 2210% $153,427 225.6% $119,517 175.5% 170.3% 2012 2013 Percentage of Sales Percentage of Sales $42,278 8,863 8,724 $45,041 9,450 9,167 Cost of goods sold Gross protits Selling, general, admin, and depreciation expense Operating income Interest expense Non-operating income (loss) Earnings before taxes Income taxes Net income (loss) 21% 21% 21% 9,260 9,620 21% Common shares outstanding Earnings per share 1,800 3.43 3.69 September 28, 2012 September 23, 2013 Dollars Percentage of Sales Dollars Percentage of Sales ASSETS Cash and cash equivralents Recelvables 3,387 6,540 1,537 3,931 6,967 Other current assets Total current assets Gross fixed assets Accumulated depreciation Net fxed assets Other assets TOTAL ASSETS LIABILITIES Accounts payable and accruals Shorl-term notes payable $14,109 $41,192 $13,709 18% 17% 51% $17,895 24% $18 733 23% 4,619 3,614 4,899 1,512 Other curent labilities $12,813 0,981 2,251 17% 15% $11,704 13,050 14% Total current liabilities Long-term debt Deferred tawes Other liabilities TOTAL LIABILITIES 16% Common equity Total common stock sold Less: Treasury stock Total common stock Retained earnings Other equity Total common equit OTAL LIABILITIES AND EQUITY $31731 $33,440 41% ($1,142 47758 42,985 57% 59%