Question
Activision Blizzard is an American Company headquartered in Santa Monica, California. It is listed in NASDAQ and traded in USD under the stock code ATVI.
Activision Blizzard is an American Company headquartered in Santa Monica, California. It is listed in NASDAQ and traded in USD under the stock code ATVI. The company is in the Electronic Gaming & Multimedia industry, developing and distributing content and services on video game consoles, personal computers, and mobile devices all over the world. The companys key product franchise includes Call of Duty, World of Warcraft, Diablo, Candy Crush, and Hearthstone. These games and many others, are enjoyed by people of all ages during their leisure and recreational time.
Below is the breakdown of ROE based on semi-annual data provided by Activision Blizzard.
Date | ROE = | Net Income x Revenues | Revenues x Total Assets | Total Assets Total Equity |
Jun 30, 2020 | 13.25% | 25.94% | 0.35 | 1.48 |
Dec 31, 2019 | 11.74% | 23.16% | 0.33 | 1.55 |
Jun 30, 2019 | 14.08% | 23.70% | 0.41 | 1.46 |
Dec 31, 2018 | 15.96% | 24.17% | 0.42 | 1.57 |
Part a. Suppose there were no substantial changes in the debt and equity accounts. For each of the three ratios, comment on how they are contributing to the changes in ROE. Explain what these changes mean for the company, and whether it makes sense for a company operating in leisure and entertainment.
Part b. What is your estimation of the current demand for these leisure activities, and your view on the value creating ability of Activision Blizzard for the next half a year (until 30 Jun 2021)? Elaborate.
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