Part B: Executive Memo and Video Presentation (Due: Sunday, Midnight of Week 5)

Present a synopsis of your analysis in an executive memo you would feel comfortable turning in to your CEO or to Jack. You may organize the memo as you see fit, but it must follow the principles of good business communication. To support your executive memo, record a brief video presentation highlighting the key points of your findings. The requirements for each component are outlined below.

Executive Memo:

1. Profitability/Net Income Margins

• What are the after-tax net income margins (i.e., net profit margins) for both companies?
• How do they compare?
• Who achieves the higher net income margin? Why?
• Tip:Analyze the major cost structure line items in the income statement (COGS, SG&A, interest, other, and taxes) as percentages of net sales, so you can identify reasons for better net income margins. Identify and comment on the differences. You may not know why a particular cost item like COGS is higher or lower, andthat's okay. Your CEO only wants to know which cost-structure items are higher or lower for each company.

1. Accounts Receivable Management

• Who takes longer to collect AR (Days Sales Outstanding ratio)?
• What are their respective 3-year trends for DSO?
• What options could the company consider to improve DSO?

1. Cash Is King

• How much net cash from operations did each company generate last year?
• Which company has done a better job generating cash from operations?
• In layman's terms, how is each company spending their cash with respect to reinvestments in
• the business, changes in debt, and returning money to shareholders?

1. Liquidity

• How do the companies compare in terms of the current ratio, and what are their respective 3-
• year trends?
• Do their current ratios indicate that either of these companies could go bankrupt soon?
• Explain.
• Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This course guide is subject to change based on the needs of the class.

530-Assignment 1 (1194) Page 2 of 6

JWI 530: Financial Management I

Assignment 1

Submission Requirements

• Your executive memo should be single-spaced and 2 pages long, using 10- or 12-point font. You may also include an appendix with additional references, graphs, charts, and tables for additional support if needed.

DISNEYNETFLIXUNITS (eg Billions, Millions, Thousands - Please input)MillionsMillionsFY 2018FY 2017FY 2016FY 2015Variance Trend Analysis (Posiitve, Neutral, Negative)

FY 2018

FY 2017

FY 2016

FY 2015Variance Trend Analysis (Posiitve, Neutral, Negative)Total Revenue (or Sales)59,434

55,13755,632

52,465Negative4,186,8413,285,7552,477,5411,823,333PositiveCost of Goods Sold/Cost of Sales

-44,597-41,264

-41,274-39,241Negative9,968,0008,033,0006,257,0004,591,000PositiveTotal Selling, General & Administrative (SG&A)-8,860-8,176-8,754-8,523Neutral630,294431,043315,663407,329NeutralTotal Interest Expense-574-385-260-117Negative

-420,493

-238,204

-150,114-132,716PositiveGross Profit (Gross Income)

26,70824,831

25,639

24,101Positive1,453,4411,071,421823,122

573,968PositiveGross Margin104,031

96,40196,90691,706

Positive-5,781,159-4,747,245

-3,779,459-2,767,667PositiveNet Profit (Net Income)12,5988,9809,3918,382

Positive1,211,242558,929186,678122,641Positive

Net Margin0.2119662150.16286704

0.168805723

0.159763652Positive0.289297350.170106720.07534810.06726199PositiveSG&A as % of Sales-0.750361746-0.748390373-0.74191113-0.74794625Negative2.380792582.444795792.525487972.51791637PositiveInterest Expense as % of Sales-0.009657772-0.006982607-0.004673569-0.002230058Positive-0.100432-0.072496-0.0605899-0.0727876PositiveReturn on Sales (ROS)0.2119662150.162867040.1688057230.159763652Positive0.289297350.170106720.07534810.06726199Positive

Return on Total Assets (ROA)0.1277713540.0937477160.1020394860.095053412Positive

0.046632150.02939760.013739850.01202024PositiveReturn on Equity (ROE)0.2384539670.1995378190.1984447310.172274175Positive0.231207550.156040160.069661170.05515857Positive

Cash

4,1554064

46104269Neutral3,794,4832,822,7951,733,7822,310,715PositiveAccounts Receivable8,2688,0138,458

7,613Negative0000NeutralInventory

-17

-5

186

1Negative0

00

0NeutralTotal Current Assets16,82515,88916,96616,758Neutral9,694,1357,669,9741,467,5761,809,330NeutralTotal Assets98,59895,78992,03388,182

Positive25,974,40019,012,74213,586,61010,202,871PositiveAccounts Payable9,4798,8559,1307,844Negative199,198

74,559

32,247

51,615NegativeTotal Current Liabilities17,86019,59516,84216,334

Neutral6,487,3205,466,3124,586,6573,529,624NegativeLong Term Debt (excluding CPOLTD)

170,840191,190

164,830

127,700Negative10,360,058

6,499,432

3,364,311

2,371,362NegativeTotal Debt446,400496,400447,100

395,300Negative14,873,1959,048,8284,730,3693,425,813NegativeRetained Earnings82,67972,60666,08859,028Positive2,942,3591,731,1171,128,603941,925Positive

Total Equity52,83245,004

47,323

48,655

Positive5,238,765

3,581,956

2,679,800

2,223,426PositiveCurrent Ratio0.1811395770.2045641980.1829995760.185230546Neutral0.249758220.287507820.337586570.3459442NeutralLong Term Debt to Equity3.2336462754.2482890413.4830843352.624601788

Negative1.97757639

1.81449242

1.25543361

1.06653516NegativeTotal Debt to Equity0.3380526950.4354057420.3558945970.335710616Neutral1.238330031.5260691.711566911.58747087NeutralAR Turnover (times per year)0.1453289080.15203480.145106261Neutral0000NeutralDays Sales Outstanding(in days)53.0450514255.49270204

52.96378538Negative0000Neutral

Cash Flow From Operations14,29512,34313,13611,385Negative-2,680,479-1,785,948-1,473,984-749,439NegativeCash Flow from Investing-5,336-4,111-5,758-4,245Neutral-339,12034,32949,765-179,192NeutralCash Flow from Financing-8,843-8,959-7,220

-5,801Negative4,048,5273,076,9901,091,6301,640,277PositiveCapital Expenditures4,4653,6234,773

4,270

Neutral-339,120

-233,710

-185,770

-171,120NegativeChange in Long Term Debt (Proceeds - Payments)

2,090

2,940

2,710633Negative3,930,0002,990,000

989,300

1,480,000NegativeDividends-2,515-2,445-2,313-3,063Neutral0000NeutralCash used in Acquisitions-1581-417-850-

Neutral-38,586

-53,720

-77,177

-77,958Positive

Free Cash Flow9,830

8,720

8,363

7,115Neutral-2,341,359-1,552,238-1,288,214-578,319NegativeFree Cash Flow as % of Net Income24.0518894922.3860565523.6123094621.70018107Positive-64.021514-54.354266

-59.493829

-41.102695Negative