Explanation of Financial Statements and Cash Flow Management

Explanation of Financial Statements and Cash Flow Management

Instructions/Descriptions

Explanation of Financial Statements and Cash Flow Management

Explanation, Financial, Statements, Cash, Flow, Management

Business Selection

The business I have chosen for this project is Disney. I chose Disney because it is the most diversified corporation of the options with interests in parks experiences, media networks, studio entertainment, consumer products, and vacation and travel. Disney company was founded by brothers Roy Disney and Walt Disney in 1923 under the name Walt Disney Productions (Carillo et al., 2015).

The company’s diverse offerings make the company an interesting case study since each part can help reinforce another part of business when things go astray. A good instance was during the Covid-19 epidemic when Disney theme park faced challenges due to low turnout; Hulu paired with ESPN+ and Disney+ to keep the company’s outlook stable when one business was experiencing a difficult period. Disney’s diversification necessitates shareholder value and aptitude.

Financial Statements

Balance sheet

Income Statement

Cash flow statement

Financial Health of Disney

To determine the financial health of Disney, this paper will use the Current Ratio. This is a liquidity ratio that helps determine the company’s ability to pay short-term obligations. A current ratio that is below 1.00 signifies bad or poor financial health.

Current Ratio = Current assets/current liabilities

Current assets = 202,221,000

Current liabilities = 111,099,000

Current ratio = 202,221,000/111,099,000 = 1.82

Based on the above calculation, it is evident that Disney has sound or good financial health since the ratio is more than 1.00.

Financial Statement Role

A financial statement is a crucial item for any business because it provides a visual representation of the company to investors and other interested parties. Financial statements include the balance sheet, income statement, statement of shareholders’ equity, and cash flow statement. Financial statements allow the top management to see the financial implications of the decisions they made and how to make changes that will make the business more profitable (Abukari, Jog & McConomy, 2000).

A company’s financial statement is also significant as it contains important information that investors can use to make decisions. Financial statements are also used to dictate a company’s financial health, an important consideration to investors.

Cash flow Management

Cash flow management is crucial as it allows organizations to regulate their spending habits in that they do not spend more than they are earning (Morar, 2015). Cash flow is an important area that management should monitor constantly. Cash flow management is an area that I can relate to, having worked as an executive assistant in a local winery.

At one time, our chief financial officer noted that the company was facing a major cash flow problem; this was because of excessive-high debt repayments. This was not the first time the company was experiencing this problem, given that the CEO has a high affinity for Merchant Cash Advances. Luckily, the shareholders were able to raise enough money to finance the daily operations of the business. The CEO was later let go from the position.

References

Abukari, K., Jog, V. M., & McConomy, B. J. (2000). The role and the relative importance of financial statements in equity valuation. Available at SSRN 254972.

Carillo, C., Crumley, J., Thieringer, K., & Harrison, J. S. (2012). The Walt Disney Company: A Corporate Strategy Analysis.

Morar, A. (2015). THE IMPORTANCE OF CASH FLOW IN UNDERLINING COMPANIES FINANCIAL POSITION. Annals Constantin Brancusi’University of Targu-Jiu. Economy Series, (6).

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