Walt Disney Solvency and Capital Structure

Topics: Finance, Term, Time Pages: 4 (887 words) Published: May 20, 2013
Debt to total assets ratio
Debts to total assets | 2011| 2010|
Walt Disney Co. October*| 0.48| 0.46|
Time Warner Inc. December*| 0.56| 0.51|
Industry Average | 0.36| 0.33|

The Debt to Total ratio measures the amount of debt a business has in proportion to assets and is also an indicator of financial leverage and shows the percentage of total assets that were financed by creditors, liabilities, debt. The debt to total assets ratio is calculated by dividing short-term and long-term debt by total assets. Included in the assets are accounts receivable, office equipment and real estate, while possible debt items are short-term loan interest and long-term bond debt. Usually small debt-to-asset ratios indicates lower lending risk, and a bigger ratio could have as a consequence higher borrowing interest rate and the possibility of some denial of new loans.

Time Warner Inc.'s Debt to Total Assets Ratio increased from 2010 to 2011, by 9.8 % and Walt Disney Co.'s on the other side only increased by 4.35 %. Both companies' ratios are above the industry average but Walt Disney definitely had not only better numbers but also better behavior from 2010 to 2011.

Long Term Debt to Equity Ratio
Long Term Debt to Equity | 2011| 2010|
Walt Disney Co. October*| 0.29| 0.27|
Time Warner Inc. December*| 0.65| 0.50|
Industry Average| 0.56| 0.49|

The Long Term Debt to Equity Ratio expresses the relationship between long-term capital contributions of creditors as related to that contributed by owners (investors). Long-Term Debt to Equity expresses the degree of protection provided by the owners for the long-term creditors. When a company has a high long-term debt to equity is considered to be highly leveraged. Walt Disney not only maintained a lowest ratio in relation to Time Warner between 2010 and 2011, but the increased was also smallest (7.4 %) compared to Time Warner (30 %)....
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