BMG704 (86967) International Finance Assignment Sample

Introduction

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The report aims to provide an analysis on recent developments in International financial managent in the world. It has been prepared to develop an understanding on how these developments initiate the performance of the company Walt Disney Company. The company is an American multinational company involved in entertainment and mass media. The main headquarter of the company is in California. The company is growing and have scope of expansion in near future. Every organization is influenced by the developments undertaken internationally. It is important to maintain the environment in the business so that it could easily adapt with the changes in the external environment (Brambilla et al., 2018).

Also the key elents in the international finance have also been implented in the chosen company. The financial performance of the company is analyzed on the basis of ratio analysis using the latest annual reports of the company. The profitability, efficiency, liquidity and investment of the company are interpreted in the report to take decisions for the company. It is important to ascertain effective controls in an organization. These are used to ensure that company will take necessary steps to improve and develop sustainable growth in the market. The financial performance and the financial position of the company can be evaluated by ratio analysis.

Section A

Recent developments in the international financial environment and their Impact on companies’ financial performance

The recent developments have direct impact on the functioning of the company. To make the company adaptable to the changes and to be always forward looking it is required to implent it to the business. These changes bring up gradation and easy the doing of business. These changes and developments have both positive and negative effects on the economy of the company. It is important to organize the resources prepared the business from uncertain circumstances that could create changes in decisions.

1. Development – Global value chain

These are the recent developments that took place in the international markets. This is the process where production is broken down into different activities and tasks carried out in different activities. It is said to be the large scale extension and a division of labour that are performed by dedicated worker. The operations cover the national boundaries also. This is only possible by the liberalization of trade and movent of technology, operation and information across the geographical boundaries (Saputra et al., 2019). It is the free flow of goods and services, technology, currency, from one country to another. The increase in such movent leads to increase in the global trade and exchange of ideas, technology and culture in other countries. It is the integration of the social and cultural aspects. The shortage of resources in one country is fulfilled by the other country (Brambilla et al., 2018).

It helps in establishing the production units across different countries where the company can get benefits of cheap labour, cheap location set up. It also helps in acquiring the fresh talent requisite of the company situations. It is possible to make analysis in long term generation of results and facts of the company. The company can able to meet long term goals if the changes are being implented in the company. The value chain activities of marketing, design, production would be more easier with the proper follow up of value chains in an organization (Hatefi, 2019).

Also many countries can use GVC by applying forward and backward linkages in a company. The inputs can be sourced from one country to the other and this effectively the process could be completed and carried out successfully (Thewaltdisneycompany, 2020).

GVC lead to increase in economic developments and creation of job opportunities of the company. People move from one nation to another for job opportunities, setting up business due to cost effective working environment. It must be required so that efficiency can be established in the nation and under developed countries and compete with the developed and developing ones (Yanti et al., 2019).

Impact of GVC on Walt Disney Company

The Walt Disney is the largest company in the entertainment segment that is operating internationally. The big volume of industries is created from all over the world. The goals of today are achieved by being futuristic and the changes are adaptable. It is long way to establish cooperation in the organization. Teamwork and communication are key factors of the company that make it possible to impact the large number of customers at a time delivering high quality of value (Brambilla et al., 2018).

2. Covid 19

The world is suffering from the impacts of Corona virus. To stop the spread of the pandic, the government of many countries has imposed lockdowns in the place. The economy, stock markets get collapsed and no sector was left untouched with the impacts of the covid-19. All the offices, shops, and schools have been closed throughout the world to stop the rise of pandic. This was prove to be important to maintain efficiency in the country (Hatefi, 2019). Various strategies have been come up to stop the pandic such as statistical practices, analysis of qualitative data to develop assumptions and forecast on the spread of virus. The significant toll has created unforeseen challenges to the country and the whole worlds that will definitely take time to get heal (Thewaltdisneycompany, 2020).

Impact of Covid-19 on Walt Disney Company

The Covid-19 has impacted the company in various segments and most significantly Parks, Experiences and Products that are closed and run on reduced capacity due to the risks of covid-19. The cruise ship sailings and guided tours were all suspended. The impacts of this have seen on the operating and financial results of the company for the year 2020 (McKibbin et al., 2020). Additional costs have been incurred to bear the government regulations on the safety and security of ployees. The increase in covid 19 cases in the world affects the performance of the company. The company provide testing and treatment of the company at no costs to the ployees and dependents of the company. The company have also generated efficiencies in its staffing, including limiting hiring to critical business roles, furloughs and reductions in-force (Palepu et al., 2020).

Section B

Dividend policy and source of finance

Dividend Policy

The dividend policy is used by the companies to pay out the dividend to the shareholders of the company. It has been paid in relation to the decisions made by the managent of the company in relation to the debt equity combination. The profits that are not distributed as dividends are retained back in the business. It is important to undertake decisions in this direction in order to measure efficiency in a company. The company could take appropriate measures to handle the pressure and maintain efficiency in a company. There are various dividend policies that are followed by the company in this direction. It is required to ascertain long term aspects in an organization (Thewaltdisneycompany, 2020).

The major goal is to align the policy the dividend policy with the growth of the company. There are various types of dividend policy adopted in a company. These are stable dividend policy where dividend is stable and predictable at the end of the year. The constant dividend policy is based on the concept that the dividend would be seen boom in the coming years. The company pay dividend as a percentage of increased earnings. The ployees are usually in favour of following this policy. This would give an effective approach in experiencing the volatility of the company (Brambilla et al., 2018).

The residual dividend policy of the company is acceptable when company pay dividends towards the same. It is important to maintain efficiency in an organization. It is more important in terms of the business operations (Hatefi, 2019).

The dividends declared by the company Walt Disney Company include $1587 in the year 2020 and $ 2895 in the year 2019. It is important to determine reliability and responsibility ion an organization. These are prepared to maintain efficiency in an organization. The company has not declared the dividends in the year 2020 as various operations have been suspended due to covid 19 that affect the dividend policy of the company (Thewaltdisneycompany, 2020). The stock market affected the most with the covid situations. The company take several mitigation measures to stop the rise of pandic. It help in measuring and reducing the effects of such covid measures. Cash provided by financing activities in fiscal 2020 was due to borrowings, partially offset by dividend payments and settlent of acquisition related obligations. The binomial valuation model takes into account variables such as volatility, dividend yield and the risk-free interest rate (Brambilla et al., 2018).

Source of finance

Debt

It is borrowed from outside the business organization at a fixed rate of interest. It has been paid to determine the costs and services involved in the industry. The day to day operations would involve inventories and expenses. The bank loans taken and the bank line of credit are a source of debt capital in the organization. The company Walt Disney has a total outside borrowings of $ 16801 in 2020 and $ 17762 in the year 2019. The borrowings have been reduced from the previous year as seen from the financial statents of the company. The company repay certain amount of debt that reduces the borrowings (Thewaltdisneycompany, 2019).

Equity

There are several classes of shares being issued by company to make funding from equity capital. These are considered as the owners of the business. It is important to maintain well defined targets in order to organize capital structure of the company. There are different classes of equity shares that include private individuals and financial institutions. These are the owners of the company. The initial public offers are made to the general public to make investment in the company. The price is adjusted according to the general market conditions and the market sentiments (Hatefi, 2019). The total equity of the company in the year 2020 is $ 88263 and that in 2019 it is $93889. The same has been reduced due to changes in the retained earnings of the company. The losses might reduce equity of the company that have significant effect on the net worth of the equity holders of the company (Palepu et al., 2020).

Retained Earnings

The concept behind retained earnings is equal to no dividends that are equal to reinvestment. The retained earnings have been used to invest funds in aircraft. These could be reflected as the cost to the investors that no dividend has been paid and the investment that is collected is used back in the business itself. The retained earnings of the company in the year 20202 is a loss of $ 8322 and in 2019 it is $ 6617. In both the years company incur loss. The loss has been increased in the current year due to outbreak of pandic in the country (Thewaltdisneycompany, 2019).

Section C

Ratio Analysis

Walt Disney Company
Ratio Analysis
Ratio	Formula	2020		2019		2018
Liquidity Ratio
Current Ratio	Current Assets/Current Liabilities	35,251/26,628	1.32383	28,124/31,341	0.8974	16,825/17,860	0.94204927
Quick Ratio	Quick assets/Current Liabilities	(35,251-1,583)/26,628	1.26438	(28,124-1,649)/31,341	0.8447	(16,825-1392)/17,860	0.86410974
Profitability Ratio
Return on Capital Employed	Net Operating Profit ÷ Capital Employed × 100	(2,442)/(201,549-26,628)	1.40%	10,897/( 193,984 -31,341) )	6.70%	13,066/(98,598-17,860)	16.18%
Operating Profit Margin	Operating Profit ÷ Sales× 100	(1,743)/65,388*100	2.66563	13,923/69,607*100	20.002	14,729/59,434*100	24.7821112
Efficiency Ratios
Accounts Receivable Turnover	Revenue/Average Accounts Receivable	65388/((12708+15481)/2)	4.63926	69607/((9334+15481)/2)	5.6101	59434/9334	6.36747375
Inventory Turnover	Cost of Goods Sold/Average Inventory	65388/((1583+1649)/2)	40.4629	69607/((1649+1392)/2)	45.779	59434/1392	42.6968391
Shareholder’s ratio
Earnings per share	EPS = net income / number of ordinary share	(2474)/1,808	1.36836	11584/1,656	6.9952	13066/ 1,499	8.71647765
Dividend Pay out ratio	total dividend / net profit * 100	1,587/-2474*100	-64.147	2,895/11584*100	24.991	2,515/13066	0.19248431

Profitability Analysis

1. Return on Capital Employed

The ratios are used to evaluate the ability of the company to generate income as compared to the expenses and costs of organization. It is the final performance of the company to determine how well the company is able to achieve profits of organization (McKibbin et al., 2020). The usage of funds to generate profits of the company is depicted by profitability ratio. The profits earned by the company is compared with the amount invested in the company the equity and the long term liabilities of organization. The ratio helps in understanding how well a company is generating profits from the capital. The profitability of the company is measured in context of financial terms. In the company the capital ployed has been reduced significantly from 2018 to 2020. This is because negative impacts of the covid 19 (Brambilla et al., 2018).

Return on Capital Employed

1. Operating Profit Margin

The operating profits of the company attained after deducting all the operating expenses of the company. It is important to make well informed decisions for the organization (Hatefi, 2019). The net profits in the above case are taken after adjusting all the incomes and expenses of the organization. The profits are converted to losses in the year 2020. The business has been shut and there is no space of profitability in company (Thewaltdisneycompany, 2019).

Efficiency Ratio

1. Inventory Turnover –the ratio is used to determine the ability of the company to convert its inventory into sales. The numbers of days it take to convert the inventory into cash determine the ability to enhance productivity in an organization. The more the turnover ratio, higher the chances of inventory being obsolete. It is important to undertake effective controls in an organization. The inventory turnover has been reduced that suggests stock is cleared from the company (Thewaltdisneycompany, 2019).
2. Accounts Receivable Turnover –the ratio is calculated by determining the average realization period of the customer in the company. It is a better way to determine whether it is able to cover up liabilities in an organization. The resources are used to maintain effectiveness and stability. The investors with the help of ratio can able to identify the how fast the company can able to realize its cash and cash equivalent from debtors. The chances of debts being bad are also very clear on seeing the ability to pay off bad debts of the company. The debtors are reduced that suggests that cash has been realised in the company in 2020 than in 2018 (Hatefi, 2019).

Liquidity Ratio

Assets that can be easily converted into cash are the liquid assets. These assets are used to determine liquidity of the company. The solvency of the company can be enhanced by using the liquidity ratios (Laitinen, 2017).

1. 5. Current Ratio –the ability of the company to pay short term obligations in an organization is the current ratio of an organization. The investors are well informed about the ability of the company to pay and satisfy current liabilities. It is used to manage the working capital structure of the company. It is used to cover the short term liabilities of the organization. The current ratio has been improved in 2020 as compared to 2018. This is due to stock piled up in company and left unsold.
2. 6. Quick Ratio- the short term liquidity position of company measures the ability to meet short term obligations of the organization. Inventory is excluded from the calculation of quick assets as it is difficult to convert inventory of organization into cash. The ratio has been reduced in the company (Laitinen, 2017).

Shareholder’s ratio

1. Earnings per share –These are calculated by dividing the profits of the company with the outstanding shares of the company. It shows how much money a company can make from its investment. It is required in long term analysis and stability of the company. The ratio has been declined and even negative as there are losses in the company in the year 2020 (Laitinen, 2017).
2. Dividend Pay-out ratio –the total amount of dividend that has been paid to the shareholders as compared to the net income of the company. The amount that is not paid to the shareholder is retained back in the business. The ratio is negative as there are no profits to be distributed as profits of the company (Brambilla et al., 2018).

References

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Hatefi, M.A., 2019. Indifference threshold-based attribute ratio analysis: A method for assigning the weights to the attributes in multiple attribute decision making.<>Applied Soft Computing</>,<>74</>, pp.643-651.

Husna, A. and Satria, I., 2019. Effects of return on asset, debt to asset ratio, current ratio, firm size, and dividend payout ratio on firm value.<>International Journal of Economics and Financial Issues</>,<>9</>(5), p.50.

Laitinen, E.K., 2017. Profitability ratios in the early stages of a startup.<>The Journal of Entrepreneurial Finance</>,<>19</>(2), pp.1-28.

McKibbin, W. and Fernando, R., 2020. The economic impact of COVID-19.<>Economics in the Time of COVID-19</>,<>45</>.

Palepu, K.G., Healy, P.M., Wright, S., Bradbury, M. and Coulton, J., 2020.<>Business analysis and valuation: Using financial statents</>. Cengage AU.

Saputra, A.J., 2019. The Effect Of Liquidity Ratio Leverage Ratio And Activity Ratio In Predicting Financial Distress.<>Managent and Economic Journal</>, pp.581-592.

Thewaltdisneycompany, 2019. Annual Reports, 2019. (Online), Available at: https://thewaltdisneycompany.com/app/uploads/2020/01/2019-Annual-Report.pdf, [Accessed on: 16/04/2021]

Thewaltdisneycompany, 2020. Annual reports, 2020. (Online), Available at: https://thewaltdisneycompany.com/app/uploads/2021/01/2020-Annual-Report.pdf, [Accessed on: 16/04/2021]

Yanti, N.M.Y.W.A. and Dwirandra, A.A.N.B., 2019. The effect of profitability in income smoothing practice with good corporate governance and dividend of payout ratio as a moderation variable.<>International Research Journal of Managent, IT and Social Sciences</>,<>6</>(2), pp.12-21.