Several ratios can be employed to assess a company’s performance in a given fiscal year and its overall financial position. Rates calculated based on accurate data can help the firm prevent a crisis and reevaluate its business model if necessary. This post will discuss one of the largest publicly traded corporations in the world and how its liquidity ratio explains its performance and financial condition.
The Walt Disney Company was selected for this reflection as it continues to be one of the most profitable and fastest-growing publicly traded companies. Although the COVID-19 pandemic has affected many businesses worldwide, Disney is unique in having both highly profitable online and offline enterprises (The Walt Disney Company). Many physical locations owned by Disney were forced to close due to the measures set in place to control the pandemic, leading to lost revenue. However, other ventures, such as Disney + and services accessible online, were not affected. At the end of the fiscal year 2020, the corporation’s liquidity ratio was evaluated at 1.24, while its cash ratio was 0.67 (The Wall Street Journal). According to these calculations, the company performed well in 2020 and has enough liquid assets to cover its debts but not enough cash. It can be assumed that these ratios indicate a lack of cash inflow during the last year.
In summary, the Walt Disney Company is one of the largest publicly traded companies in the world, with numerous enterprises in entertainment and mass media. Its liquidity ratio indicates that despite a challenging fiscal year for many corporations, Disney has a comfortable liquidity position with sufficient assets to repay any short-term debts but insufficient cash to pay back liabilities. Overall, the 1.24 liquidity and 0.67 cash ratios do not indicate an uncertain or problematic financial situation for the company.
References
The Wall Street Journal. “Walt Disney Co.” WSJ, 2020. Web.
The Walt Disney Company. “Disney – Leadership, History, Corporate Social Responsibility.” The Walt Disney Company, 2021. Web.