The financial statements for 2012 and 2013 for Time Warner Inc. are shown in thi

Question

The financial statements for 2012 and 2013 for Time Warner Inc. are shown in this popup window, EEB, and those for Walt Disney Co. are shown in this popup window, EE3 a. How did Time Warner's profit margins change from 2012 to 2013? To what would you attribute the differences? Answer the same question for Disney. b. Compare the profit margins between Time Warner and Disney. How are they different? How would you explain these differences? c. What differences do you notice in the common-sized balance sheets that might indicate that one of the firms is doing better than the other? a. How did Time Warner's gross profit margin change from 2012 to 2013? 0 % (Round to one decimal place.)

Explanation / Answer

a) Profit margins : Warner Warner Disney Disney 2012 2013 Difference 2012 2013 Difference Revenues 28729 26795 42278 45041 Net Income 2922 3691 6173 6636 GP Margins 44.50% 45.50% 1% 21% 21% Nil NI Margins 10.20% 13.77% 2.50% 14.60% 14.73% 0.15% Attributes: The gross profit margin of Warner has increased by 1% over last year, therefore the Net Income margins has increased by 2.5% this year (2013). For Disney, there is not difference between profit margins for year 2012 and 2013. b) The profit margins between the Warner and Disney are: Warner Disney Warner Disney 2012 2012 Difference 2013 2013 Difference GP Margins 44.50% 21% 24% 45.50% 21% 24.50% NI Margins 10.20% 14.60% -4.40% 13.77% 14.73% -0.96% The Warner is having double gross profit margin to that of Disney, but due to its periodic expenses been more than that of Disney, it have lower net income margin. c) A common size balance sheet possesses neutral GP Margin and varying NI Margins due to fluctuating periodic expenses, so Disney firm is doing better than Warner due to lower NI, even through it enjoys higher GP.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.