Question

Company analysis.  Given the financial data in the popup​ window, LOADING...​, for Disney​ (DIS) and​ McDonald's (MCD), compare these two companies using the following financial​ ratios: debt​ ratio, current​ ratio, total asset​ turnover, financial​ leverage, profit​ margin, and return on equity. Which company would you invest​ in, either as a bondholder or as a​ stockholder?

	Disney		​McDonald's
Sales	​$48 comma 85148,851		​$28 comma 14928,149
EBIT	​ $12 comma 11912,119		​$8 comma 1048,104
Net Income	​ $7 comma 4627,462		​$5 comma 4145,414
Current Assets	​$15 comma 12915,129		​$4 comma 9194,919
Total Assets	​$84 comma 11284,112		​$36 comma 55736,557
Current Liabilities	​$13 comma 16413,164		​$3 comma 0383,038
Total Liabilities	​$39 comma 11139,111		​$20 comma 60520,605
Equity	​$44 comma 87144,871		​$15 comma 95815,958
Values are expressed in millions of dollars.

Answer 1

If we look at all the financials given above, we will notice that the sales as well as the total earnings of Disney is much higher than McDonalds. Also, the total assets as well as the net assets ( assets - liabilities) of Disney is greater than McDonalds. This means that Disney has a much wider revenue base than McDonalds and is at higher profit levels than McDonalds. However, if we compare the earnings to sales ratio, McDonalds performs better than Disney and also has much fewer liabilities than Disney.

Therefore, a risk averse invetor or bondholder would more likely prefer Disney because of its presumed sense of safety of investment, bringing in the "too large to fail" concept. But if an investor wants to go for a high risk stock and thus high returns, it would be McDonalds.