Requirement #2
Market capitalization is the amount of shares of a firm multiplied by the value of the
shares of the firm i.e. the value of the firm in the market. The total stockholders equity is the
total amount of money invested into the company in order to create value i.e. a firms total assets.
The stockholders equity is used by the firm to create its market capitalization. The market
capitalization is an external aspect of a business and the stockholders equity is an internal aspect
of the firm.
Requirement #3
As a large multinational corporation, Disney faces innumerable challenges and risks that
the firm cannot completely account for. Some of the risks Disney acknowledges include loss of
stored data, increased competition, changes in regulation, changes in business strategy, labor
disputes, and short-term dilution in earnings per share caused by the acquisition of Lucasfilm.
However, the three greatest risks Disney faces are changing regional and global economic
conditions, the maintenance of its intellectual property, and a sustained increase in pensions and
postretirement medical costs of employees.
Changing regional and global economic conditions such as economic recessions have a
huge impact on Disneys business and is a fundamental risk the company faces. The company
relies on people having enough disposable income to spend on Disney entertainment products
and services. If peoples disposable incomes drop because of an economic downturn, consumers
will purchase significantly less entertainment products such as Disney movies. Consumers will
not buy as much entertainment because entertainment is a nondurable, luxury good not a
necessity. When peoples incomes decrease, the quantity of luxury goods demanded also
decreases thus Disneys revenues are adversely affected by economic downturns because
peoples incomes decrease with recessions. Disney hopes to counter this fact by providing
patrons with top-quality, recognizable brands that consumers know they can trust such as ESPN,
Pixar, and Marvel entertainment. Disneys resorts and theme parks are the most vulnerable part
of Disneys operation to economic slumps because going on vacation to one of these resorts or
theme parks is one of the most significant monetary investments a family could make with
Disney. Vacationing is one of the first things families cut from their budgets in lean economic
times. Disney recognizes this critical fact by offering a superior vacationing experience so if
consumers are inclined to go on vacation, Disney is certainly an attractive option to consider.
Disney maintains its extensive entertainment empire by the liberal use of copyrights,
trademarks, patents and other instances of intellectual property. However, internet privacy both
in the U.S. and abroad unfavorably affects the revenues Disney makes on its intellectual
property. Because such a large amount of Disneys revenues comes from the licensed use of its
Citations
1) http://thewaltdisneycompany.com/sites/default/files/reports/fy13-form-10k.pdf
2) http://finance.yahoo.com/q?s=DIS
3) http://money.cnn.com/quote/quote.html?symb=DIS