Simple Aspects of the Profit and Loss Account of Disney

Financial News
The recent report by Forbes (Trefis, 2019) that Walt Disney is likely to return an increase in revenues of $US $10 billion in 2019 intrigued me as to how this would been achieved and if it was a real improvement in the company’s fortunes. /sites/greatspeculations/2019/10/08/what-is-driving-disneys-10-billion-revenue-surge-in-2019/#57f49ffa7d37. The forecast was made by Trefis, which is a company providing support to Chief Financial Officers and other financial experts and relates to a dashboard managed by engineers from Massachusetts Institute of Technology and Wall Street analysts. The report states that Disney is likely to more than double its increase of $US4.3 billion revenues in 2018 as a result of the combination of a merger with Fox Television Networks in 2019 for $US 71.3 billion and acquisition of a larger proportion of the ownership of Hulu, now 30% which is a streaming player. The changing fortunes of Disney are demonstrated in figure 1, which reveals a seemingly incredible recovery since 2017 but that in 2020 the revenues will not be maintained.
Figure 1: Trends in Sales Revenues Disney 2016 to 2020
Source
Source: Trefis (2019, p.1)
The increasing revenues after 2017 are attributed to higher fees that Disney earn from multi-channer video programme distributors, streaming service provides such as You Tube and Lulu and television stations. The company has also increased subscription revenues, and these are expected be boosted in the future as a result of the acquisition of various Fox networks. However, its advertising revenues are declining. Several of Disney’s traditional business continue to experience substantial growth for instance its global and United States based parks and resorts because prices, volumes and the mix of sales revenues including food and accommodation have increased . Whilst studio entertainment is also growing consumer products, for instance merchandise are declining.
The link between these revenue increases and profits can only be assessed by an analysis of Disney’s Profit and Loss Account, and the latest 9 month accounts (Walt Disney, 2019) reveal that the Fox acquisition was funded by issuing 307 million new shares such that shareholders have received lower return on their investments than in previous quarters. Diluted Earnings Per Share (EPS) declined by 59% from $US 1.95 to $US 0.79 when the last quarter was compared with the same quarter in 2018, which may be a short term decline but for those investors relying on income, the reduction is significant especially as the 9months figures show and EPS decline of 15%. Diluted EPS is a complex financial measure which calculates across all securities including debt, whereas earning per share is simply profit per share (WSM, 2019).
The diluted EPS figures reflect declining operating in...