EPS/EBIT AND Projected Statements for Walt Disney - Case Study Example

Although the earnings available for common are the lowest among the financing alternatives, acquiring debt does not increase the number of common stocks, thus, creating a bigger value for the shareholders. The EPIS/EBIT Chart shown below further illustrates the analysis. The financial ratios from 2006-2008 are illustrated below. The financial ratios include the current ratio, debt-to-equity ratio and ROI ratio. The current ratio compares the assets that will turn into cash with the year to the liabilities that must be paid within the year.

There is a very slight increase in the current ratio for Walt Disney in the projected the year of 2008. This means that the company’s liquidity has remained constant. The debt-to-equity ratio illustrates that creditors will supply Walt Disney with 69 cents for every dollar supplied by the shareholders. There is an increase in this ratio because of the additional bank financing of $450M. The ROI ratio measures the efficiency with which the company employs shareholder’s dollars. For 2008, the ROI ratio decreased slightly due to t the additional issuance of stocks which increases the financial costs.