The Walt Disney Company has four profitable business segments, described as follows:

The Walt Disney Company has four profitable business segments, described as follows:

• Media Networks: The ABC television and radio network, Disney channel, ESPN, A&E, E!, and Disney.com.

• Parks and Resorts: Walt Disney World Resort, Disneyland, Disney Cruise Line, and other resort properties.

• Studio Entertainment: Walt Disney Pictures, Touchstone Pictures, Hollywood Pictures, Miramax Films, and Buena Vista Theatrical Productions.

• Consumer Products: Character merchandising, Disney stores, books, and magazines.

Disney recently reported sector income from operations, revenue, and invested assets (in millions) as follows:


income from  
Operations revenue
invested  
Assets
Media Networks $6,146 $18,714 $27,244
Parks and Resorts 1,553 11,797 19,530
Studio Entertainment 618 6,351 12,221
Consumer Products 816 3,049 4,992

a. Use the DuPont formula to determine the rate of return on investment for the four Disney sectors. Round whole percents to one decimal place and investment turnover to two decimal places.

b.  How do the four sectors differ in their profit margin, investment turnover,
and return on investment?


Answer:

a. 
Media Networks: $6,146 P
arks and Resorts: $1,553 S
tudio Entertainment: $618 C
onsumer Products: $816 b
. The four sectors are different from each other. Media Networks combines a good profit 
margin with a very low investment turnover. Media Networks is sensitive to advertising 
revenue, while the Studio Entertainment sector is sensitive to producing box office hits. 
The Parks and Resorts sector has a good profit margin at 13.2% with a fairly low 
investment turnover. The combination produces a respectable ROI of 7.9%. Studio 
Entertainment has a weak profit margin and a weak investment turnover generating only 
a 5% return on investment. The Consumer Products division combines a good profit 
margin with a good investment turnover. The combination produces a sound ROI of 
16.3%.