Walt Disney Company’s Yen Financing Case Essay - 4601 Words

Introduction: The Walt Disney Company is the largest media conglomerate in the world and is headquartered in Burbank, California, USA. It was established by Walt and Roy Disney in 1923. Since its inception, Disney has grown vastly so that operational areas now include theme parks, motion pictures, television dramas and consumer products. In 1955, the most charming place in the world was ‘Disneyland’ was open for the public. The idea was to create a magical place for the whole family. Ever since then, Disneyland theme parks have been growing and today Walt Disney Company owns 14 theme parks in the world. In Film Industry, Disney mainly focused on children; however the films produced by Disney under touchstone label were focused†¦show more content†¦And the ratio of debt to total capitalization jumped from 20% to 43%. Japanese Royalties Situation With the opening of Tokyo Disneyland in April 1983 and the inflow of yen royalty receipts, the Walt Disney want to increase the assets and decrease debt, they realized they had an opportunity to use the yen royalties from Japan to pay down some of their debt: * In 1984 the average exchange rate is 347.30 JPY/US$ * The royalties of Disneyland Tokyo of JPY 8 billion was equivalent to US $ 33,712,600 * This represents 11.58% (=33,712,600 / 291,033,000) of 1984 operating income before corporate expenses, a percentage which is more common to grow, since Disney itself will probably not grow as rapidly as its JPY royalties * In Figure 5, only 21.47% of all debts has a maturity greater than 2 years * The JPY has also depreciated to disrupt Disney’s financial plan for its large, long-term construction, expansion, production, and development. * Disney transferred Yen to USD from the 2nd quarter of 1984 through the first quarter of 1985, because the JPY recei pts are a huge amount of money. * However, it has appreciated in the quarter since then. Issues: TheShow MoreRelatedThe Walt Disney Companys Yen Financing, Harvard Case Study1352 Words   |  6 Pagesthat it becomes more expensive to buy  ¥ and more expensive to buy the foreign import. Risk can work both ways: if the ex-rate is 125 ¥ / $ (dollar appreciates, Yen depreciates) in 6 months, the cost is only $800. In this case, the dollar got stronger, so it became cheaper to buy Yen, and the foreign product (priced in a fixed amount of Yen) became cheaper. Ex-rate volatility (currency risk) means the cost of parts could range between $800-1250 over the next 6 months for the U.S. manufacturer. ImagineRead MoreWalt disney companys yen financing1838 Words   |  8 PagesCASE STUDY THE WALT DISNEY COMPANYS YEN FINANCING Alexandra Molnà ¡r Laure Vigneron Manuel Aguilee Pimprapai Lertamornkitti Pranav Goyal EXECUTIVE SUMMARY Walt Disney, an American leisure and entertainment company, receives royalty payment from Tokyo Disneyland every year. The royalties were denominated in yen and were constantly growing and becoming significant for the company (8 billion Yen in 1984, with 10-20% projected growth). However, the depreciation of the yen against the dollar couldRead MoreWalt Disney Case2290 Words   |  10 PagesThe Walt Disney Company’s Yen Financing International Financial Economics Universiteit van Amsterdam Question 1 Should Walt Disney Company hedge its yen exposure? Why? On April 1983 Tokyo Disneyland started to operate. The Japanese company that operated this park paid royalties on certain revenues to Walt Disney Productions. The Yen royalties receipts in 1984 already reached a height of 8 billion Yen. The director of finance of the Walt Disney Company expected a further growth of 10% toRead MoreAccounting 1-4 Chapter100452 Words   |  402 Pagesknow how to read financial statements, you can’t really know your business. 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