Microsoft Corporationis a well-known, inter-
national company. However, U.S. Airways,
Kmart, WorldCom, Polaroid, Winn-Dixie
Stores,Inc., and Planet Hollywoodwere also
well-known companies. These latter companies
share the common characteristic of having de-
clared bankruptcy!
Obviously, being well-known is not neces-
sarily a good basis for investing. For example,
Planet Hollywood sought bankruptcy protec-
tion twice, even though it was owned and pro-
moted by such prominent Hollywood stars as
Bruce Willis, Whoopi Goldberg, and Arnold
Schwarzenegger. Knowing that a company has
a good product, by itself, may also be an inad-
equate basis for investing in the company. Even
with a good product, a company may go bank-
rupt for a variety of reasons, such as inadequate
financing.
How, then, does one decide on the compa-
nies in which to invest? Like any other significant
purchase, you would need to do some research
to guide your investment decision. If you were
buying a car, for example, you might go to
Edmunds.comto obtain reviews, ratings, prices,
specifications, options, and fuel economy across a
number of vehicle alternatives. You could re-
search investment alternatives using financial
analysis techniques. In this chapter, we will illus-
trate financial statement analysis with Pixar’s fi-
nancial statements.
Pixar has created six of the highest grossing
animated features in the history of film, including
Toy Story, Finding Nemo, The Incredibles, and Cars.
Pixar essentially invented computer-animated
feature films, thus making obsolete the traditional
hand-drawn approach used for years by Disney.
Pixar was born out of the creative energy of John
Lasseter and the business vision of Steve Jobs,
who is now CEO of both Apple Computer and
Pixar. Today, Pixar is regarded as the most suc-
cessful animation studio in the industry. Indeed,
this success has been translated into a debt-free
business with over $800 million in the bank.
Pixar’s success is demonstrated by its
Animation Time-Line:
- Toy Story:The first computer-animated fea-
ture film. - A Bug’s Life: Pixar simulated translucent
leaves to create rounder, more organic forms.
This required 12 times the computer power
ofToy Story. - Monsters, Inc:Unlike bugs and toys, Sulley is
covered by 3 million hairs that had to look
and move naturally. Some frames took 80
hours to render on the computer.- Finding Nemo:Programmers learn to simu-
late waves, swells, currents, and underwater
light movements. Nemo’s tank has over
120,000 individual pebbles. - The Incredibles:According to the director, “the
more geometric the figure is, the easier it is
to do with computer animation. The more
organic something is the harder it is.
Everything about a human is organic. The
audience looks into the mirror every day, so
if you don’t get it right, it is obvious to them.”
To make humans lifelike, the animators first
made the muscles over which a sheath of
skin was placed. The muscle animation then
caused the skin to move.
While Pixar’s movies are very successful,
how can one determine the company’s finanical
success? This is the role of financial statements.
In this chapter, we will focus on the important
role that financial statements play in analyzing
business operations as well as how those oper-
ations are financed. The basic financial statements
provide much of the information users need to
make economic decisions about businesses. We
illustrate how to perform a complete analysis
of Pixar’s statements by integrating individual
analytical measures. In addition, we discuss the
contents of corporate annual reports.
Sources:Richard Corliss, “All Too Superhuman Breaking
Rules, Making Megahits, the Pixar Team Now Unleashes a
Family of Repressed Superheroes,” reported by Desa
Philadelphia/Emeryville,Time, October 25, 2004; Randall
Stross, “Pixar’s Mr. Incredible May Yet Rewrite the Apple
Story,”The New York Times, October 24, 2004.Pixar
© MIKE WINTROATH/AP PHOTO (AP WIDE WORLD PHOTO)