(TIỂU LUẬN) ASSIGNMENT REPORT of corporate finance 1 FINANCIAL STATEMENTS ANALYSIS OF NETFIX, INC

NATIONAL ECONOMICS UNIVERSITY

ASSIGNMENT REPORT
of
Corporate Finance 1
FINANCIAL STATEMENTS ANALYSIS
OF NETFIX, INC

Hanoi, Mar 2020


Table of Contents
I – Introduction.............................................................................................................. 2
1 – Purpose of the report............................................................................................2
2 – Overview................................................................................................................ 2
II – Analysis.................................................................................................................... 2
A. Balance sheet........................................................................................................2
1.

Assets................................................................................................................. 2

2.

Liabilities & Shareholders' Equity......................................................................2

B. Income Statement................................................................................................2
C. Cash Flow............................................................................................................. 2
D. Financial Ratios....................................................................................................2
1.

Liquidity ratios................................................................................................... 2

2.

Solvency ratios...................................................................................................2

3.

Profitability ratios...............................................................................................2

4.

Acivity ratios......................................................................................................2

5.

Valuation ratios...................................................................................................2

E. The DuPont system..............................................................................................2
III – Conclusion.............................................................................................................. 2
IV – Reference................................................................................................................ 2
1.

Netflix, Inc............................................................................................................. 2

2.

AMC Entertainment Holdings, Inc........................................................................2

3.

Lions Gate Entertainment Corp.............................................................................2


I – Introduction
1 – Purpose of the report
This report discusses and analyses Netflix’s financial performance over the
past 3 years (2017-2019), with the use of financial ratios. The reason for choosing
is that Netflix is well known to many as a major streaming platform and the
company that changed traditional DVD players as the main source for movies and
TV shows into the more equipped and reliable streaming services. Finally, from
this 3-year period performance, we can figure the points in which Netflix has
excelled and the point in which they need some improvements.
2 – Overview
a. Entertainment Industry – Comunication Service Sector
Throughout the beginning of the 21st century, as our world was experiencing
a strong evolution in technology, new consumer trends were starting to expand in
the industry. Coming from an era were services in the television sector were very
broad and limited, the latest implementation of online streaming services, has
since permitted customers to benefit from a wide range of available commodities.
As the television industry faces new innovations, industry incumbents encounter
new challenges, and already established competitors are displaced. In
consequence, the online video streaming service is considered a disruptive
innovation to the conventional TV system.
b. Netflix, Inc (NFLX)
Founded

1997

HQ

Los Gatos, California

People

Reed Hastings (co-CEO, founder), Ted Sarandos (coCEO, chief content officer), Greg Peters (COO,
CPO)

Company type

Public (NASDAQ: NFLX)

IPO date

29 May 2002

 Netflix was originally created as an online DVD rental service, for then
successfully establishing itself in the market for over-the-top (OTT) services.
A streaming service that provides movies and TV shows just with a touch of a
button, operates today as the biggest streaming platform in the world with
over 204 million paid memberships in over 190 countries.
 Netflix saw an opportunity in the 1990s of a change in the way people watch
movies and TV shows, Netflix realized that the people don’t want to go to the
store, look for a DVD player, and purchase it. They knew that the people


would rather sit at home and watch their movies from the comfort of their
couch, something that Blockbuster did not agree with.
 Blockbuster was Netflix’s competition in the 1990s, they believed that
Netflix’s theory is wrong and that people still preferred to go to the store and
purchase their movies, which later lead to the bankruptcy of Blockbuster and

their extinction. (Grace, Darothee, & Holly, 2014).

c. Competitors


Top companies by revenue for the "Motion Pictures", 2019
Rank

Company

Revenue ($ millions)

#1

Netlix, Inc

20,156

#2

AMC Entertainment Holdings, Inc

5,471

#3

Lions Gate Entertainment Corp

3,859

 AMC Entertainment Holdings, Inc
Founded in 1920 and headquartered in Leawood, Kansas, for market-share
context - AMC is not only America’s largest theater chain by locations in the US
but the largest in the world. The company owns, operates, or has interests in
theatres. As of March 12, 2021, it operated approximately 1000 theatres and
10,700 screens in the United States and internationally.
In 2019 it became the first theater to take a stab at home entertainment by
launching on-demand movies and TV shows.
Much has already been written about the battle between Netflix and Movie
Theaters. In short, Netflix would like to premiere a movie in theaters and on its
streaming platform simultaneously, known as a “day-and-date” release. That
would increase Netflix revenues while providing flexibility for consumers to see
what they want, where they want, at a price they want.
Theaters have resisted because they feel, rightly so, that a concurrent
theater and streaming launch will cut into their business. As a safeguard, large
theater chains (including AMC) demand a 90-day window for a film to be shown
in theaters before it is available in the home. They enforce this with boycotts.
Research studies suggest that between 13% to 28% of people prefer seeing
a film the first time in theaters instead of streaming. If we use 15% on the
conservative end of this range, and apply it to 576 million people who streamed
these 5 films, it leaves us with an estimated 86.4 million people who might have
preferred to watch these movies in theaters. At an average ticket price of about
$9.16 in 2019, that’s a box office of $791.4 millions.
 Lions Gate Entertainment Corp
The company was founded in 1986 and is headquartered in Santa Monica,
California. Lions Gate Entertainment Corp. engages in motion picture production
and distribution, television programming and syndication, home entertainment,
interactive ventures and games, and location-based entertainment operations in
Canada, the United States, and internationally. Lionsgate has large output and

many subsidiaries. It’s been known to have distributed some big titles like The
Hunger Games, Saw, Kick-Ass, The Expendables, Ender’s Game, and John Wick.
With none of the Lionsgate catalog streaming on Netflix right now (at least
in the US), It was a big deal at the time leading to Netflix putting out a blog post
explaining why it was happening, said that the movies were widely available
elsewhere beyond Netflix (when they were streaming on Netflix) and that’s a
problem because Netflix tends to like exclusivity whether that’s with its Originals
or third-party contracts.
Combining Starz, one of the leading premium global streaming platforms,
with its motion picture and television studio operation, launched its independent
direct to consumer over-the-top (OTT) app Lionsgate Play in India which takes
on Netflix.
II – Analysis
A. Balance sheet
1. Assets
There was overall an increase in total assets from $25,974,400 in 2018 to
$33,975,712. This significant increase shows the growth of assets within the
company which will aid in future economic increases.
Total Assets
33,976
35,000.00
30,000.00

25,974

25,000.00
19,013
20,000.00
13,676

15,000.00

9,496 8,968

8,409

9,806 9,197

10,000.00
5,000.00
0.00

2019

2918
Netflix, Inc

AMC

2017
Lions Gate

The total current assets decreased significantly from 2018 to 2019. This is
due to the reclassification of DVD content assets from current assets to non-current
assets. This explains the decrease in current assets in 2019.
Look at these figure, we can say that Long-term asset has the biggest
portion in total assets (about 81.8% in 2019). While, Cash on Hand was kept


fluctuating at 14% range. The above figures show that the company always ensures

a certain amount of reserve money, including the amount of cash in the fund as
well as bank deposits to meet the payment needs of customers and pay salaries for
employees of the company.
90.00%
81.80%
80.00%
70.00%
62.70%
60.00%

59.70%

50.00%
37.30%

40.00%

40.30%

30.00%
20.00%

18.20%

10.00%
0.00%

2019

2018

Total current assets

2017

0.00% 0.00%

Long-tem assets

Cash: Netflix ended 2017 with approximately 2.8 million in cash. Over
the next 2 years, the company ballooned its cash position to approximately $5
billion. This shows that the firm is holding excess cash as compared to investing
the funds in short-term investments. Unfortunately, this is not the best strategy
for cash management. Resources such as cash can lead to future economic
benefit.
Accounts Receivable and Inventory: Because Netflix does not sell
products or services through other entities, the organization has no, or very little,
Accounts Receivable or inventory items.
Property plant and equipment: Netflix has steadily increased its property
plant and equipment over the last five years. The average growth rate is about
30% annually. This indicates that the firm needs substantial property and
equipment to support its growth needs. From this assessment, investors should
expect this line item to maintain its growth rate until revenue levels off.


C har t Ti tle
8,000.00

7445.2

7,000.00

6,000.00
5,000.00

5018.4

3794.5

4,000.00

3039.6

3,000.00

3116.5

2822.8

2097.5
2,000.00
1,000.00

647.2
454.4
265
184.3
160.3

946
155.3

378.1 362.7
313.3
183.2

908.1
418.3
161.7

0.00

321.9
310

204.3
0

Netflix,Inc

AMC

Lions Gate

2. Liabilities & Shareholders' Equity

Netflix continues to have high long-term debt that is relatively consistent.

319.4165.5


Common-size (%)

90.0%
80.0%
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
2019

2018

2017

The retained earnings increased in 2019 which is a positive as this can be
reinvested into the business. Finally, stockholder equity also increased in 2019.
Total stockholder equity increased from $5,238,765 in 2018 to $7,582,157 in 2019.
An increase in stockholder equity signifies an increase in assets.

B. Income Statement
Netflix, Inc

AMC

(USD
million
s)
2019

Sales

COGS

Gross
profit

20,156.4

12,440.2
0

7,716.
20

5,471.00

1,978

2018

15,794.3

9,967.50

5,826.
80

5,460.80

2017

11,692.7

7,660.00

4,032.
70

5,079.20

Sales

Lions Gate
Sales

COGS

Gross
profit

3,493.00

3,680.5
0

2,028.20

1,652.30

1,981

3,479.80

4,129.1
0

2,309.60

1,819.50

1,856

3,223.20

3,201.5
0

1,903.80

1,297.70

COGS

Gross
profit


25,000.00

20,000.00

15,000.00

10,000.00

5,000.00

0.00
2019

2018

2017

Revenue increased from 2018 to 2019 which positively impacted the gross
profit. Gross profit is a measure of how efficient the company is in using
resources to deliver their service. The gross profit of 2018 was $5,826,803 and
increased to $7,716,234 in 2019. This increase in gross profit demonstrates that
Netflix was able to produce their service more efficiently in 2019 which is good
for the company financially.

As a
percentage
of revenues
Netflix
, Inc

COGS

Fiscal year Jan-Dec
2019

61.70%

2018

63.10%

2017

65.50%

AMC
COGS
Lions
Gate

COGS

36.20%

55.10%

36.30%

55.90%

Change

2019 vs 2018
2018 vs 2017
2,472.7
0

25%

2,307.5
0

30
%

-3.00

-0.2%

125.00

7%

-281.40 -12.2%

405.80

21
%

36.50%

59.50%


COGS (as apercentage of Sales)
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%

2019

2018

Netflix, Inc COGS

AMC COGS

2017
Lions Gate COGS

COGS change
30%
25%
20%
15%
10%

5%
0%
-5%

Netflix, Inc

AMC

Lions Gate

-10%
-15%
2019 vs 2018

2018 vs 2017

The increase in COGS for the year ended December 31, 2019 as compared
to the year ended December 31, 2018 was primarily due to a $1,684 million
increase in content amortization relating to our existing and new streaming
content, including more exclusive and original programming.


Net Income (USD millions)
2,000.00

1,867.00

1,500.00

1,211.20

1,000.00

473.6
500.00

-284.2
0.00

2019

110.1

14.8

2918

-149.1

558.70

2017

-500.00

-487.2
Netflix, Inc

AMC

Lions Gate

An increase in net income demonstrates an increase in profitability as the
sales were greater than all expenses for that year.
C. Cash Flow
Netflix's Cash flow (2017 - 2019)
5000
4000
3076.99
3000
2000
1000
34.33
0
-1000
-1785.95
-2000
-3000
-4000

4048.53

4505.66

-339.12

-387.06

-2680.48

-2887.32

Cash From Operating Activities
Cash From Financing Activities

Cash From Investing Activities

Cash Flow from Financing activities – Netflix generates in Cash Flow from
financing by issueing its stock and debt.
Cash Flow from Investing Activities – Netflix Cash Flow from Investing
activities was at -$387,06 million in 2019 as compared to $34,33 million in 2017.
This was primarily due to increasing capital expenditure in the core business.
Cash flow from Operating activities – Netflix Cash Flow from Operations
is weak due to continued losses over the year. Netfix CFO was -$2887.32 million
in 2019 as compared to -$1785.95 million in 2015.
=> From 2017 to 2018 there has been a drop in net change in cash but it has
increased again in the period of 2018 - 2019. The ending cash balance has made
big progress as it continued to increase every year by around 32%.
D. Financial Ratios
1. Liquidity ratios


Ratio

2019

2018

2017

Current ratio

0.9

1.49

1.4

Quick ratio

0.9

1.49

1.4

Cash ratio

0.73

0.58

0.52

Chart Title
1.6
1.4
1.2
1
0.8

0.6
0.4
0.2
0
Netflix, Inc

Industry (median)

With its cash ratio lower than 1, we can imply that the company in 2017
didn’t have enough cash to cover its current liabilities. But Netflix did have a
quite good current ratio and quick ratio; both of 1.4 which means overall they
were able to satisfy the company’s current bills. In comparison with the average
industry’s financial ratio in U.S, Netflix was quite better off in 2017 because all
of its ratio is higher than average (the average ratio is 0.83; 1.06; 0.42
respectively).
In 2018, Netflix faced the same problems as 2017 as they did not have
enough cash to cover current liabilities of the company but overall they can still
pull it off as the current ratio and quick ratio were proven to be still good enough.
All the ratio were making a raise. Cash ratio rise from 0.52 to 0.58 while current
ratio and quick ratio both rise from 1.4 to 1.49.
Motion pictures seems to be a rising star in 2018 because all of its ratio are good.
Netflix slacked behind as its current ratio and quick ratio though seem good but
both of them is less than the average mark (1.53 and 1.91 respectively). Cash
ratio is nowhere near the average mark (0. 58 to 1.03)
2019 was not a good year for Netflix as we can see here that 2 of its ratio
had dropped drastically. Current ratio and quick ratio drop from 1.49 to 0.9;
which is quite a large amount. Cash ratio did make a raise; from 0.58 to 0.73 but
didn’t make much of a change because it still below 1 and implied that the
company didn’t have enough cash to cover its current liabilities.
In 2019 the average industry financial ratio is not in good shape either. Although

Netflix’s ratios are much worse than the recent years but compare to the average
mark, it’s still a quite decent amount. (The average mark is 0.56; 0.5 and 0.34
respectively)


2. Solvency ratios
Ratio

2019

2018

2017

Debt-to-assets

0.4344

0.3989

0.3418

Debt-to-capital 0.6606

0.6642

0.6447

Debt-to-equity 1.9466

1.9776

1.8145

1. The debt to assets ratios from 2017 - 2019 of Netflix are quite constant,
being 0.3418; 0.3989; 0.4344 respectively. These figures are actually quite a
good sign because they’ve shown that company by then didn’t have much to
worry about debt ; it had the capability to pay off its debt with its available
assets and did not have much struggle meeting its obligations.
2. The debt to capital ratios from 2017 - 2019 do not vary much. Being
0.6447; 0.6642; 0.6606 respectively and with an average of 0.6565; Netflix
was quite a safe bet during that time as having lower debt to capital ratio also
means having lower risk of insolvency.
3. In the three years from 2017 to 2019, Netflix’s debt to equity ratios are all
quite high and also do not vary much. In 2017, it’s 1.8145. In 2018 it’s 1.9776
and in 2019 it’s 1.9466. It’s all quite close to 2 and this indicates that the
company it’s quite risky. In 2018 we saw an increase in the debt to equity
ratio but in dropped a little in 2019; which may indicate a good sign in the
futur.In fact in the year of 2018, Netflix has the highest debt to ratio figure in
3 years. In 2017 and 2019 the average ratios are 1.13 and 1.64 - which in my
opinion still indicates quite a safe bet while Netflix struggle to maintain its
figure below 2.0.
3. Profitability ratios
3.1. Profit margin
Netflix had lower profit margin than median industry ratios in 2017. Its profit
margin increased yearly and surpassed average industry ratios in 2019 which is a
good signal for them. Lions Gate and AMC had higher ratios than either Netflix
and Industry ratios.

70.00%

60.00%

50.00%

40.00%

30.00%

20.00%

10.00%

0.00%

Netflix

Lions Gate

AMC
2019

3.2.
margin

Netflix

2018

Industry ratios
2017

2019

2018

2017

Netflix

38.28%

36.89%

31.30%

Lions Gate

44.89%

44.07%

40.53%

AMC

63.85%

63.72%

63.45%

Industry ratios
(Median)

31.7%

36.9%

35.4%

Operating

2019

2018

2017

12.92%

10.16%

7.17%


Lions Gate

3.52%

6.02%

-0.51%

AMC

2.49%

4.85%

2.00%

-10.50%

8.00%

1.00%

Industry ratios
(Median)

Netflix had the highest operating margin compare with Lions Gate, AMC,
and Industry ratio in 3 years. It means that the company is efficient in its
operations and is good at turning sales into profits.
Chart Title
15.00%
10.00%
5.00%
0.00%

Netflix

Lions Gate

AMC

Industry ratios

-5.00%
-10.00%
-15.00%
2019

2018

2017

3.3. Basic Earning Power (BEP)
2019

2018

2017

Netflix

7.67%

6.18%

4.41%

Lions Gate

1.54%

2.77%

-0.18%

AMC

0.99%

2.79%

1.04%

Netflix’s BEP increased steadily and was the highest one in those three
companies. Netflix is more efficient at generating income from its assets. On the
other hand, Lions Gate and AMC’s BEP have not been stable over time.


Chart Title
8.00%
7.00%
6.00%
5.00%
4.00%

3.00%
2.00%
1.00%
0.00%

Netflix

Lions Gate

AMC

-1.00%
2019

2018

2017

3.4. Return on Equity (ROE)
2019

2018

2017

Netflix

24.62%

23.12%

15.60%

Lions Gate

-10.25%

14.82%

0.58%

AMC

-12.28%

7.88%

-23.06%

-6%

-92.3%

-30.5%

Industry ratios
(Average)

Netflix had the highest ROE in three years and grew annually. It may provide
that the company management is good at generating shareholder value because it

knows how to reinvest its earnings wisely, so as to increase productivity and
profits.


Chart Title
40.00%
20.00%
0.00%
-20.00% Ne

ix
tfl

G
ns
Lio

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at

C
AM
st
du
In

-40.00%

r

a
yr

t io

s
(

er
Av

ag

e)

-60.00%
-80.00%
-100.00%
2019

2018

2017

3.5. Return on Assets (ROA)
2019

2018

2017

Netflix

5.49%

4.66%

2.94%

Lions Gate

-3.56%

5.22%

0.16%

AMC

-1.09%

1.16%

-4.97%

Industry ratios
(Median)

-16.7%

-33.8%

-18.8%

On general, although ROA of Entertainment Industry was quite low, Netflix still
had a positive ROA and increased in the next year. It may seem that the business
was more profitable and efficient.


Chart Title
10.00%
5.00%
0.00%
-5.00%

ix
tfl
Ne

-10.00%

n
Lio

a
sG

te

AM

C
st
du
n
I

r

a
yr

t io

s
(M

ia
ed

n)

-15.00%
-20.00%
-25.00%
-30.00%
-35.00%
-40.00%
2019

2018

2017

4. Acivity ratios

4.1. Fixed Assets Turnover (FAT)
2019

2018

2017

Netflix

6.12%

11.97%

12.03%

Lions Gate

5.77%

5.01%

3.11%

AMC

0.68%

1.53%

1.40%

Even though Netflix’s FAT decreased overtime, it was still higher than Lions
Gate and AMC. A declining ratio may also suggest that the company is overinvesting in its fixed assets.
Chart Title
14.00%
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%

Netflix

Lions Gate
2019

2018

AMC
2017

4.2. Total Assets Turnover (TAT)
2019

2018

2017

Netflix

0.59%

0.61%

0.62%

Lions Gate

0.44%

0.46%

0.35%

AMC

0.40%

0.58%

0.52%

The ratio measures the efficiency of how well a company uses assets to produce
sales. These numbers showed that Netflix operates more efficiently than both
Lions Gate and AMC. This reduction may be caused by the over-investing in
Fixed Assets as we can see in the previous part. However, it was having a greater
TAT than its competitors.
Chart Title
0.70%
0.60%
0.50%
0.40%
0.30%
0.20%
0.10%
0.00%

Netflix

Lions Gate
2019

2018

AMC
2017

5. Valuation ratios
5.1. P/E
2017

2018

2019

Netflix

188.12%

91.78%

78.35%

Lions Gate

33.65%

15.54%

10.49%


14.10%

AMC

12.42%

7.24%

It can be seen as the P/E ratios of both 3 companies are decreasing over time. In

detail, among 3 companies, Netflix has the highest P/E ratios percentage, while
Lions Gate decreases the PE ratios fastest after 3 years (-220.8%). Decreasing in
Netflix was caused by the dropping of the price per share and a slight increasing
in EPS. Lower or decreasing EPS gives poor indication about the health of the
company and gives lower return to the shareholders. It will make the investors no
longer interest in investing the company in the long-run.
5.2. P/CF
2017

2018

2019

Netflix

186.24%

256.08%

323.57%

Lions Gate

10.59%

12.28%

6.701%

AMC

14.10%

12.42%

7.24%

Difference from P/E ratios, P/CF ratios table show an increasing in
financial data of both 3 companies although there’s a drop in 2019 of Lions Gate
and AMC. Netflix P/CF ratios keep growing during 2017- 2019 (186.24% ->
323.57%), which reveal its advance ability to generate additional revenues. The
same happens to Lions Gate and AMC, but in 2019, these ratios declined (Lions
Gate: 12.28% -> 6.701%). A high P/CF ratio indicated that the firm is trading at a
high price but is not generating enough cash flows to support the multiple. This
will somehow explain the decreasing in P/E. When a firm is overvalued, analysts
and other economic experts expect the price to drop eventually.

E. The DuPont system
Netflix is the only company among these three that offer a positive sign as its
ratios raise regularly (15.61% -> 24.62%). Contrary to Netflix, Lions Gate and
AMC seem to become less efficient at creating profits and increasing


shareholder value as their ROE ratios remain insecure. Lions Gate ratios
increase from 0.58% to 14.54% then decrease to -9.31%, while the ratios of
AMC increase 30.92% (-23.05% -> 7.87%) from 2017-2018 then fall down
20.14 % (6.27% -> -11.42%) in 2018-2019 period.

a. ROA:

- ROA ratio in 2018 of Netflix is higher than the 2017 ROA ratio
(4.66%>2.94%), while in 2019, Netflix’s ROA ratio keeps developing up to
5.49%. This is a sign of the strategy using the total assets of Netflix wisely.
+ From these data, we understand that 2017 Net income over Total assets
ratios is 2.94% meaning every 100$ from Total assets invest in business
activities bring back 2.94$ profit after taxes, which show a quite high ROA
ratio of Netflix Inc. In 2018, this ratio is 4.66%, which increases 1.722%
compared to 2017. In 2019, Netflix keeps the development in ROA ratios
as it creases 0.833% compared to the previous year. The 2019 ROA ratio is
5.495% meaning when invest 100$ of assets, Netflix gets back 5.495%
profit after taxes, which is a good sign for the company. The increase in
ROA is a result of the expansion in “Net Income after Taxes”.
b. ROE:

- 2017 Net income over Total equity ratios is 15.60% meaning every 100$
invest in equity brings back 15.60$ profit after taxes, which also shown a
high ROE ratio of Netflix Inc. In 2018, this ratio is 23.11%, which
increases 7.50% compared to 2017. Similar to ROA, the increase in ROE is
a result of the expansion in “Net Income after Taxes”. In 2019, Netflix’s
ROE ratio keeps growing as it creases 1.50% compared to the previous
year. The 2019 ROE ratio is 24.62% meaning when invest 100$ of assets,
Netflix gets back 24.62% profit after taxes. Thus, it has shown that Netflix
has used Total Equity effectively through the years and leads to the rise in
Net Income after taxes and ROE ratios.


+ In particular:
 In each 100$ investment in business activities in 2017, there is 5$ create
from equity, 5$ in 2018 and 4$ in 2019.
 Each 100$ from assets in 2017 bring back 2.94$ in net revenue,

4.66$ in 2018 and 5.49$ in 2019.

III – Conclusion
Netflix was established in 1997 and one of their most
revolutionary ideas was realizing that people would much rather
stay at home and watch whatever movie or tv show they’d like
over physically going to the store and Purchasing the movie, this
then turned reality where people can watch whatever they want
with a touch of a button using a subscription fee.
All of this generated a lot of money for Netflix and their
financial performance over the past 3 years proves it. Netflix
pretty much had growth in all the financial ratios with significant
growth in their return on assets and return on equity ratios,
meanwhile they managed to reduce their debt ratio to reach its
lowest amount in 2019. In addition, the cash and inventory ratios
maintained a healthy growth rate between 2016 and 2019.
However, the biggest downfall was in the return on equity
ratio as Netflix had an unsteady return on equity ratio between
2017 and 2019 reaching a high 35.6% in 2018, but falling back
down to 29.4% in 2019 their second worse number over the past
3 years. All and all Netflix had a financially successful period
between 2016 and 2019 as they almost had a positive return in
every ratio, and more impressively had constant growth in
almost all ratios.
The ”battle” between Netflix and AMC movie theaters or
Lions Gate, a new comer in the streaming platform may not
make Netflix, Inc worried as, these 2 company has a weaker
financial position.
Suggest hat Netflix works to create more original content as
this will continue to set them apart from the competition. Netflix

has stated the success of these originals and this success is
needed for their continued growth. Without this, subscribers will
not keep this subscription and may choose other companies
instead.
They should work on moving their cashflow towards a positive
amount as this will allow them to be less reliant on the public
and allow them to fund more of their needs on their own. This


will
also
help
strengthen
them
as
a
company.
Netflix should also come up with a strategic plan in order to
continue to generate revenue even if subscriptions slow or
decrease. They need to be prepared to make different financial
decisions to
continue the
rebirth
of the
company.
The financials of an organization on their own mean very little
with comparison to previous years, competition, and key
performance
indicators.

IV – Reference
1. Netflix, Inc

a. Assets
Fiscal year is Jan-Dec
%
2018
%
2017
14.8% 3,794.5 14.6% 2,822.8
1.3%
362.7
1.4%
0.5%
178.8
0.7%
1.5% 5,358.1 20.6% 4,847.2
18.2% 9,694.1 37.3%
7,670

%
14.8%
25.5%
40.3%

2,097.5

6.2%

418.3

1.6%

319.4

1.7%

-

-

-

-

-

-

-

-

-

-

-

-

57.6%
3.5%

10,371.1
652.3

54.5%
3.4%
100.0
%

Netlix, Inc (USD
2019
millions)
Cash and Equivalents
5,018.4
Short-term Investments
Acount Receivables, Net
454.4
Inventory
Prepaid Expenses
181
Other Current Assets
524.7
Total current assets 6,178.5
Property, Plant and
equipment, Net
Real Estate Owned
Capitalized/Purchased

Software
Long-term investments
Goodwill
Other Intangibles
Other Long-term assets
TOTAL ASSETS

14,703.4 43.3% 14,951.1
10,996.4 32.4%
910.8
33,975.6

100%

25,974

100.0%

19,013

b. Liabilities & Equity
Fiscal year is Jan-Dec

Netlix, Inc
(USD millions)
Accounts Payable
Accrued Expenses
Short-term Borrowings

2019

674.3
652.4
-

%
2.0%
1.9%
-

2018
563
481.9
-

%
2.2%
1.9%
-

2017
359.6
315.1
-

%
1.9%
1.7%
-

Current Portion of LT
Debt
Current Portion of
190.6
0.6%
Capital Lease Obligations
Other Current Liabilities
5,338.30 15.7%
Total Current Liabilities 6,855.70 20.2%
Long-term Debt
14,759.3
43.4%
0
Capital Leases
1,422.60
4.2%
Other Non-current
3,356.00
9.9%
Liabilities
Total Liabilities 26,393.6
77.7%
0
Common Stock
2,793.90
8.2%
Additonal paid in capital
Retained earnings
4,811.70 14.2%
Treasury Stock

Other Common Equity
-23.5
-0.1%
Adj
Total Common Equity 7,582.20 22.3%
Total Preferred Equity
Minority Interest, Total
Other Equity
0
0.0%
Total Equity 7,582.20 22.3%
TOTAL LIABILITIES
33,976
100.0%
& EQUITY

-

-

-

-

-

-

-

-

5,442.50
6,487.30
10,360.1
0
-

21.0%
25.0%

4,491.70
5,466.30

23.6%
28.8%

39.9%

6,499.40

34.2%

-

-

-

15.0%

3,465.00

18.2%

3,888.30

8.9%
11.3%
-

15,430.8
0
1,871.40
1,731.10
-

-19.6

-0.1%

-20.6

-0.1%

5,238.80
0
5,238.80

20.2%

0.0%
20.2%
100.0
%

3,582.00
0
3,582.00

18.8%
0.0%
18.8%
100.0
%

20,735.6
0
2,316.00
2,942.40
-

25,974

79.8%

19,013

81.2%
9.8%
9.1%

-

c. Income statement
Netlix, Inc
(USD millions)
Sales
Cost of Goods Sold
Gross Profit

2019

%

2018

%

2017

%

20,156.4

100.0
%

15,794.3
0

100.0

%

11,692.7
0

100.0
%

61.7%

9,967.50

63.1%

7,660.00

65.5%

38.3%

5,826.80

36.9%

4,032.70

34.5%

3,566.80

17.7%

2,999.80

19.0%

2,141.60

18.3%

1,545.10

7.7%

1,221.80

7.7%

1,052.70

9.0%

5,111.90

25.4%

4,221.60

26.7%

3,194.30

27.3%

12,440.2
0
7,716.20

Operating expenses
Selling General &
Admin Expenses
R&D Expenses
Total Operating
Expenses