Netflix Inc. provides entertainment services. It offers TV series, documentaries, feature films, and mobile games across various genres and languages. The company provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, television set-top boxes, and mobile devices. It has approximately 222 million paid members in 190 countries. I have attached photos of the income statement and balance sheet over the last three years as well as pertinent financial ratios. (a) Appraise Netflix’s long-term solvency and asset management ratios over the last three years. (b) Calculate Netflix’s return on equity for 2021 and 2022 using the DuPont identity and show your view based on your observations. Step-by-step working (c) Examine the effect on Netflix’s current ratio and return on asset if it continues to generate more sales and but takes on more long-term debt during 2023.
Netflix Inc. provides entertainment services. It offers TV series, documentaries, feature films, and mobile games across various genres and languages. The company provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, television set-top boxes, and mobile devices. It has approximately 222 million paid members in 190 countries. I have attached photos of the income statement and balance sheet over the last three years as well as pertinent financial ratios. (a) Appraise Netflix’s long-term solvency and asset management ratios over the last three years. (b) Calculate Netflix’s return on equity for 2021 and 2022 using the DuPont identity and show your view based on your observations. Step-by-step working (c) Examine the effect on Netflix’s current ratio and return on asset if it continues to generate more sales and but takes on more long-term debt during 2023.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Netflix Inc. provides entertainment services. It offers TV series, documentaries, feature films, and mobile games across various genres and languages. The company provides members the ability to receive streaming content through a host of internet-connected devices, including TVs, digital video players, television set-top boxes, and mobile devices. It has approximately 222 million paid members in 190 countries.
I have attached photos of the income statement and
Transcribed Image Text:Balance Sheet
Balance Sheet as of:
Currency (In million)
ASSETS
Cash And Equivalents
Total Cash & ST Investments
Accounts Receivable
Other Receivables
Total Receivables
Prepaid Exp.
Other Current Assets
Total Current Assets
Gross Property, Plant & Equipment
Accumulated Depreciation
Net Property, Plant & Equipment
Other Intangibles
Deferred Tax Assets, LT
Other Long-Term Assets
Total Assets
LIABILITIES
Accounts Payable
Accrued Exp.
Curr. Port. of LT Debt
Curr. Port. of Leases
Uneamed Revenue, Current
Other Current Liabilities
Total Current Liabilities
Long-Term Debt
Long-Term Leases
Other Non-Current Liabilities
Total Liabilities
Common Stock
Retained Earnings
Treasury Stock
Comprehensive Inc. and Other
Total Common Equity
Total Equity
Total Liabilities And Equity
Dec-31-2020 Dec-31-2021
USD
8,205.6
8,205.6
610.8
610.8
203.0
742.2
9,761.6
3,492.7
(494.8)
2,997.9
13,747.6
589 1
12,184.2
39,280.4
656.2
846.0
499.9
256.2
1,118.0
4,429.5
7,805.8
15,809.1
1,945 6
2,654.6
28,215.1
3,447.7
7,573.1
44.4
11,065.2
11,065.2
39,280.4
USD
6,027.8
6,027.8
804.3
804.3
323.8
913.9
8,069.8
4,386 3
(616.3)
3,770.0
13,799.2
148.1
18,797.5
44,584.7
837.5
1,134.2
699.8
315.2
1,209.3
4,293.0
8,489.0
14,693.1
2,408 5
3,144.9
28,735.4
4,024.6
12,689.4
(824.2)
(40.5)
15,849.2
15,849.2
44,584.7
Dec-31-2022
USD
6,113.7
6,113.7
875.0
875.0
391.8
1,436.3
8,816.9
4,294.3
(710.0)
3,584.3
12,571.1
22,590.0
47,562.2
560.2
1,469.2
334.3
1,176.3
4,225.9
7,765.9
13,888.1
2,209.7
3,170.3
27,034.0
4.474.0
17,126.0
(824.2)
(247.6)
20,528.1
20,528.1
47,562.2
Financial Ratios
For the Fiscal Period Ending
Return on Assets %
Gross Margin %
Net Income Margin %
Fixed Asset Tumover
Accounts Receivable Tumover
Inventory Tumover
Current Ratio
Quick Ratio
Total Debt/Equity
LT Debt/Equity
EBIT/ Interest Exp.
Note: Debt includes lease liabilities
12 months
Dec-31-
2020
7.03%
38.9%
11.0%
8.3x
40.9x
NA
1.3x
1.3x
167.3%
160.5%
6.0x
12 months
Dec-31-
2021
11.48%
41.6%
17.2%
7.9x
36.9x
NA
1.0x
1.0x
114,3%
107.9%
8.1x
12 months
Dec-31-
2022
10.61%
39.6%
16.0%
8.8x
36,0x
NA
1.1x
1.1x
80.0%
78.4%
7.9x
Transcribed Image Text:Question 1
Netflix Inc. provides entertainment services. It offers TV series, documentaries, feature films,
and mobile games across various genres and languages. The company provides members the
ability to receive streaming content through a host of internet-connected devices, including
TVs, digital video players, television set-top boxes, and mobile devices. It has approximately
222 million paid members in 190 countries.
The income statement and balance sheet over the last three years as well as pertinent financial
ratios are provided below.
Income Statement
For the Fiscal Period Ending
Currency (In million)
Revenue
Cost Of Goods Sold
Gross Profit
Selling General & Admin Exp.
R & D Exp
Other Operating Exp., Total
Operating Income
Interest Expense
Interest and Invest. Income
Net Interest Exp.
Currency Exchange Gains (Loss)
EBT
Income Tax Expense
Net Income
12 months
Dec-31-2020
USD
24,996.1
15,276.3
9,719.7
3,304.8
1,829.6
5,134.4
4,585.3
(767.5)
41.6
(725.9)
(660.0)
3,199.3
438.0
2,761.4
12 months
Dec-31-2021
USD
29,697.8
17,332.7
12,365.2
3,896.8
2,273.9
6,170.7
6,194.5
(765.6)
8.2
(757.4)
403.0
5,840.1
723.9
5,116.2
12 months
Dec-31-2022
USD
31,472.8
19,003.7
12,469.1
4,069.8
2,684.6
6,754.4
5,714.7
(725.0)
6.5
(718.5)
782.0
5,775.4
731.4
5,044.1
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