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. Balance SheetBalance Sheet as of:Currency (In million)ASSETSCash And EquivalentsTotal Cash & ST InvestmentsAccounts ReceivableOther ReceivablesTotal ReceivablesPrepaid Exp.Other Current AssetsTotal Current AssetsGross Property, Plant & EquipmentAccumulated DepreciationNet Property, Plant & EquipmentOther IntangiblesDeferred Tax Assets, LTOther Long-Term AssetsTotal AssetsLIABILITIESAccounts PayableAccrued Exp.Curr. Port. of LT DebtCurr. Port. of LeasesUneamed Revenue, CurrentOther Current LiabilitiesTotal Current LiabilitiesLong-Term DebtLong-Term LeasesOther Non-Current LiabilitiesTotal LiabilitiesCommon StockRetained EarningsTreasury StockComprehensive Inc. and OtherTotal Common EquityTotal EquityTotal Liabilities And EquityDec-31-2020 Dec-31-2021USD8,205.68,205.6610.8610.8203.0742.29,761.63,492.7(494.8)2,997.913,747.6589 112,184.239,280.4656.2846.0499.9256.21,118.04,429.57,805.815,809.11,945 62,654.628,215.13,447.77,573.144.411,065.211,065.239,280.4USD6,027.86,027.8804.3804.3323.8913.98,069.84,386 3(616.3)3,770.013,799.2148.118,797.544,584.7837.51,134.2699.8315.21,209.34,293.08,489.014,693.12,408 53,144.928,735.44,024.612,689.4(824.2)(40.5)15,849.215,849.244,584.7Dec-31-2022USD6,113.76,113.7875.0875.0391.81,436.38,816.94,294.3(710.0)3,584.312,571.122,590.047,562.2560.21,469.2334.31,176.34,225.97,765.913,888.12,209.73,170.327,034.04.474.017,126.0(824.2)(247.6)20,528.120,528.147,562.2Financial RatiosFor the Fiscal Period EndingReturn on Assets %Gross Margin %Net Income Margin %Fixed Asset TumoverAccounts Receivable TumoverInventory TumoverCurrent RatioQuick RatioTotal Debt/EquityLT Debt/EquityEBIT/ Interest Exp.Note: Debt includes lease liabilities12 monthsDec-31-20207.03%38.9%11.0%8.3x40.9xNA1.3x1.3x167.3%160.5%6.0x12 monthsDec-31-202111.48%41.6%17.2%7.9x36.9xNA1.0x1.0x114,3%107.9%8.1x12 monthsDec-31-202210.61%39.6%16.0%8.8x36,0xNA1.1x1.1x80.0%78.4%7.9x Question 1Netflix Inc. provides entertainment services. It offers TV series, documentaries, feature films,and mobile games across various genres and languages. The company provides members theability to receive streaming content through a host of internet-connected devices, includingTVs, digital video players, television set-top boxes, and mobile devices. It has approximately222 million paid members in 190 countries.The income statement and balance sheet over the last three years as well as pertinent financialratios are provided below.Income StatementFor the Fiscal Period EndingCurrency (In million)RevenueCost Of Goods SoldGross ProfitSelling General & Admin Exp.R & D ExpOther Operating Exp., TotalOperating IncomeInterest ExpenseInterest and Invest. IncomeNet Interest Exp.Currency Exchange Gains (Loss)EBTIncome Tax ExpenseNet Income12 monthsDec-31-2020USD24,996.115,276.39,719.73,304.81,829.65,134.44,585.3(767.5)41.6(725.9)(660.0)3,199.3438.02,761.412 monthsDec-31-2021USD29,697.817,332.712,365.23,896.82,273.96,170.76,194.5(765.6)8.2(757.4)403.05,840.1723.95,116.212 monthsDec-31-2022USD31,472.819,003.712,469.14,069.82,684.66,754.45,714.7(725.0)6.5(718.5)782.05,775.4731.45,044.1

Financial ratios refer to the techniques of evaluating the financial performance of the company.…

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

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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.

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

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

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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