Netflix Trend Analysis Paper

Amazing Essays
The MD&A section of the financial statement were consistent with my research results. Netflix is an emergent company that is attempting to expand their services worldwide. With this expansion comes an internal growth within the company, but it also come with a rise of costs within the operation that is becoming dangerous for Netflix. This is illustrated in Netflix’s financial reports. You can clearly see the growth of Netflix in their balance sheet. Every year their total assets grow at least 30% and their current assets isn’t falling behind growing from year to year at an average growth rate of 34%. Most of this growth is pertained to Netflix’s “current content assets, net” account and its “non-current content assets, net” account. These …show more content…
Netflix has to finance these new assets in some way. Unfortunately, Netflix has had to financing a lot these assets with long-term debt. This is evident when we look at the trend analysis for Netflix’s balance sheet. You can see over the past 3 years that long term debt has been increasing and then over this past year has exploded, growing by 167.29% in comparison to last year. In my opinion this can become a serious problem for Netflix and the MD&A section also lists long-term debt as a risk factor in the company. The main debt contributor that is cited in the 10k report is an increase in issuance of senior notes worth $2,400 million. The 10K report states that their debt problem is limiting their company in 3 ways. First, since the debt requires payments they have had to put a portion of their operating cash flows into paying down that debt. This cash could be used for working capital, capital expenditures, acquisitions and investments, but instead is being put towards their debt and interest expense. Secondly, the debt payment is limiting their ability to react to market conditions. Thirdly, a growing debt can make it harder for Netflix to borrow additional funds at rates they find acceptable. I can agree with everything that Netflix has reported. The more debt a company has the less willing creditors are of giving money to a company. This can drag down the growth of expansion as you need money to finance new …show more content…
However, investors must be cautious as a growing company like Netflix can incur expenses that can lead to financial problems as stated above. There is an upside though as Netflix is a growing company it can put up ridiculous numbers for earnings year to year. For the next 3 years I would invest in Netflix as their EPS has for the most part been positive and their price to earnings ratio has been amazing. Netflix consistently puts up a positive net income and growing revenues. All good sign to hold this stock as the trend for Netflix seems to be up. After these 3 years investors should however be very cautious. We will have to see how the expansion of Netflix’s services goes on an international scale. We will also have to take into account the growth of Netflix’s competitors cutting into this new Internet television market. Companies like Amazon and Hulu could take away Netflix customers as they expand their services. Overall, Netflix is at a growing trajectory and exceptional growth for the time being in my opinion a good

Related Documents

  • Decent Essays

    Netflix Financial Statement Analysis The online video streaming media has been in demand. But the most popular and shown to be on top of its competitors is Netflix. The company’s financial statement will be explained on how much of their success has increased in the past few years. Every company would like to expand their business and aim to be the best and the most successful they can be. But, being successful also includes taking risks.…

    • 916 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Next to increase their customer base they should use their bigdata information to promote their services in a unique way to the audience who don’t know what Netflix is yet. With a steady increase in their subscriber base, they may have an increasing strong customer base which would be hard for any player to build. Hence the giants like Amazon or Microsoft may have huge sums of money but with the original content’s trust and a loyal customer base, Netflix can give them a run for their money atleast in this…

    • 992 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Costco management has done great job building into a $60 million market cap business focusing on North America and in particular the United States. Although concerns were raised that Costco warehouse model would not fit international markets. Huge future growth can be expected if management figures out as to how to succeed in these foreign markets. Also if it performs as it did in North America, chances are that there will be immense growth in the coming future. The company makes most of its profits from membership fees.…

    • 951 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Therefore, the private sector will have negative outcomes, and the private sector will borrow less money. With the private sector borrowing less money and less money circulating in the economy, the unemployment rate goes up, aggregate demand decreases, and a recession may occur. The items listed before all slow down economic growth. This is another con of national debt because it affects the private sector, job security, and economic growth in bad ways. A negative of the national debt is taxes may rise in the future to produce higher revenues for the government…

    • 728 Words
    • 3 Pages
    Decent Essays
  • Decent Essays

    Swot Analysis Of Windowing

    • 1979 Words
    • 8 Pages

    If the online VOD companies are making their own films then those films are going to be released via their VOD service. Thus, cinemas may not even have the chance to show them. Netflix had 4.94 million subscribers in the U.K at the end of last year (Statista, 2016). Statista, a statistics company, is predicting that by the year 2020 Netflix will reach 9.5 million subscribers in the U.K alone (2016). Thus, with this rapid rise in subscribers and Netflix producing their own films, it is clear the idea of windowing will be a business strategy of the past.…

    • 1979 Words
    • 8 Pages
    Decent Essays
  • Decent Essays

    Based on the numbers it seems like they are having some trouble collecting on their receivables. Their cash ratio came in low so they may be relying too heavily on their assets to drive reneue. If their heavy funding of expansion through debt does not yield a sufficient amount of revenue, they could be putting themselves at risk Recommendations – For the future, I would recommend that Organics management team closely monitor their process for collecting payments. Their quick ratio came in under 1 so it could mean they are collecting slowly or extending too long of terms. I would also recommend that they not rely so heavily on their debt to finance their operations and be more effective in using their invested…

    • 1097 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Balance Sheet Observation Pinnacle Entertainment INC. (PNK) a) What is the trend, in each company, in total revenues over the three years? Growth has been observed in revenue. It is increased from (2012) 1,002,836 to (2014) 2,210,543 which is 120% growth as compare to base year. Revenue is very sensitive for the survival of company but since growth rate is very high, it is sign that company will grow further in future. PNK need to maintain it through the period, any negative in growth can badly affect the reputation of PNK.…

    • 464 Words
    • 2 Pages
    Decent Essays
  • Decent Essays

    EXTERNAL ANALYSIS General characteristics of the environment To understand how and why Netflix operates the way it does we are going to analyze the environment of the business in which the firm operates. The performance of the company is not affected only by its particular actions but it changes depending on different factors such as: The demographic structure: The population is rising nearly 77 million people per year, at a rate of 1.15 % per year; it is over 6.9 billion people. The five most populated countries are: China (1.3 billion), India (1.2 billion), United States (311 million), Indonesia (246 million), and Brazil (203 million). It’s essential to recognize the larger markets because they offer great opportunities for Netflix to increase…

    • 1972 Words
    • 8 Pages
    Decent Essays
  • Decent Essays

    Because the creditor tends to consume less and save more, in order to invest the money in debtors, as a result they have a large proportion of savings. When deflation impairs debtors’ wealth, the decline in consumption will makes debtors suffers more than the…

    • 1183 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Amazon Swot Analysis Paper

    • 1119 Words
    • 4 Pages

    Crises like that can reduce the demand and the visors of the site. This requires a lot from the company such as reducing prices, presentations, and loyalty programs for customers. At the same time when raw materials prices rise, it will be reflected in higher product prices, and thus may cause a lot of losses through the reluctance of customers for purchase. Intense competition such as Google and Ebay began to compete with the company which made a lot of customer orientation for new companies get competitive prices. Perhaps one of the proposed solutions for the company is to create a new company follow them for retail sale, as well as trying to buy those companies or acquire a large stake in these companies to dominate the…

    • 1119 Words
    • 4 Pages
    Decent Essays