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
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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
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