Homework Help is Here – Start Your Trial Now!
Business
Finance
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.

Financial Accounting
Financial Accounting
14th Edition
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Carl Warren, Jim Reeve, Jonathan Duchac
Chapter1: Introduction To Accounting And Business
Section: Chapter Questions
Problem 26E
See similar textbooks
icon
Related questions
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 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
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
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
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
Expert Solution
steps

Step by step

Solved in 5 steps

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Stock Market Analysis
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Financial Accounting
Financial Accounting
Accounting
ISBN:
9781305088436
Author:
Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Financial Accounting
Financial Accounting
Accounting
ISBN:
9781337272124
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning
Managerial Accounting
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub
SEE MORE TEXTBOOKS