Netflix, Inc. Financial Analysis

Here is the link to the SEC Report for Netflix, which is the company I chose. https://www.sec.gov/Archives/edgar/data/1065280/000106528018000069/q4nflx201710k.htm#sA2DC171FBD9D5399AD30B9D6737B66CA 

The corporation that I chose to study is Netflix, Inc. This corporation is traded at NASDAQ, and its ticker symbol is NFLX i.e. Netflix, Inc.: NASDAQ: NFLX. I decided to do a study on the financial performance on Netflix because this particular company has been of interest to many after the merge with Warner Bros in 2010. This agreement, which involves both Netflix and Warner Bros sharing movie titles after their release has had immense effect on the performance of both Companies. The negotiations involved price changes, which were in favor of Netflix’s position to acquire titles at better positions. This access to more titles is set to help Netflix open up to more access of movie titles. There is hope that the Company will soon expand their business into even a wider range of movies, which will place it in a better position to compete against the big entertainment moguls like Blockbuster. It is, therefore, evident that this agreement with Warner Bros is set to greatly change Netflix’s positioning both financially and in its financial share ("Netflix Enterprise Value (NFLX)", 2018) . However, it is worth noting that Netflix could be affected either positively or negatively by this agreement. It is for this reason that I decided to do a financial analysis on Netflix Inc., because this would give me a better insight on where the company is currently positioned financially ("Price Ratios and Valuation for Netflix Inc. (NFLX) from Morningstar.com", 2018) . 

Here is a direct link to the 2015 SEC 10-K report for Netflix, Inc.: https://www.sec.gov/Archives/edgar/data/1065280/000106528015000006/nflx201410k.htm 

Netflix, Inc. was position 314 on 2017 Fortune 500 list. Below are the pages where the crucial financial statements for Netflix, Inc. 

Income Statement 

Consolidated Balance Sheet 

Statement of Stockholders Equity 

Discussion of the Components of the Income Statement 

Accounts Receivable 

According to the financial statements, specifically the balance sheet, Netflix does not have any current accounts receivable. Next, we will look at the changes in Accounts Receivable and the Allowance for Bad Debts. The Account Receivable are increasing as far as Netflix, Inc. is concerned, while the Bad Debts are in the rise. These changes come hand in hand with a decrease in sales, whereby Netflix is making lesser sales because of the rise in debt and decline in account receivables. It is evident from Netflix’s financial statements that the Property, Plants, and Equipment (PPE) have been on the rise over the years ("Netflix Inc. (NFLX) | Enterprise Value", 2018). 

Inventory 

The fiscal year for Netflix, Inc. is the January to December. According to the SEC 10-K files, Netflix, Inc. describes the Company’s inventory in terms of average costs. It considers the cost at which a given movie was obtained and the amount of finances collected from the same. The Company’s income statement is a single-statement income statement ("Netflix Inc. (NFLX) | Enterprise Value", 2018) . The Gross Profit and Gross Profit Percentage for this year and last year is as seen below 

As seen in the table above, the sales decreased, the gross profit increased, while the gross profit percentage increased. It is, therefore, evident that sales are more profitable. Netflix, Inc. made 34.49 cents of gross profit on every dollar of sales this year, but only 31.72 cents of gross profit on every dollar of sales last year. Sales decreased, but sales are actually generating more profit overall, both as an absolute dollar value and as a percentage ("Price Ratios and Valuation for Netflix Inc. (NFLX) from Morningstar.com", 2018) . 

Balance Sheet 

The line items and dollar values in the ‘equity’ section of the balance sheet include: the Common Stock was $1,995,225, Accumulated Other Comprehensive Income was $4,264, the Retained Earnings were $2,021,241, and the net income of Netflix, Inc. according to the SEC 10-k is $6.5 million. These figures indicate an upward trend in the finances of Netflix, Inc. over the past years ("Financial Statements | Netflix, Inc.", 2018). 

Income Statement 

The first line on the income statement has the words: Fiscal year ends in December. USD in Million except per share data . The assets listed on the balance sheet include: Cash and cash equivalents of $2,593,666, Short-term investments of $246,125, Current content assets, net of $4,626,522, other current assets of $597,388, and property and equipment of $341,932. 

Auditing 

Netflix  recently dropped its longtime  auditor,  KPMG and shifted to Ernst & Young. This move aimed at giving  Netflix  a new  auditor  during a time when this company was seeking to expand its international operations. Ernst & Young (EY) is a multinational Company that has its headquarters in London, England. This company is rated as one of the largest professional services firms in the world. It is one of the "Big Four" accounting firms. The first page of the SEC 10-K is very standard and lists two key locations. Using this information, post the state of incorporation and the city and state of the corporate headquarters for your SEC 10-K. Kelly Grier is the chairman while Michael Cohn is the editor-in-chief ("Netflix Enterprise Value (NFLX)", 2018) . 

References 

Financial Statements | Netflix, Inc. (2018).  Netflix, Inc. Retrieved 27 April 2018, from https://ir.netflix.com/financial-statements 

Netflix Inc. (NFLX) | Enterprise Value . (2018).  Stock Analysis on Net . Retrieved 27 April 2018, from https://www.stock-analysis-on.net/NASDAQ/Company/Netflix-Inc/Valuation/Enterprise-Value 

Netflix Enterprise Value (NFLX) . (2018).  Ycharts.com . Retrieved 27 April 2018, from https://ycharts.com/companies/NFLX/enterprise_value 

Price Ratios and Valuation for Netflix Inc (NFLX) from Morningstar.com . (2018).  Financials.morningstar.com . Retrieved 27 April 2018, from http://financials.morningstar.com/valuation/price-ratio.html?t=NFLX