Netflix Financial Analysis
Introduction
Netflix is the world’s largest online television service provider, which controls the market globally generating over 50 million subscribers. The company has consolidated its position as an online television industry. It provides its users with a fast Internet delivery service of television shows and movies directly on computers, television, and mobile devices worldwide. The video streaming and broadband connection help users around the globe download and watch large video files from the comfort of their homes. With the advantage of this technology, Netflix has launched a video steaming website in 2009 where subscribers can watch the most recent television shows and movies.
For today’s audience, it’s all about immediacy and …show more content…
A high ratio indicates a company with a low risk.
There are two types of liquidity ratios, current ratio and quick ratio.
Current Ratio
Current Ratio is calculated by dividing the Current Assets of a company by its Current Liabilities.
It measures if a company has enough cash or assets to pay its current liability over the coming fiscal year.
Current Ratio = Current Asset/ Current liabilities
The current assets for NFLX in 2013 equated to $3,058,763 with current liabilities equating to $2,154,203. The current ratio is calculated as follows: Current Assets = $3,058,763 = 1.42
Current Liabilities $2,154,203 Current Ratio 2011 2012 2013
Netflix 1.49 1.34 1.42
TWC 1.19 0.92 0.41
NTFX compared to TWC, the current ratio indicates that the NTFX is healthy due to it having a higher proportion of assets to liabilities. However, irrespective of industry standing, the current ratio falls short of an ideal ratio of 2:1, which is sought after by most …show more content…
Debt-to-equity ratio (3.06) in 2013 indicates that NTFX may not be able to generate enough cash to satisfy its debt.
In general, Creditors prefer low amount of debt to equity ratio. Netflix compare to Time Warner Cable has a similar amount of this ratio and high percentage means that a company is using more leverage and has a weak equity position and requires significant financing.
Profitability Ratios
Profitability ratio provides an indication of the company 's ability to produce revenue as compared to its expenses.
Net Profit Margin
Net profit margin is net income as a percentage of sales. This indicator reflects how much net profit get back that each every paid, it represents the level of sales income. If trend is down, product costs and/or operating expenses are rising faster than sales. The calculate formula is Net Income/ Sales (net), Netflix and TMC’s data is calculated as follows:
Net Profit Margin 2011 2012 2013
Netflix 7% 0.50% 3%
TWC 8% 10% 9%
Netflix is the world’s largest online television service provider, which controls the market globally generating over 50 million subscribers. The company has consolidated its position as an online television industry. It provides its users with a fast Internet delivery service of television shows and movies directly on computers, television, and mobile devices worldwide. The video streaming and broadband connection help users around the globe download and watch large video files from the comfort of their homes. With the advantage of this technology, Netflix has launched a video steaming website in 2009 where subscribers can watch the most recent television shows and movies.
For today’s audience, it’s all about immediacy and …show more content…
A high ratio indicates a company with a low risk.
There are two types of liquidity ratios, current ratio and quick ratio.
Current Ratio
Current Ratio is calculated by dividing the Current Assets of a company by its Current Liabilities.
It measures if a company has enough cash or assets to pay its current liability over the coming fiscal year.
Current Ratio = Current Asset/ Current liabilities
The current assets for NFLX in 2013 equated to $3,058,763 with current liabilities equating to $2,154,203. The current ratio is calculated as follows: Current Assets = $3,058,763 = 1.42
Current Liabilities $2,154,203 Current Ratio 2011 2012 2013
Netflix 1.49 1.34 1.42
TWC 1.19 0.92 0.41
NTFX compared to TWC, the current ratio indicates that the NTFX is healthy due to it having a higher proportion of assets to liabilities. However, irrespective of industry standing, the current ratio falls short of an ideal ratio of 2:1, which is sought after by most …show more content…
Debt-to-equity ratio (3.06) in 2013 indicates that NTFX may not be able to generate enough cash to satisfy its debt.
In general, Creditors prefer low amount of debt to equity ratio. Netflix compare to Time Warner Cable has a similar amount of this ratio and high percentage means that a company is using more leverage and has a weak equity position and requires significant financing.
Profitability Ratios
Profitability ratio provides an indication of the company 's ability to produce revenue as compared to its expenses.
Net Profit Margin
Net profit margin is net income as a percentage of sales. This indicator reflects how much net profit get back that each every paid, it represents the level of sales income. If trend is down, product costs and/or operating expenses are rising faster than sales. The calculate formula is Net Income/ Sales (net), Netflix and TMC’s data is calculated as follows:
Net Profit Margin 2011 2012 2013
Netflix 7% 0.50% 3%
TWC 8% 10% 9%