Financial Analysis of Netflix Essay Example | Topics and Well Written Essays - 1250 words

Financial Analysis of Netflix - Essay ExampleIn 1999, monthly subscriptions model was introduced and the reputation of the firm grew as a flat- honorarium rental with no due dates and late fee. Netflix has to its credit the personalized movie recommendation system which suggests choices to substance abusers based on their previous purchases. Also mentionable is the fact that Netflix user base has increased every year from the date its conception by over 50% from past years till 2005. After 2005, the number of subscribers go on to increase but at lower rates. (Netflix, 2012) Netflix also partnered with certain electronics companies to make streaming possible on the PS3, TVs with internet connections, Xbox 360, Apple iPhones, iPads, iPods and other internet committed devices. (Netflix, 2012) Researches showed that in 2011, 61% of the digital video market clintele belongs to Netflix. (Stambar, 2011) in 2011, Netflix is the highest revenue earner in the United States. (Frankel, 2012) T his data clearly shows that as of right now, Netflix is a market leader. INCOME STATEMENT (Business Week, 2012) 31-Dec-08 31-Dec-09 31-Dec-10 31-Dec-11 Revenues 1,364.70 1,670.30 2,162.60 3,204.60 TOTAL REVENUES 1,364.70 1,670.30 2,162.60 3,204.60 Cost of Goods Sold 910.2 1,079.30 1,357.40 2,039.90 GROSS PROFIT 454.4 591 805.3 1,164.70 Selling General & Admin Expenses 249.4 286.6 358.3 520.6 R&D Expenses 89.9 114.5 163.3 259 opposite Operating Expenses -6.3 -- -- -- OTHER operational EXPENSES 332.9 401.2 521.6 779.6 OPERATING INCOME 121.5 189.8 283.6 385.1 Interest Expense -2.5 -6.5 -19.6 -20 Interest and Investment Income 9.2 4.8 2.7 2.8 NET INTEREST EXPENSE 6.7 -1.6 -16.9 -17.2 Other Non-Operating Income 0.1 -- -- -- EBT, EXCLUDING UNUSUAL ITEMS 128.4 188.2 266.7 367.8 Gain (Loss) on Sale of Investments 3.1 1.9 1 0.7 Other Unusual Items, Total -- 2.1 -- -9 Legal Settlements -- 2.1 -- -9 EBT, INCLUDING UNUSUAL ITEMS 131.5 192.2 267.7 359.5 Income Tax Expense 48.5 76.3 106.8 133. 4 Earnings from Continuing Operations 83 115.9 160.9 226.1 NET INCOME 83 115.9 160.9 226.1 Talking about the income rehearsal of Netflix, the trend of revenues has certainly taken a great boost since 2006 from 1365 million dollars to 3205 million dollars in 2011. Growth in revenue certainly is a authoritative sign for any company. Netflix has achieved huge numbers during the four years. The cost of sales has also risen but looking at the overall gross loot margin, we see a rising trend. Expanses look pretty much under control and would not had been a point of concern for Netflix. The change in the income avowal which was very obvious was the interest charges which rose by big number from (1.6) in the year 2008 to (16.9) in 2010 and (20) in 2011. This sum that Netflix has taken huge arrive of loans in 2010 and have retained them in 2011 as well. In the income statement, we can also see that the investments income earned has also decreased since 2006. This means that Netflix hav e taken out all the investments it had made outside its company. Net income also shows a positive growing trend. From the income statement, we can say that Netflix is growing and has productive numbers. BALANCE SHEET (Business Week, 2012) 31-Dec 31-Dec 31-Dec 31-Dec Currency in Millions of US$ 2008 2009 2010 2011 Assets Cash and Equivalents 139.9 134.2 194.5 508.1 Short-Term Investments 157.4 186 155.9 289.8 TOTAL CASH AND SHORT TERM INVESTMENTS 297.3 320.2 350.4 797.8 Prepaid Expenses 26.5 26.7 62.2 56 Deferred Tax Assets, present-day(prenominal) -- -- 2.2 10 Restricted