Netflix Financial Analysis and Financial Ratios

Quality Business Consultant's financial analysis expert, Paul Borosky, MBA., doctoral candidate, and published author, has created proprietary financial models to help analyze Netflix's financial performance using Netflix's summarized income statements and balance sheets for the last five years, 2016 to 2020, found in their Annual Reports and Netflix's 10ks. 

Further, our financial model also calculates over 10 popular financial ratios, such as Netflix's current ratio, return on equity, and debt ratio. This information is the basis of our financial report, "Netflix's Inc. Financial Report", where we offer insights into understanding Netflix's financial standing through insightful financial analysis.

Netflix Financial Report and Financial Analysis

Beginner's Guide to Netflix 2021 Financial Analysis

Price: $9.99

Netflix Beginner’s Guide 2021

Table of Contents

  • Disclaimer 3
  • Forward 4
  • Income Statement 6
  • Netflix’s Summarized Income Statements 6
  • Revenues 7
  • Cost of Goods Sold (COGS) 8
  • Selling, General, and Administrative Expenses (SG&A 8
  • Research and Development (R&D) 9
  • Operating Expenses 10
  • Earnings Before Interest and Taxes (EBIT 10
  • Interest Expense 11
  • Earnings Before Taxes (EBT) 12
  • Taxes 12
  • Net income 12
  • Tax Rate 13
  • Balance Sheet 15
  • Netflix’s Summarized Balance Sheets 15
  • Cash 16
  • Short-Term Investments 17
  • Accounts Receivables 17
  • Inventory 18
  • Current Assets 19
  • Property, Plant, and Equipment (PP&E) 20
  • Total Assets 20
  • Accounts Payable 21
  • Accrued Expenses 22
  • Short-Term Debt 23
  • Total Current Liabilities 24
  • Long Term Debt (LT Debt) 25
  • Total Liabilities 26
  • Common Stock and Additional Paid-in Capital 27
  • Treasury 27
  • Retained Earnings 28
  • Total Equity 29
  • Financial Ratios 30
  • Netflix’s Liquidity Ratios 31
  • Current Ratio 31
  • Quick Ratio 32
  • Cash Ratio 33
  • Netflix’s Asset Ratios 35
  • Total Asset Turnover 36
  • Fixed Asset Turnover 37
  • Days Sales Outstanding 37
  • Inventory Turnover 38
  • Accounts Receivable Turnover 39
  • Accounts Payable Turnover 40
  • Other Asset Ratio Calculations 41
  • Working Capital Turnover 41
  • Average Days in Inventory 41
  • Average Days Payable 41
  • Netflix’s Profitability Ratios 43
  • Return on Assets (ROA) 43
  • Return on Equity (ROE) 44
  • Net Profit Margin 45
  • Gross Profit Margin 46
  • Operating Profit Margin 46
  • Netflix’s Debt Ratios 48
  • Debt Ratio 48
  • Debt to Equity Ratio 49
  • Times Interest Earned 50
Netflix Financial Report by Paul Borosky, MBA.

Price: $14.99

Netflix Financial Report 2020

Table of Contents

  • Disclaimer 3
  • Forward 4
  • Company Summary 5
  • Financial Statement Introduction 7
  • Income Statement 8
  • Netflix’s Income Statement – Summary Analysis 9
  • Income Statement Discussion 10
  • Balance Sheet 18
  • Balance Sheet – Summary Analysis 19
  • Balance Sheet Discussion 20
  • Financial Ratios 35
  • Liquidity Ratios 36
  • Liquidity Ratios - Summary Analysis 36
  • Liquidity Ratios Discussion 37
  • Current Ratio 37
  • Quick Ratio 37
  • Cash Ratio 38
  • Other Liquidity Ratios 39
  • Net Operating Working Capital 39
  • Asset Ratios 41
  • Asset Utilization Ratios - Summary Analysis 42
  • Asset Utilization Ratios Discussion 43
  • Total Asset Turnover 43
  • Fixed Asset Turnover 43
  • Days Sales Outstanding 44
  • Inventory Turnover 45
  • Accounts Receivable Turnover 46
  • Accounts Payable Turnover 47
  • Other Asset Ratio Calculations 47
  • Working Capital Turnover 47
  • Average Days in Inventory 48
  • Average Days Payable 48
  • Profitability Ratios 50
  • Profitability Ratios - Summary Analysis 50
  • Profitability Ratios Discussion 51
  • Return on Assets (ROA) 51
  • Return on Equity (ROE) 52
  • Profit Margin 53
  • Gross Profit Margin 54
  • Operating Profit Margin 54
  • Basic Earnings Power 55
  • ROCE 55
  • Capital Employed 56
  • Debt Ratios 57
  • Netflix’s Debt Ratios - Summary Analysis 57
  • Debt Ratios Discussion 58
  • Long-Term Debt Ratio 58
  • Debt to Equity Ratio 58
  • Times Interest Earned 59
  • WACC 61
  • Book Value of WACC 61

Netflix Financial Report by Paul Borosky, MBA.

Hey All,

Thanks for considering my Netflix's Inc. Financial Report. In this report, you will be able to find preliminary information about Netflix's current financial performance as well as some historical track records and trends. Also, in this report, written by myself, Paul Borosky, MBA., Doctoral Candidate and published author, you will find:

  • Summarized income statement for the last 5 years.
  • Summarized balance sheet for the last 5 years.
  • Summary analysis by myself of the important income statement, balance sheet, and financial ratio trends and other happenings.
  • Five years’ worth of over ten common financial ratios presented with formulas, calculations, and analysis tips for each ratio.
  • Line by line description, explanation, and analysis tip for most financial statement line items and financial ratios.
  • Professional financial analysis tips are provided in each section to help YOU conduct your OWN financial analysis!
  • Each section includes an “in other words” segment.  This is where I use plain English to explain concepts.

Sincerely,

Paul, MBA.

Sample Report

Sample report 2
Financial Report Sample 1

Netflix's Income Statement Analysis Sample

In this section of the financial report, I walk you through a broad definition as to what an income statement is and why it is important.  From this, I then discuss and define important income statement line items, such as revenues, gross profits, etc. in detail.  Finally, I offer a summary analysis of the company's important income statement line item trends.  For example,...

Netflix Cost of Goods Sold.

Netflix ended 2016 with the cost of goods at approximately $6 billion.  In the next several years, the organization’s cost of goods would increase substantially, ending 2020 at $15.2 billion.  On average, the company’s cost of good growth is 26.2% annually.  In comparing the cost of good growth with revenue growth, revenues are growing at a faster pace as compared to the cost of goods.  This is an excellent strategy to maintain.  It means the company is continually improving its gross margin.  However, if the company’s cost of goods growth exceeds the revenue growth, then investors should be wary because the situation is unsustainable and may eventually lead to negative profits.

Netflix 2021 Summary Income Statement

Column1

2021

2020 2019 2018

2017

Revenues

            29,697,844

            24,996,056             20,156,447             15,794,341

              11,692,713

COGS

            17,332,683

            15,276,319             12,440,213               9,967,538

                7,659,666

Gross Profit

            12,365,161

              9,719,737               7,716,234               5,826,803

                4,033,047

 
SG&A

              1,351,621

              1,076,486                  914,369                  630,294

                   431,043

Depreciation

                 208,412

                 115,710                  103,579                    83,157

                     71,911

R & D

              2,273,885

              1,829,600               1,545,149               1,221,814

                   953,710

Other                            -                            -                            -                            -                             -
Total Operating Expenses

              3,833,918

              3,021,796               2,563,097               1,935,265

                1,456,664

EBIT

              6,194,509

              4,585,289               2,604,254               1,605,226

                   838,679

Other Income                            -                            -                            -                            -                             -
Interest Expense

                 765,620

                 767,499                  626,023                  420,493

                   238,204

EBT

              5,840,103

              3,199,349               2,062,231               1,226,458

                   485,321

Taxes

                 723,875

                 437,954                  195,315                    15,216

                   (73,608)

Net Income

            5,116,228

            2,761,395             1,866,916             1,211,242

                 558,929

Netflix's Balance Sheet Analysis Sample

In this section of the financial report, I walk you through a broad definition of what a balance sheet is and why it is important.  From this, I then discuss and define important balance sheet line items, such as cash, inventory, etc., in detail.  Finally, I offer a summary analysis of the company's important balance sheet line item trends.  For example,...

Netflix Property, Plant, and Equipment

Netflisx property, plant, and equipment ended 2016 at $21.2 billion.  In the next four years, the organization would moderately increase its property, plant, and equipment ending 2020 at $24.9 billion. 

Surprisingly, the organization’s revenues are falling while the company is taking on more property, plants, and equipment.  Usually, when organizations suffer sustained revenue losses, they try to better utilize their fixed assets by selling off underperforming assets.  Netflix seems to be going against the grain and adding more assets even though its revenues are declining.  Not sure this strategy makes sense.

Netflix 2021 Summary Balance Sheet

Column1

2021

2020 2019 2018

2017

Cash

                6,027,804

            8,205,550             5,018,437             3,794,483

            2,822,795

Short Term Investment                              -                         -                         -                         -                         -
Account Receivable                              -                         -                         -                         -                         -
Inventory                              -                         -                         -                         -                         -
Other                              -                         -                         -                         -                         -
Current Assets

              8,069,825

         9,761,580          6,178,504          9,694,135

         7,669,974

Net PPE

                1,323,453

               960,183                565,221                418,291

               319,404

Goodwill                              -                         -                         -                         -                         -
Other                              -                         -                         -                         -                         -
Total Assets

           44,584,663

       39,280,359        33,975,712        25,974,400

       19,012,742

Accounts Payable

                   837,483

               656,183                674,347                562,985

               359,555

Accrued Expense

                1,449,351

            1,102,196                843,043                477,417

               315,094

Accrued Taxes                         -                         -                         -                         -
Notes Payable

                   699,823

               499,878

                        -                         -                         -
LT Debt - Current                              -                         -                         -                         -                         -
Other                              -                         -                         -                         -                         -
Total Current Liabilities

                8,488,966

            7,805,785             6,855,696             6,487,320

            7,669,974

LT Debt

              14,693,072

          15,809,095           14,759,260           10,360,058

            6,499,432

Other                              -                         -                         -                         -                         -
Total Liabilities

           28,735,415

       28,215,119        26,393,555        20,735,635

       15,430,786

Common Stock

                4,024,561

            3,447,698             2,793,929             2,315,988

            1,871,396

Treasury

                   824,190

                        -                         -

                        -

                        -
Retained Earnings

              12,689,372

            7,473,144             4,811,749             2,942,359

            1,731,117

Other                              -                         -                         -                         -                         -
Total Equity

           15,849,248

       11,065,240          7,582,157          5,238,765

         3,581,956

Total Equity & Liability

           44,584,663

       39,280,359        33,975,712        25,974,400

       19,012,742

Netflix's Financial Ratios Sample

In this section of the financial report, I walk you through definitions of various popular financial ratios, how to calculate the ratios, formulas used, etc. Also, for some popular financial ratios, I provide brief explanations of what the ratios mean as it is related to the company.

Netflix's Fixed Asset Turnover Ratio

Netflix fixed asset turnover ended 2016 at 35.2.  In the next two years, the organization fixed asset turnover would increase substantially, ending 2018 at 37.7.  However, in the last two years, the organization’s fixed asset turnover would continually fall, ending 2020 at 26.0. 

The continued and sustained fall and underutilization of fixed assets show that the firm’s revenue growth expectations may not be met in the long term.  If this trend continues, the company needs to sell off underperforming assets to better utilize their current fixed assets under management.

Netflix's Return on Equity

Netflix’s return on equity ended 2016 at 6.9%.  In the next four years, the organization’s return on equity would increase substantially, ending 2020 at 24.9%.  The substantial growth in return on equity indicates that the company may be taking on more debt.  As the organization uses debt to finance growth and operations, then less equity is needed.  This capital structure shift drives up the company’s return on equity ratio.  Unfortunately, taking on more and more debt is an unsustainable strategy for long-term growth.  Also, increased debt drives up the risk for an organization.  A better strategy would be for the company to identify a long-term sustainable capital structure that relies equally upon debt as well as equity.

Netflix 2021 Liquidity Ratios

Ratios

2021

2020 2019 2018

2017

Current Ratio

                          0.95

                   1.25

Cash Ratio

                          0.71

                   1.05

Quick Ratio

                          0.95

                   1.25

Net Working Capital

                  (419,141)

          1,955,795

Netflix 2021 Asset Utilization

Ratios

2021

2020 2019 2018

2017

Total Asset Turnover

                          0.67

                   0.64

Fixed Asset Turnover

                        22.44

                 26.03

Days Sales Outstanding                              -                        -
Inventory Turnover (Using Sales)

#DIV/0!

#DIV/0!

Inventory Turnover (Using COGS)

#DIV/0!

#DIV/0!

Accounts Receivable Turnover

#DIV/0!

#DIV/0!

Working Capital Turnover

                      (70.85)

                 12.78

AP Turnover

                        23.21

                 22.96

Average Days Inventory

#DIV/0!

#DIV/0!

Average Days Payable

                        15.73

                 15.90

Netflix 2021 Profitability Ratios

Ratios

2021

2020 2019 2018

2017

Return on Assets

11.48%

7.03%

Return on Equity

32.28%

24.96%

Net Profit Margin

17.23%

11.05%

Gross Profit Margin

41.64%

38.89%

Operating Profit Margin

20.86%

18.34%

Basic Earning Power

13.89%

11.67%

ROCE

17.16%

14.57%

Capital Employed

               36,095,697

        31,474,574

ROIC

17.37%

14.46%

Netflix 2021 Debt Ratios

Ratios 2021 2020 2019 2018 2017
Debt Ratio

34.53%

41.52%

Debt/Equity

97.12%

147.39%

Times Interest Earned

                          8.09

                   5.97