ESSAY : Financial Analysis

NETFLIX
1. Ratio analysis for the ratios shown on Table 1 in the Guide to Case Analysis (CA) of the textbook:
a. Profitability ratios
b. Liquidity ratios
c. Leverage ratios
d. Activity ratios
e. Price-to-earnings ratio
2. Financial analysis should include comparisons to the firm’s main competitor as well as to the industry. How does the financial position of the firm influence the strategic direction of the company? This section should not be used to define what each ratio is rather it should clearly provide analysis based on the calculations as to the strategic

SAMPLE SOLUTION

In the financial year 2018, 2019, and 2020, Netflix recorded operating profit margins of 10.16%, 12.92%, and 18.34% respectively. This implies that the company’s operating margin was on an upward trend for the three years. This is an indication of the company’s growth in revenue despite the increasing competition in the streaming video segment. The increase in operating profit margin is also due to the fact that the company is paying for its single-largest expense-content on a fixed-cost basis.
As compared to the three main competitors, Netflix performed better than Charter Communications Inc., Comcast Corp., and Walt Disney Co. for the three years under review. Of the three competitors, only Charter Communications Inc. posted increasing operating profitability ratios of 1.97%, 14.23%, and 17.48% …