Netflix Analysis

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The net working capital to total assets of the company is always less than 20% despite the fact that it has increased every year. This is a relatively low rate and it might indicates serious cash flow difficulties for the company, with the company unable to make payments to its suppliers and creditors, even when it makes profit and has assets to cover its liabilities. The reason for the low ratio could be consistent operating losses by slow sales that eat into working capital reserves, causing it to shrink relative to total assets.

Netflix Inc. ‘s interval measure is increase at a very good pace during the last three years. This statistic shows the survivability of the company and we could easily figure it out that this firm could hang on for a long time ahead. The last interval measure in 2015 indicates that Netflix can live up to 306 days since the beginning of 2016.

- Financial leverage ratio

Netflix Inc.’s total debt ratio has decreased slightly in 2014, then go up to 78%. It's easy to understand because Netflix's long term debt has a big jump. With the high level of debt ratio, it seems that Netflix will have to face with barriers in solvency.

In 2015, the times interest earned (TIE) ratio of Netflix Inc. was at its lowest point at 2.07, a huge decrease from 2014 which is at 7.96. In fact, the lower a company’s interest coverage ratio is, the more its debt expenses burden the company. However, a high ratio can indicate that a company has an undesirable lack of debt or is paying down too much debt with earnings that could be used for other projects. In this situation, Netflix Inc. should be careful not to let the TIE ratio go down further or it will have a hard time paying its interests and debts.

- Asset Management Ratio:

During the period of 2013 to 2015, the figures of fixed asset turnover gradually grows from 32% to 39%. Netflix has a start of 32% of fixed asset turnover in 2013 and increased by roughly 3% each year until 2015.Generally speaking, the higher the ratio, the better, because a high ratio indicates the business has less money tied up in fixed assets for each unit of currency of sales revenue. Thus indicated a positive state of the company. This mean Netflix have been effectively utilized investment in fixed assets to generate revenue.

However, looking at the same period, Netflix also has a dramatically decrease of total asset turnover. Running from about 0.81 in 2013 to 0.66 in 2015, dropped by almost a third of the beginning year. This on the other hand is implying that the company is generating less revenue per dollar of assets. Netflix should pay close attention to this figure or it might drop under acceptable rate.

- Profit Ratio:

Netflix made a leap in profit margin from 2.57% in 2013 to 4.85% in 2014 but then settle back seriously to 1.81 in 2015. While still being a big competitor in the industry, but a setback in the profit margin can be interpreted as indicating that Netflix’s profitability is not very secure. Low profit margins may also reveal certain things, in this case, it is about expenses management. High expenditures relative to revenue (or profit margin) indicate that Netflix is struggling to keep its cost low. The underlying reason is because of the increase in expenses due to investment and the interest from increased debt. Netflix should be careful with the new investment and debt or it might put certain distresses on the profit capability of the company.

Furthermore, ROA or Return on Assets followed the same trend. A leap from 2.08% in 2013 to 3.79% in 2014 and then set back at 1.2% in 2015. ROA measure how effectively a company can earn a return on its investment in assets. Generally speaking, it show how efficiently a company can convert the money used the purchasing assets into net income (or profit). Looking at 2015 figure of 1.2% means every dollar that Netflix invest in assets during 2015 generated $1.2 of net income. The number is certainly low, we can distinguish that this organization is dealing with managing problem in using its assets to produce net income (profit)

ROE or Return on Equity measures how efficiently a firm can use the money from shareholders to generate profits and develops the organization. Looking the statistics, ROE, is no doubt, followed the same trend of ROA. With an extreme increase from 8.43% (2013) to almost double 14.36% (2014) and then dropped back to 5.52% (2015). ROE is a comparable figure and is closely depended on how many and investors and how much income does the firm has, therefore ROE cannot be used to compare companies outside of their industry very effectively, but higher ROE ratios are almost always better than lower ratios. In this case, 5.52% is certainly low in the industry.

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CAST FLOW

The statement of cash flows comprises of cash flow from financing, cash flow from operations and cash flow from investing activities. All the three have impact on Netflix stock price history and can be seen from Netflix stock comparison chart. Netflix saw an increase in Net Change in Cash and Cash Equivalents from 508.64M in 2014 to 695.72M in 2015. Apart from Netflix stock price, this is the first thing an investor looks for as it's the net change in cash on hand that a company has as compared to previous period.

1) Cash provided by operating activities

Netflix reported a negative operating cash flow of -749.43M for 2015 and has seen a decrease from the previous year 2014, which is 16.483M. In operation activities in 2015, cash out is exceed cash in. This scene is the result of increase in debt and the reduce of net income, while asset increase also lead to the raise of depreciation. Too much money went out shows that the performance of operating activities is not efficiency enough.

2) Cash used in investing activities

Growth companies (typically most tech companies) spend heavily on investing activities and this figure was negative at -179.19M for NFLX stock. We can see that thank to this NETFLIX cash out has increased significantly. But it can also be seen that cash out has increased too much and can led to imbalance. Sometimes a company might have a negative overall cash flow which may not be really bad if its due to investment expenses. Hence is important to check the Cash Flow from investment activities.

3) Cash provided by financing activities

Financing