RE: Netflix Ratios for 2016 - 2017 - 2018 Describe how and why each of the...

RE: Netflix Ratios for 2016 - 2017 - 2018

Describe how and why each of the ratios has changed over the three-year period. For example, did the current ratio increase or decrease? Why? Describe how three of the ratios you calculated for your company compare to the general industry

Current Ratio: 2018 (1.49) 2017 (1.4) 2016 (1.25)

Debt Equity Ratio 2018 (1.98) 2017 (1.81) 2016 (1.26) - Industry Avg (36.8)

Price Earnings Ratio: 2018 (118.55) 2017 (220.95) 2016 (328.44) - Industry Avg (27,4)

Expert Solution

Ratio	FY15	FY16	FY17	Pattern	Remarks
Current Ratio	1.25	1.40	1.49	Increasing and improving over years	Improvement is current ratio is mainly attributable to the improving liquidity scenario of the firm. The firms current assets have grow better that its current liabilities over last three years. The firm has maintained a current ratio is excess of 1 throughout the last three years. Overall, the firm has done quite well on the liquidity management side.
Debt/ Equity Ratio	1.26	1.81	1.91	Increasing and deteriorating over years	The leverage of the firm has improved over a period of time. Cash flow from operations had been negative in each of the last three years. The implies business is burning cash. The firm has used external funding to finance its operating losses and capital expenditure. This has led to increase in debt (bonds, NCDs, bank debt etc) over years. The increasing Debt to Equity ratio is primarily a reflection of this.
Price to Earning Ratio	328.44	220.95	118.55	Decreasing and deteriorating	Increasing leverage has been putting pressure on the net income. Net income had been declining due to which EPS growth had been stunted. Price levels had also fallen down from its levels two years ago. As a result Price to Earning ratio had shown a decline. Market expectations about the stock had also run down.

jeff jeffy answered 1 year ago

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