Look at evaluating Netflix's liquidity ratios and comparing them to the industry average. Lenders, creditors and...

Look at evaluating Netflix's liquidity ratios and comparing them to the industry average. Lenders, creditors and suppliers find liquidity ratios quite useful in deciding whether or not to grant credit.

Expert Solution

Liquidity ratios measure the company's ability to meet its short-term obligations. Following is the list of liquid ratios.

Current Ratio
Quick Ratio
Cash Ratio

Netflix Inc., Current Ratio

Dec 31, 2017

Selected Financial Data (USD $ in thousands)
Current assets 76,69,974
Current liabilities 54,66,312
Ratio

Current ratio = Current assets ÷ Current liabilities
= 7,669,974 ÷ 5,466,312 = 1.40

Current ratio 1.40
Benchmarks
Current Ratio, Competitors
Amazon.com Inc. 1.04
Costco Wholesale Corp. 0.99
eBay Inc. 2.19
Home Depot Inc. 1.25
Lowe's Cos. Inc. 1.00
Target Corp. 0.94
TJX Cos. Inc. 1.63
Walmart Inc. 0.86
Current Ratio, Sector
General Retailers 1.03
Current Ratio, Industry
Consumer Services 0.98
Source: Based on data from Netflix Inc. Annual Reports

Netflix Inc., Quick Ratio
Dec 31, 2017
Selected Financial Data (USD $ in thousands)
Cash and cash equivalents 28,22,795
Short-term investments –
Accounts receivable –
Total quick assets 28,22,795
Current liabilities 54,66,312
Ratio

Quick ratio = Total quick assets ÷ Current liabilities
= 2,822,795 ÷ 5,466,312 = 0.52
Quick ratio 0.52
Benchmarks
Quick Ratio, Competitors
Amazon.com Inc. 0.70
Costco Wholesale Corp. 0.41
eBay Inc. 1.85
Home Depot Inc. 0.32
Lowe's Cos. Inc. 0.05
Target Corp. 0.20
TJX Cos. Inc. 0.78
Walmart Inc. 0.19
Quick Ratio, Sector
General Retailers 0.42
Quick Ratio, Industry
Consumer Services 0.52
Source: Based on data from Netflix Inc. Annual Reports

Netflix Inc., Cash Ratio
Dec 31, 2017
Selected Financial Data (USD $ in thousands)
Cash and cash equivalents 28,22,795
Short-term investments –
Total cash assets 28,22,795
Current liabilities 54,66,312
Ratio

Cash ratio = Total cash assets ÷ Current liabilities
= 2,822,795 ÷ 5,466,312 = 0.52
Cash ratio 0.52
Benchmarks
Cash Ratio, Competitors
Amazon.com Inc. 0.54
Costco Wholesale Corp. 0.33
eBay Inc. 1.66
Home Depot Inc. 0.18
Lowe's Cos. Inc. 0.05
Target Corp. 0.20
TJX Cos. Inc. 0.73
Walmart Inc. 0.10
Cash Ratio, Sector
General Retailers 0.32
Cash Ratio, Industry
Consumer Services 0.28
Source: Based on data from Netflix Inc. Annual Reports

Lenders, creditos and suppliers uses liqudity ratio in order to evaluate whether company will be in position to meet out its current obligation againts the existing current asset/ receivable.

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