Financial Statement Analysis Report PDF

Running head: FINANCIAL STATEMENT ANALYSIS
Financial Statement Analysis
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Author’s Note

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Table of Contents
Introduction................................................................................................................................2
Discussion..................................................................................................................................2
Company Overview and Analysis..........................................................................................2
Macroeconomic Analysis.......................................................................................................3
Industry Analysis...................................................................................................................6
Competitors Analysis.............................................................................................................7
Business Strategy and Model...............................................................................................10
Corporate Events..................................................................................................................11
Analysis of the Financial Performance................................................................................12
Ratio Analysis......................................................................................................................12
Company Valuation.............................................................................................................15
Free Cash Flow Model.........................................................................................................16
Conclusion................................................................................................................................17
Reference..................................................................................................................................18
Appendix..................................................................................................................................20

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Introduction
The main purpose of the assessment is to analyze the business of Netflix which is
engaged in entertainment service industry. The assessment would be considering the market
situation for the business and estimate whether the factors which are present in the market are
appropriate for the growth of the business. The analysis would be including PESTLE
Analysis and Porter’s five forces model for a better understanding of the factors which have
an impact on the operations of Netflix. The assessment would also be identifying critical
events which have taken place impacting the operations of Netflix. In order to review the
financial performance, ratio analysis and company valuation model would be applied for
better analysis. Finally, the assessment would be providing appropriate investment
recommendations for the business of Netflix considering all the factors affecting the
operations of the business.
Discussion
Company Overview and Analysis
The business of Netflix is a fast growing business which streamlines entertainment
and basically is an entertainment service provider. The application provides access to
different genre of movies, documentaries, serials. The company has access to 190 nations
getting a charge out of more than 125 million hours of TV which generates maximum portion
of revenue for the business (Netflixinvestor.com. 2020). The management of the company is
continuously trying to make improvements in the operational activities of the business by
improving the technological aspect of the business.
In terms of market strategy, the business of Netflix follows STP strategy which
involves Segmentation, Targeting and Positioning strategy for effectively attracting more
customers to the operations of the business. The management of Netflix is extremely alert for

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change in innovation and buyer contracts. As per 2015 data, it was estimated that more than
2.7 million Australian are using Netflix for watching any movies or series for the purpose of
entertainment. The management of Netflix considers different factors such as age, income,
geographic region, and watching preference for providing the best of services for the
customers (Netflix: Segmentation, Targeting & Positioning 2016). The company is trying to
expand its reach to customers which would help the business to earn more revenue from
operations of the business (Shih and Kaufman 2014). In terms of business segments, the
business is looking to expand the operations of the business further by targeting people on the
basis of age, preferences and customers.
Macroeconomic Analysis
Macroeconomic Analysis for a business is undertaken for the purpose of
understanding different factors which have an impact on the operations of a business. The
analysis would be showing PESTLE analysis for the business which is quite a useful
technique for taking appropriate decisions regarding the activities which needs to be
undertaken for the business for expanding the revenue which the business is able to generate
(Pant and Yu 2018). The different factors which impact the operations of Netflix are listed
below:
 Political factors: The political factors include impacts of government regulations and
intervention in day to day operations of a business. The business of Netflix operates
with a aim to digitalize different contents of movies, Tv shows and documentaries. In
some countries some contents are prohibited considering the laws and regulations
which are already implemented (Zalengera et al. 2014). It is an obvious fact that the
management of Netflix would not want to offend a population by streamlining a
certain content of work. One of the prime examples of political influence was the

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marketing of the TV series Narcos which offended the people of Colombia. This was
a reason that Netflix decided to reduce their efforts to promote the TV series.
 Economic Factors: The price at which the product or service is provided is an
important factor which affects the profits which is generated by the business. The
purchasing power of the consumers is also an important factor which needs to be
considered (McDonald and Smith-Rowsey 2016). In Netflix's case, the business
charges a different monthly fee based not only on the country's economy but also on
the nature of content which is shown in the application.
Figure 1: (Cost Comparison on the basis of Different Countries)
Source: (Netflix Inc 2019)
 Social Factors: The social factors incudes the taste and preference of the targeted
customers of the business and this factor is considered to be important as this directly

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impacts the decision making process of the business. Netflix streamlines TV contents
and movies for which it charges monthly or quarterly fees based on the subscription
requirements (Summers et al. 2016). The opinions of the customers who are
subscribing to the services needs to be positive and this can impact the operations.
 Technological Factors: The technological level in an industry is continuously
changing which has a direct impact on the activities of a business. It is important that
businesses needs to adapt to the changes which is taking place in the business. In the
case of Netflix, movies and shows are shown through online medium and therefore it
is imperative that advanced user interface is used for promoting efficiency in the
operations of the business. The use of social media is important in this age of
digitalization and the same is also important in the business of Netflix. In current
scenario, the business is using the most advanced technology for maintaining the
portal and also for providing the best experience to the users.
 Legal Factors: The legal factors include regulations and rights of the customers
which are applicable to the country. Netflix must ensure that they respect the regional
restrictions of certain shows or films so that it does not affect the population. In
addition to this, the business also needs to adhere to digital laws so that efficiency is
maintained in the operations of the business.
 Environmental Factors: This refers to the CSR responsibilities which the businesses
need to adhere to while providing services. The business of Netflix provides services
and therefore they are not depleting any form of natural resources. However, carbon is
produced when they are using electricity for running their servers. The company has
also taken step in this respect by installing wind turbines so that clean electricity can
be generated. In 2019, the company has managed to change to 50% clean