Financial Statement Analysis

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Netflix Streaming vs. DVD

2019-03-04T20:13:57-06:00

A Brief History of Netflix Netflix was founded in 1997 as a DVD-by-mail service.  In 2007, Netflix began offering streaming and the company’s focus shifted.  By 2013, three-quarters of Netflix’s domestic revenue came from streaming.  Streaming is now clearly Netflix’s focus, with 97% of its 7,100 employees working on streaming and 95% of domestic revenue coming from streaming in 2018. In 2014, Netflix stopped marketing its DVD-by-mail service, which it calls its “legacy” business.  The number of DVD subscribers has fallen by two-thirds since that time.  Meanwhile, Netflix has significantly increased its [...]

Netflix Streaming vs. DVD2019-03-04T20:13:57-06:00

Is GM Underestimating its Bad Debt?

2019-03-24T17:06:48-06:00

General Motors’ accounts receivable increased from $43 to $53 billion between 2017 and 2018, yet GM’s allowance for doubtful accounts actually decreased over the same time period. One explanation is that GM underestimated its bad debt to increase its profit. To answer this question, let’s look more closely at GM’s receivables.  First, note that GM has two types of receivables: 1. Retail receivables Retail receivables are loans made to consumers so they can purchase a GM vehicle. 2. Commercial receivables Commercial receivables are loans made to GM dealers so they can purchase inventory (vehicles). GM estimates that some of [...]

Is GM Underestimating its Bad Debt?2019-03-24T17:06:48-06:00

Netflix’s Cash Flow Problem

2019-03-04T18:49:56-06:00

Netflix has a serious cash flow problem. The company has impressed investors by consistently showing growth in top-line revenue.  Yet, Netflix hasn’t been able to achieve positive Operating Cash Flow in five years.  Netflix is burning through cash at a torrid pace with no end in sight. Why hasn’t Netflix run out of cash?  Netflix is borrowing money like a college student who ran out of meal points.   Just take a look at the its debt-to-equity ratio. Netflix was a debt-free company in its early years.  The company boasted positive Operating Cash Flow, strong sales growth, and [...]

Netflix’s Cash Flow Problem2019-03-04T18:49:56-06:00