Question
The ratio of cost-of-revenue to revenue (cost-of-revenue/revenue) provides a metric to assess how well Netflix is able to manage its gross profit percentage. An increase
The ratio of cost-of-revenue to revenue (cost-of-revenue/revenue) provides a metric to assess how well Netflix is able to manage its gross profit percentage. An increase in rates charged to customers and/or a decrease in the cost of revenue will result in an increase in the gross profit percentage. If the ratio of cost-of-revenue to revenue reported for the year ended December 31, 2016 did not change over the three-year period from the number computed for the year ended December 31, 2016, how much in thousands of dollars would operating income for the year ended December 31, 2018 have increased or (decreased)?
Answer $_____________________ indicate whether the change is an increase or decrease
Consolidated Income Statement (in thousands) | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Revenues | $ 15,794,341 | $ 11,692,713 | $ 8,830,669 |
Cost of revenues | 9,967,538 | 8,033,000 | 6,257,462 |
Gross Margin | 5,826,803 | 3,659,713 | 2,573,207 |
Expenses: | |||
Marketing expense | 2,369,469 | 1,436,281 | 1,097,519 |
Technology and development expense | 1,221,814 | 953,710 | 780,232 |
General and administrative expense | 630,294 | 431,043 | 315,663 |
Total Expenses | 4,221,577 | 2,821,034 | 2,193,414 |
Operating income | 1,605,226 | 838,679 | 379,793 |
Interest expense | 420,493 | 238,204 | 150,114 |
Other income (expense) | 41,725 | (115,154) | 30,828 |
Income before income tax expense | 1,226,458 | 485,321 | 260,507 |
Income tax expense | 15,216 | (73,608) | 73,829 |
Net income | $ 1,211,242 | $ 558,929 | $ 186,678 |
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