ULIVUUS LA Problem 2 The 2018 balance sheets and income statement for Netflix Inc. follow. Refer to these financial statements to answer the requirements. Netflix Inc Consolidated Statement of Earnings 2018 2017 Revenues Cost of Revenues Marketing Technology and Development General and Administrative 15,794,341 9,967,538 2,369,469 1.221,814 315,147 Other Operating Expense Operating Income 15,000 1,905,373 Interest Expense Interest and Other Income Income before Income Taxes Provisions for Taxes Net Income 520,493 41,725 1,426,605 12,216 1,414,389 Netflix Inc Consolidated Balance Sheet Current Assets Cash and Cash Equivalents Marketable Securities Current Content Asset, Net Other Current Assets Total Current Assets Noncurrent content assets net PPE Net Other Noncurrent Assets Total Assets 897 242 1,897,242 5,151,186 748,466 8,694,135 14.960,954 418,281 901030 24,974.400 411 398 1,411 398 4,310,934 536,245 6,669,974 10,371,055 319,404 652 309 18,012,742 Current Liabilities Short-Term debt Accounts Payable Accrued Expenses Deferred Revenue Total Current Liabilities Noncurrent Content Liabilities Long-term debt Other noncurrent Liabilities Total Liabilities Stockholders' Equity Preferred Stock Common Stock Accumulated Other Comprehensive Income Retained Earnings Total Stockholders Equity Total Liabilities and Stockholders Equity 4,686,019 562,985 477,417 760,899 6,487,320 3.759,026 10,360,058 129,231 20,735,635 4,173,041 359,555 315,094 618,622 5,466,312 3,329,796 6,499,432 135,246 15,430,786 2,315,988 (19,582) 1,942,359 4,238,765 24,974,400 1,871,396 (20,557) 731,117 2,581,956 18,012,742 A) Compute returns on net operating assets. (15 Points) B) Calculate non-operating returns using Financial Leverage and Spread. (10 Points) C) Calculate ROE and comment on the difference between ROE and RNOA. What does this relation suggest about Netflix's use of equity capital? (7 Points) ULIVUUS LA Problem 2 The 2018 balance sheets and income statement for Netflix Inc. follow. Refer to these financial statements to answer the requirements. Netflix Inc Consolidated Statement of Earnings 2018 2017 Revenues Cost of Revenues Marketing Technology and Development General and Administrative 15,794,341 9,967,538 2,369,469 1.221,814 315,147 Other Operating Expense Operating Income 15,000 1,905,373 Interest Expense Interest and Other Income Income before Income Taxes Provisions for Taxes Net Income 520,493 41,725 1,426,605 12,216 1,414,389 Netflix Inc Consolidated Balance Sheet Current Assets Cash and Cash Equivalents Marketable Securities Current Content Asset, Net Other Current Assets Total Current Assets Noncurrent content assets net PPE Net Other Noncurrent Assets Total Assets 897 242 1,897,242 5,151,186 748,466 8,694,135 14.960,954 418,281 901030 24,974.400 411 398 1,411 398 4,310,934 536,245 6,669,974 10,371,055 319,404 652 309 18,012,742 Current Liabilities Short-Term debt Accounts Payable Accrued Expenses Deferred Revenue Total Current Liabilities Noncurrent Content Liabilities Long-term debt Other noncurrent Liabilities Total Liabilities Stockholders' Equity Preferred Stock Common Stock Accumulated Other Comprehensive Income Retained Earnings Total Stockholders Equity Total Liabilities and Stockholders Equity 4,686,019 562,985 477,417 760,899 6,487,320 3.759,026 10,360,058 129,231 20,735,635 4,173,041 359,555 315,094 618,622 5,466,312 3,329,796 6,499,432 135,246 15,430,786 2,315,988 (19,582) 1,942,359 4,238,765 24,974,400 1,871,396 (20,557) 731,117 2,581,956 18,012,742 A) Compute returns on net operating assets. (15 Points) B) Calculate non-operating returns using Financial Leverage and Spread. (10 Points) C) Calculate ROE and comment on the difference between ROE and RNOA. What does this relation suggest about Netflix's use of equity capital? (7 Points)
