Financial Statement Analysis Project
(20% of your entire grade)
Now that you have studied the chapters involved in this Financial Accounting 2 course, I do not expect you to be a professional business analyst but you should have a pretty good handle on analyzing a public corporations’ financial statements (or knowing where to look for the answers) by knowing what dollar numbers you need, as well as what they mean. Buying a car, a house, and/or receiving a new credit cards are just some of the ways you may have already encountered a company lending you money for your purchases. Now you will be on the other side of the desk in deciding whether or not you would be willing to give Netflix a loan.
The storyline for your project is that you are the senior lending officer of a very large worldwide bank and Netflix has come to you to ask for a loan. They need to borrow $2,000,000 and will pay you back within 5 years from the time of borrowing. They are going to use this money to update their software as they feel many users are “giving” their codes to their family and friends instead of their friends and families becoming members themselves. They need to create a larger department to write codes to try to prevent this is from happening.
You will of course have to crunch numbers as shown in CH 15 and tell me what those numbers mean (in your own words) as part of your decision-making. It’s your job to be very sure the bank will get paid back. You will also go online to see what “others,” think of Netflix’s future, deciding if you agree or disagree, and then examine that information to see if Netflix meets your bank's criteria. Be sure to attach URL information as to what “others” think about them to your word document
You will need to use Word and Excel for this project I expect correct grammar in the Word document and formulas within the Excel spreadsheets. I do not just want the answer on the spreadsheet I want the actual formula and as shown in the first example I made for you in Excel. The Word document should explain what it means (in your words) and the for or against or neutral for your own criteria in that paragraph.
I will expect 2 documents back from you. The Excel spreadsheet of which I answer the first formula-driven question (you will use this for the other formula driven questions) and the Word document giving me what the information means in relation to the loan in question. Simply type your answers within the pages are given.
Ps. It would be good to find out who Netflix’s largest competitors are?
CH 8
-How many accounts receivable did Netflix report on its balance sheet as of December 31, 2020? As of 2019?
-Refer to the Netflix notes, what types of receivables are included in their “Other Current Assets”?
-What method does Netflix use to account for their possible bad debt from customers? Does this sound like a good method to you? Why?
-Compute Netflix’s acid ratio test as of end of 2020 and another for 2019. Did the year-to-year ratio improve or deteriorate? For each date, if all current liabilities came due immediately, could Netflix pay them off?
-Compute Netflix’s current ratio test as of end of 2020 and another for 2019. Did the year-to-year comparison ratio improve or deteriorate? For each date, if all current liabilities came due immediately, could Netflix pay them off?
CH 9
-What depreciation method does Netflix use for reporting in the financial statement? What are the income and tax ramifications of using this method?
-What was the amount of depreciation for the year ended Dec 2020?
-The statement of cash flow reports the cash purchases of pp&e (property plant and equipment). How much were Netflix’s paid cash additions to property, plant, and equipment during the 2020 year? Did you see any cash sale from the sale of pp&e? If so, how much?
-What was the amount of accumulated depreciation on Dec 31, 2020. What was the net book value of the long-term assets?
-Compute Netflix’s asset turnover ratio ending Dec 31, 2020. Round to two decimals. How does? Netflix’s ratio compare with its largest competitor? Who is the largest competitor??
CH 10
-Compute the rate of return on total assets for Netflix for 2020, also compute its largest competitor’s ratio, what’s the difference? Is Netflix better or worse?
-How much was Netflix long term debt for 2020 and 2019.
-Compute the debt-to-equity ratio for both years, how does it compare? Any ideas why?
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