Question

How would you respond to the two posts made by Ben about the balance sheet and financial statement they summarized from the companies they have chosen ? What do you agree or disagree with about their posts? what opinions and information would you like to add in your response about their posts? Write a response for each post. response should be 200 words.

Ben

As per the SEC 10-K Report, Netflix (NFLX) is currently the world’s leading subscription steaming entertainment service with over 167 million paid streaming memberships in over 190 countries that offers TV series, documentaries, and feature films of a wide variety of genres and languages. The balance sheet shows that the total current liabilities in 2019 was $6,855,696 and from this amount, $4,413,561 is contributed to current content liabilities, which comprises 64% of current liabilities. Streaming content obligations include amounts related to the acquisition, licensing, and production of streaming content. The total non-current liabilities is $19,537,859, which consists of non-current content liabilities and long-term debt. This amount also includes lease payments and interest and penalties related to unrecognized tax benefits within the provision for income taxes. Overall, the total liabilities is $26,393,555. The 10-K report also makes a note that since this is a world streaming entertainment service, revenue and liabilities are recognized in various foreign currency denominations, but then reported in US Dollars. Even during the pandemic, the current liabilities increased from 6,855,696 to 7,853,725 in just one quarter (January – March 2020). I am curious to see what the amount would be now by 2nd quarter since the pandemic was at its peak these past couple of months and is currently going on and affecting multiple countries around the world. I wonder if the number of paid memberships have increased substantially due to the stay-at-home/lockdown orders throughout the world with families and individuals looking toward streaming services for entertainment. It will definitely be worth checking at the end of the fiscal year.

Response:

Answer 1

US and other European countries where Netflix has more subscriber base went in lock down in the month of February itself and March ended figures already includes impact of the increase subscriber base considering revenue has increased. In the coming quarters, effect of unlockdown will be more pronounced as more people get back to work and will have less time to binge Netflix. Increase in liabilities represents deteriorating picture of the Company as in this period the company should have decreased the liabilities due to more cash flow.