Financial Analysis of Netflix Inc - 2016-2017

FINA 408 Individual Project

SAMPLE Outline

1. Introduction

1. Governance and Communication Analysis
   1. Analyst Call
      1. Listen to a recording of an analyst call (AKA earnings call or quarterly conference call) for your company. Listen to about 15-20 minutes of the call and write a summary of your observations, including any questions that you might have wanted to ask the CEO/CFO, etc.
   2. Answer and discuss the importance of the following:
      1. Who is the company’s current CEO? Is he or she also the Chair of the Board? Discuss the company’s considerations in making this decision.
      2. Who serves on the board’s Audit Committee? How many members are Financial Experts? What experience qualifies them for that designation? Do you agree with this designation? Why or why not?
      3. What was the CEO paid last year? What portion of his or her total pay was in the form of bonus? What performance measures were used to determine the CEO’s bonus?
      4. Who or what entity holds the highest percentage of the company's stock? Are most of the beneficial owners reported individuals or institutions?
      5. Is there more than one class of common stock outstanding? How many votes does each share of each class of stock get? Does any one person or entity control the voting rights at the company? If so, who?

1. Strategy Analysis
   1. Industry Analysis: Porter’s Five Forces
      1. Rivalry among existing firms
      2. Threat of new entrants
      3. Threat of substitutes
      4. Buyer power
      5. Supplier power
   2. Company Strategy Analysis
      1. Is your company following a Low Cost Leader or a Product/Service Differentiation Strategy?
      2. Where would evidence of this strategy show up in their financials?

1. Financial Analysis
   1. Recasted Income Statement (3 years)
   2. Recasted Balance Sheet (3 years)
   3. Common Size Income Statement (3 years)
   4. DuPont Analysis (1 year)

1. 1. Profitability Analysis Ratios (3 years)
      1. Profit Margin
      2. Return on Assets (ROA)
      3. Return on Equity (ROE)
      4. Gross profit margin
      5. EBIT Margin
      6. Accounts Receivable Turnover and Days’ Receivable
      7. Inventory Turnover and Days’ Inventory
      8. Accounts Payable Turnover and Days’ Payable
      9. PP&E Turnover
      10. Long-term Asset Turnover
   2. Risk Analysis
      1. Non-Financial Risk Analysis
         1. Review the Risk Factors section of the company’s most recent 10-K and discuss the three factors mentioned which, in your opinion, may have the most significant impact on the company
      2. Financial Risk Ratios (3 years)
         1. Current ratio
         2. Quick ratio
         3. Cash ratio
         4. Liabilities-to-equity ratio
         5. Interest coverage ratio

1. Forecasting
   1. Growth Rate
      1. Sustainable Growth Rate
         1. Calculate the company’s dividend payout ratio (if applicable) and the Sustainable Growth Rate
      2. Weighted Average Cost of Capital
         1. Use the CAPM to compute the required rate of return on equity capital for the company.
         2. Determine the cost of debt (if applicable) and the cost of preferred stock (if applicable)
         3. Compute the weighted average cost of capital for the company
   2. Forecasted Income Statement (5 years)

1. Sustainability Report
   1. Determine whether or not your company prepares a Sustainability Report
   2. If so, review the report and write a brief description of the key issues identified in the report and your observations regarding the report