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Accounting
Netflix, Inc.: A Financial Analysis
Andrew Gaines
This paper was written for Professor Bearden!s Financial Statement Analysis course.

Netflix, Inc. is the leading provider of online movie rentals in the United States. Out of an approximate 12,000,000 online movie subscribers in 2008, subscribers to Netflix constituted about 9,400,000. The company has strong profitability ratios as revenues increased 13.2% from 2007 to 2008 and net income increased 24.6%. Netflix has higher costs of revenues than its competitor, Blockbuster Inc., but it has outperformed that company. Blockbuster experienced net losses in 2007 and 2008. Netflix!s current liabilities have increased to match revenue growth, while long-term liabilities have increased to recognize an increase in lease obligations. Equity decreased from 2007 to 2008 by 19.2% due to an increase in treasury stock. This financial statement analysis of Netflix, Inc. encompasses the years ending December 31 of 2006, 2007, and 2008. Financial data was gathered from the 2006, 2007, and 2008 10-K filings with the Securities and Exchange Commission (SEC) and the company!s 2009 Q-1 filing for its first quarter of 2009. Additional data was also taken from the company!s website: http://www. netflix.com. For comparative purposes, data was gathered from one of Netflix!s competitors, Blockbuster, Inc. Data for Blockbuster was gathered on it company website, http://www.blockbuster.com and its 2007 and 2008 10-K filings with the SEC. Industry data was gathered from http://www.reuters.com. The fiscal year end for Netflix is December 31 for 2006, 2007, and 2008. Blockbuster!s year end was December 31, 2006 for 2006, January 6, 2008 for 2007, and January 4, 2009 for 2008. The change in the end of the period in 2007 caused there to be a 53 week fiscal year. For purposes of comparison in this analysis, the changes in revenues and expenses for

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