Financial analysis of a chosen firm

Anca-Ioana Mos

Master's thesis

Abstract:

The purpose of this thesis was to bring a valuable internal financial evaluation in a comprehensive and well-structured manner in order to assess the financial performance of a chosen firm. For the redaction of the thesis, more specifically for accurately analyzing the financial situation of Netflix there have been considered several factors, both internal and external. The paper is divided into three main parts: literature review, practical part and the results and discussion part. The theoretical part represented our point of reference in what concerns the theory behind the financial analysis, explaining different financial tools such as types of financial analysis and ratio analysis. The formulas listed in this part of the thesis were then applied to the specific conditions of our company, to create a framework of performance. In what concerns the practical part, we have looked in to the three types of financial analysis – horizontal, vertical and ratio analysis. Each one of them has played an important role in our mission to assess the financial performance of our company. The framework we tried to compile is however limited is not contextualized within the industry average or with the help of competitors’ analysis. We have chosen and looked into the financial performance of the three most important competitors on the market, and ratios averages have been also taken into account to assess the industry average. The chosen competitors are Walt Disney, Amazon anf AT&T. The results show that our company stands out in terms of performance as it has proven to constantly generate and improve the levels of revenue while also efficiently managing the assets and the debts levels. In the results and discussion part we have looked into the main conclusions we could generate from the financial analysis done in the practical part and look into certain points of improvements that the current subscribers of Netflix would recommend. In order to obtain these recommendations and to answer our research questions, we used a questionnaire. Even if there are certain limitations when it comes to a firm of such a big scale and having access to a very small part of the subscribers of platform owned by the firm, we have tried to select respondents that are classified in the same age-demographic category as Netflix’s subscribers. With the use of the results of the survey, we have managed to dive into the SWOT analysis of the company in which we integrated the results of the survey in order to generate a round of proposed measures for improvement for the company. Later, we had a look at how the financial performance of Netflix was affected by the sanitary crisis of 2020 and that certain values listed in the balance sheet and income statement are influenced by the repercussions our company had to implement. For this reason, in a “normal” context, without any sanitary crisis, we could probably obtain other results, as some of the competitors have been negatively affected by this circumstance while our company was positively affected. All in all, the results have shown that Netflix is a leader in the streaming services industry, which has gotten to this point with the help of strategic investments and therefore good financial performance. The probability of it remaining in the top of the industry is high if it continues to innovate and work on the weak areas and threats.

Keywords

financial performance, internal analysis, external analysis, verticality, competition, media and entertainment, market, horizontality

Language used: English

Date on which the thesis was submitted / produced: 28. 11. 2021

Thesis defence

• Supervisor: Ing. Pavel Srbek, Ph.D.

Czech University of Life Sciences Prague

Faculty of Economics and Management

Master programme / field:
Economics and Management / Economics and Management