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To answer this question, download Netflix Inc.?s 2005 10-K at www.hoovers.com. Once at this website, do a search for Netflix. Click on the company name and then click on the link called SEC filings. Download the 2005 10-K (which was filed in March 2006). You do not need to print the 10-K to answer the questions.
1. What is Netflix?s strategy for success in the marketplace? Does the company rely primarily on a customer intimacy, operational excellence, or product leadership customer value proposition? What evidence supports your conclusion?
2. What business risks does Netflix face that may threaten the company?s ability to satisfy stockholder expectations? Of the risks that you have identified, which ones are controllable and which ones are largely uncontrollable? (Hint: Focus on pages 8?20 of the 10-K.)
3. Prepare a comparative balance sheet similar to the one shown in Exhibit 15?4 (Use Netflix?s data from 2004 and 2005). For each account shown on Netflix?s balance sheet, calculate the change in the balance and whether the change represents a source or a use of cash.
4. Explain how each change shown in your comparative balance sheet is accounted for in Netflix?s 2005 statement of cash flows.
5. Refer to the In Business box titled ?Free Cash Flow: Do the Math? shown on page 699 of the textbook. Compute Netflix?s free cash flow for 2005. What insights are revealed by your calculation?
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