Blockbuster Inc. vs. Netflix Inc.

Paper Summary:

This paper uses four types of financial ratios---leverage ratios, liquidity ratios, efficiency ratios and profitability ratios---to summarize large quantities of financial data from Blockbuster Inc. (BBI) and Netflix Inc. (NFLX) and to compare their performances. The author points out that, because Blockbuster Inc. carries the heavy weight of debt, if Blockbuster loses market share and revenues are spread thinner, they will have a hard time repaying that debt. The paper states that current trends in this industry are in Netflix's favor because more and more people are opting not to drive to their local video store but rather have several selections mailed to them at once; however, both companies are challenged by companies that sell movie downloads. Many tables.

Table of Contents
Leverage Ratios
Total Debt Ratio (Debt to Assets) = Total Liabilities / Total Assets
Liquidity Ratios
Current Ratio = Current Assets / Current Liabilities
Quick Ratio = Cash + Marketable Securities + Receivables / Current Liabilities
Net Working Capital to Total Assets Ratio
Efficiency Ratios
Asset Turnover Ratio = Sales / Average Total Assets
Profitability Ratios
Net Profit Margin = Net Income / Sales
Operating Profit Margin = Net Income + Interest / Sales
Return on Equity = Net Income / Average Equity
Conclusion

From the Paper:

"In liquidity ratios there is a major focus on current assets. Efficiency ratios judge how effectively the company is using them. The asset turnover ratio shows how hard the companies' assets are working for them or against them. [Table: Yearly Asset Turnover Ratio] Blockbuster as expected has a steadily increasing Asset Turnover Ratio as their assets are older and more depreciated. Netflix and their assets are young compared to that of Blockbusters' and is evident in their highly erratic ratios. You can see spurts of growth between each year. Their numbers are greater in response to having less overall total assets than Blockbuster and their thousands of stores possess."

More papers on Blockbuster Inc. vs. Netflix Inc.:

• Essay # 60874 : "Marc Kasky vs. Nike, Inc."
• Case Study # 113508 : "Netflix versus Blockbuster versus Video-on-Demand"
• Analytical Essay # 126958 : "MGM Studios Inc. vs. Grokster, Ltd."

APA Citation:

MLA Citation: