By analyzing the five sets of annual financial statements..
By analyzing the five sets of annual financial statements… By analyzing the five sets of annual financial statements (2017-2021) for Netflix, Evaluate its financing decisions and how these influence the firm’s capital structure and its cost of capital. Capital Structure ChoicesWhat are the different kinds or types of financing that this company has used to raise funds? Where do they fall in the continuum between debt and equity?How large, in qualitative or quantitative terms, are the advantages to this company from using debt?How large, in qualitative or quantitative terms, are the disadvantages to this company from using debt?From the qualitative trade-off, does this firm look like it has too much or too little debt?What conclusion can you make about this firm’s capital structure choices?Optimal Capital StructureBased upon the cost of capital approach, what is the optimal debt ratio for your firm?Bringing in reasonable constraints into the decision process, what would your recommended debt ratio be for this firm?Does your firm have too much or too little debtrelative to the sector?relative to the market?What conclusion can you make about the firm’s financing decision?What conclusion can you make about this firm’s optimal capital structure?Mechanics of Moving to the OptimalIf your firm’s actual debt ratio is different from its “recommended” debt ratio, how should it get from the actual to the optimal? In particular,Should they do it gradually over time or should they do it right now?Should they alter their existing mix (by buying back stock or retiring debt) or should they take on new projects with debt or equity?What type of financing should this firm use? In particular, should it be short-term or long-term?What currency should it be in?What special features should the financing have?What conclusion can you make about the firm’s financing decision?What conclusion can you make about the firm’s financing decision?Business Finance FINANCE FN605
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