Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. What is the balance.

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Presentation transcript:

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. What is the balance sheet impact of the $400 million Netflix just borrowed? Original blog posting (April 28, 2014)

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Netflix takes out a $400 million loan Using these funds to help to create original programming On March 10, 2014, Netflix common stock was selling for about $ per share with more than 55,587,000 shares outstanding

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question 1 What is the impact on Netflix’s accounting equation from borrowing the $400 million?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question 2 Rather than borrowing the $400 million, Netflix could have issued common stock. Using the market price given in the article, how many shares of common stock would Netflix had to have issued to realize $400 million (ignore underwriting and broker fees)?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question 3 What are some possible reasons that Netflix chose to borrow the $400 million rather than issue stock?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. Question Recap 1.What is the impact on Netflix’s accounting equation from borrowing the $400 million? 2.Rather than borrowing the $400 million, Netflix could have issued common stock. Using the market price given in the article, how many shares of common stock would Netflix had to have issued to realize $400 million (ignore underwriting and broker fees)? 3.What are some possible reasons that Netflix chose to borrow the $400 million rather than issue stock?

Copyright © 2014 by Dr. Wendy Tietz. This work is licensed under a Creative Commons Attribution- NonCommercial 3.0 Unported License. For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at Related video resources can be found at Questions or comments? Contact Dr. Wendy Tietz at