Netflix Inc (NFLX)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.29 | 0.30 | 0.33 | 0.40 | 0.43 |
| Debt-to-capital ratio | 0.41 | 0.41 | 0.48 | 0.59 | 0.66 |
| Debt-to-equity ratio | 0.69 | 0.69 | 0.93 | 1.43 | 1.95 |
| Financial leverage ratio | 2.37 | 2.34 | 2.81 | 3.55 | 4.48 |
The solvency ratios of Netflix Inc. indicate its ability to meet its long-term financial obligations and the extent to which the company relies on debt to finance its operations. The debt-to-assets ratio has remained relatively stable at around 0.30 in recent years, suggesting that the company's assets are financed primarily through equity rather than debt.
Similarly, the debt-to-capital ratio has also shown consistency, indicating that debt constitutes approximately 41% of the company's capital structure. Although this ratio has decreased slightly, it still reflects a prudent level of debt utilization.
The debt-to-equity ratio has demonstrated a noteworthy improvement, declining from 1.95 in 2019 to 0.71 in 2023. This suggests that the company has significantly reduced its reliance on debt in relation to equity, indicating a healthier balance sheet and improved solvency position.
The financial leverage ratio has also shown a declining trend over the years, portraying a reduction in the company's reliance on debt to generate earnings. This shows a positive shift towards a more sustainable and less leveraged financial structure.
Overall, the solvency ratios of Netflix Inc. demonstrate a favorable trajectory, with decreasing reliance on debt and improved financial stability, which suggests a reduced risk of financial distress and enhanced capacity to meet its long-term obligations.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 9.87 | 8.45 | 8.63 | 5.17 | 4.29 |
The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. A higher ratio indicates a greater ability to cover interest expenses.
Netflix Inc.'s interest coverage has shown a consistent upward trend over the past five years, reflecting an improving ability to cover interest expenses. The ratio increased from 4.16 in 2019 to 9.94 in 2023, indicating a significant enhancement in the company's capacity to service its debt.
This positive trend suggests that Netflix's earnings before interest and taxes (EBIT) have been increasing at a faster pace than its interest expenses. This is a favorable sign for creditors and investors, as it demonstrates the company's improved financial stability and reduced risk of default on its debt obligations.
Overall, the trend in Netflix's interest coverage ratio indicates a strengthening financial position and a more secure ability to meet its interest obligations in the coming years.