Course Project: Case Study Analysis—Part 5

On-demand products and services are more popular than ever before. The expansion of online shopping, media streaming, and all other mobile services means great news for the businesses behind these services. Netflix, Inc., Amazon.com, Inc., Spotify Ltd., and similar services are all becoming household names as consumers loyally back the companies that offer them the fastest delivery of products and content for the most reasonable price.

Think about two of these services in particular: Netflix, Inc., and Amazon.com, Inc. To prepare for Part 5 of your Course Project, create a case study analysis on the key accounting policies, respective profitability, and expected staying power in the industry of these two publicly traded companies: Netflix, Inc., and Amazon.com, Inc.

For Part 5, your analysis of 5–6 pages should include the following components:

1. Overview of Netflix, Inc., and Amazon.com, Inc. (1 page)
2. Industry Competitors (1 page)
3. Narrative Analysis of Key Accounting Policies (2–3 pages)
   1. If you were a supplier, would you extend open account credit to either or both of these companies? Why or why not?
   2. If you were a banker, would you make a substantial long-term loan to either or both of these companies? Why or why not?
   3. If you were an investment banker, would you buy or merge with either or both of these companies? Why or why not?
   4. As an investor, would you buy stock in either or both of these companies? Why or why not?
4. Current Issues Facing Netflix and Amazon (1 page)
   1. What sustainability issues, if any, face each company? Explain.
      

      WEEK 8

      Imagine that you are a

      Assignment 1: Forecasting Revenue, Costs, and Estimated Cash Flows

      Imagine that you are a financial advisor for Netflix, Inc., and Amazon.com, Inc. You are tasked with creating a comprehensive forecast of the revenue, costs, and cash flows of these companies, answering key questions that may influence their future decisions.

      To prepare for this Assignment, use the Netflix and Amazon Data Spreadsheet, located in this week’s Learning Resources, to generate a pro forma forecast and consider what this indicates about the future for these two companies.

      In a 1- to 2-page paper, provide the following:

      • A forecast of Netflix, Inc., and Amazon.com, Inc.’s revenue, costs, and estimated cash flows into the next five years.
      • The appropriate discount rate for Netflix, Inc., and Amazon.com, Inc.’s forecasted cash flows.
      • An appropriate risk-adjusted rate of return for use in evaluating an investment in Netflix, Inc., and Amazon.com, Inc.
      • A determination of the estimated fair market value of 100% of Netflix, Inc., and Amazon.com, Inc.’s equity.

      • Assignment 2: The Role of Finance in Promoting Social Change

        The work of finance professionals can go a long way toward promoting positive social change. The Principles for Responsible Management Education (PRME) is a leading organization in promoting this direction in business. PRME has six principles, including “Values.” The “Values” principle states, “We will incorporate into our academic activities and curricula the values of global social responsibility as portrayed in international initiatives such as the United Nations Global Compact” (PRME, n.d.). From this principle, many companies are utilizing “impact investing” to harness “the power of the capital markets to provide financial and social returns” (Ahern, 2015). Corporations can accomplish this by connecting sales to social campaign and nonprofit beneficiaries around the world. For example, Warby Parker’s “Buy a Pair, Give a Pair” campaign partners with VisionSpring to provide access to vision care and eyewear around the world (Warby Parker, 2015).

        To prepare for this Assignment, review the Principles for Responsible Management Education (PRME) and consider how financial decisions can contribute to promoting positive social change.

        In a 2- to 3-page paper, address the following:

        • How do finance and accounting play a role in ethics and sustainable positive social change?
        • How might you use accounting or finance to support this role that you described above?

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