Netflix

Definition

Netflix is a global streaming service that offers online content, including movies and TV shows, through subscription-based revenue. It is also a significant player in content production and distribution, impacting financial strategies within the entertainment industry.

5 Must Know Facts For Your Next Test

1. Netflix raises capital primarily through debt financing to fund its content creation and acquisition.
2. The company often issues long-term bonds to secure large amounts of capital at fixed interest rates.
3. Equity financing has been less utilized by Netflix compared to debt financing but remains an option for raising funds.
4. Optimal capital structure for Netflix involves balancing debt with equity to minimize the cost of capital while maximizing shareholder value.
5. Interest expenses from debt are tax-deductible, which can make debt a more attractive option for Netflix.

Review Questions

• What primary method does Netflix use to raise capital for content creation?
• How does issuing long-term bonds benefit Netflix's financial strategy?
• Why might Netflix prefer debt over equity in its capital structure?

Related terms

Debt Financing: Raising funds through borrowing, typically via issuing bonds or loans.

Equity Financing: Raising funds by selling shares of stock to investors.

Cost of Capital: The return rate that a company must earn on its investment projects to maintain its market value and attract funds.