Netflix’s Stock

Netflix’s stock was drop at the time merely due to the result of poor decisions. There were some ineffective management decisions, which caused a drop in company’s stock. Investors can be able to predict the future position of a particular stock by reviewing company’s financial statements more closely. The main financial statements are balance sheet, profit and loss account, cash flow statement and statement of changes in shareholders’ equity. By reviewing these statements, investors can not only examine company’s current financial health, but can also develop accurate predictions about company. It is because through these statements, they are able to know profitability position, short-term and long-term solvency and movement of the cash in the business (Drake & Fabozzi, 2012).

There are also some warning signs such as lost focus, supplier squeezing, undervalued employees, operational fragmentation and number obsession, which indicates poor health of the organization (Stocker, 2006). Additionally, declining profits and revenue, use of more debt funds in the firm’s capital structure, more investment in unproductive items including inventory and more accounts receivables, etc. are some other warning signs of organization’s poor health (Fridson & Alvarez, 2011).

References

Drake, P. P. & Fabozzi, F. J. (2012). Analysis of Financial Statements. USA: John Wiley & Sons.

Fridson, M. S. & Alvarez, F. (2011). Financial Statement Analysis: A Practitioner’s Guide. USA: John Wiley & Sons.

Stocker, G. (2006). Avoiding the Corporate Death Spiral: Recognizing And Eliminating the Signs of Decline. USA: ASQ Quality Press.