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What is the balance sheet impact of the $400 million Netflix just borrowed?. Original blog posting (April 28, 2014 ). Netflix takes out a $400 million loan. Using these funds to help to create original programming

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what is the balance sheet impact of the 400 million netflix just borrowed
What is the balance sheet impact of the $400 million Netflix just borrowed?

Original blog posting (April 28, 2014)

netflix takes out a 400 million loan
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 $438.38 per share with more than 55,587,000 shares outstanding
question 1
Question 1

What is the impact on Netflix’s accounting equation from borrowing the $400 million?

question 2
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)?

question 3
Question 3

What are some possible reasons that Netflix chose to borrow the $400 million rather than issue stock?

question recap
Question Recap
  • What is the impact on Netflix’s accounting equation from borrowing the $400 million?
  • 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)?
  • What are some possible reasons that Netflix chose to borrow the $400 million rather than issue stock?
slide7

For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at http://accountingintheheadlines.com/Related video resources can be found at http://www.youtube.com/user/accountingheadlinesQuestions or comments? Contact Dr. Wendy Tietz at wtietz@kent.edu