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Netflix Income Statement

Operating/Profitability Metrics 3.2.A. (3 points) During the three years covering fiscal years 2018, 2019, and 2020, the amounts Netflix reported as revenue increased substantially. Netflix depends heavily on marketing to drive demand. Compute the percentage of sales revenue spent on marketing expenses for the fiscal years ended December 31, 2018, and December 31, 2020. What is the change in the percentage of sales revenue spent on marketing expense from the year ended December 31, 2018, to the year ended December 31, 2020, and has the percentage increased or (decreased)? Round percentages to 1 decimal places (e.g., xx.x%) Answers: _________% Indicate if the change is an _____ Increase or _____ Decrease 3.2.B (3 points) Marketing appears to be a crucial part of Netflixs operating strategy and cost structure. Compute the percentage of Operating expenses dedicated to marketing for the fiscal years ending December 31, 2020, 2019, and 2018. The term Operating expenses includes all expenses considered in the calculation of Operating income except Cost of revenues. Round percentages to 1 decimal place (e.g., xx.x%). Answers: December 31, 2020 _______ %; December 31, 2019 _______ %; December 31, 2018 _______ %

3.2.C (3 points) If Netflix did not consider marketing essential, we can assume they would cut back on marketing and devote those funds to other purposes. Without a major commitment to marketing, it appears that Netflix cannot achieve its goal of protecting and increasing market share. Explain how the relationship between marketing expense and total operating expenses creates a cost structure that results in a barrier to entry that discourages or prevents existing and potential competitors from attempting to compete with Netflix for market share.

Earnings per share Dividend per share Closing Market Price \begin{tabular}{r|r|r|} $6.26 & $4.26 & $2.78 \\ \hline$0.00 & $0.00 & $0.00 \\ \hline$540.73 & $323.57 & $267.66 \\ \hline \end{tabular}

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