Without any formal business education before entering Sauder School of Business, I have found the world of finance to be overwhelming yet profound. Initially, I assumed finance would simply be a collection of calculations and investments based off of unstable stocks; however, I remember when we welcomed Professor Mahesh to our lecture where he spoke about risk and ambiguity in operations. I was able to apply this to the discussion we had with Jeff Kroeker where we dissected financial statements. Instantly, I realized the difficulty of justifying whether certain costs should be included on statements or amortized.
Eventually, I came across an engaging article on Netflix’s current situation pertaining to their cash flow and earnings. Taking a look at the market, Netflix’s shares seem to untouched in comparison to the broader market. Although the company anticipates over 13% increase in subscribers globally and high valuations in trades, the cumulative free cash flow of the company has been negative for over nine quarters although net income has been increasing. In addition, Netflix has even deferred the amortization of expenses thus analysts are skeptical of the continuation of successful shares. Since Netflix has recently expanded into numerous European countries, it is easy for operation and production of financial statements to get out of hand.
The realm of finance is not only about completing calculations to balance out at the end of the day, but a thoroughly prepared game plan is required as well to succeed.