Yes, this can be considered as the highest valuable asset with highest value on the balance sheet without any physical existence. Goodwill is an intangible asset helping the firm to set better relations with concerned parties including customer, suppliers, investors etc.
c.
2015
2014
Change
i
Cash and Cash Equivalent Change
334.2
867.3
-533.1
ii
Consolidated Balance Sheet and Cash Flow Statement contain the information regarding calculation for change in cash and cash equivalents.
d
2015
i
Net Income in 2015
250.9
ii
Income Statement and Statement of Stockholders' Equity.
e
2015
2014
Change
i
Retained Earnings 2015
11990.8
ii
Change
11990.8
11787.2
203.6
iii
Statements of Total Equity, and Redeemable Interest, Balance Sheet,
f
i
Retained earnings represents the amount left over for the business after paying dividend to shareholders.
The company’s net income of 2014 relates to the balance sheet indirectly through the company’s statement of shareholder’s equity, as shown below. The retained earnings are added to the company’s shareholder’s equity as shown below. The calculations show $552,485 to be initially retained by Netflix, into which, the net income of $266,799 is added, which has resulted in the ending retained earnings of $819,284 in 2014. The resulting retained earnings of 2014 is added to the Netflix’s shareholders’ equity as shown by the consolidated statement of stockholders’ equity.
Netflix's Retained Earnings - 2014
Retained Earnings Beg -2013
552,485
Net Income
266799
Dividends
0
Ending Retained Earnings- 2014
819,284
Question # 3: Amazon
a. Average amount of Net Income
As, the company has no dividends during the 8 years’ time, so net income/(loss) have been transferred to retained earnings account.
Retained Earnings:
Dec-02
total Assets
1990
Less: Total Liabilities
3343
Total Equity
-1353
Paid-in equity capital
1654
Retained Earnings at 12/31/2002
-3007
No. of Years
8
Average Net Loss
-375.875
There is a huge difference between the concept of market value and the book of equity; whereas, the book value of equity depends on retained earnings and the par value multiplied by the number of shares outstanding and market value of equity depends on the market price of the share multiplied by the number of shares outstanding. Supposedly, if we have rational investors in the stock market; the stock price would be equal to the present value of the future cash flows minus outstanding debt divided by the number of shares outstanding. This implies that the high value of equity is due to the potential future cash flows of the business. Moreover, the total assets of the firm are only $1990 million as compared to $5500 million of equity market value. The reason for low book value of assets is the nature of assets possessed by Amazon. Amazon has limited physical assets but a potential online setup..............................
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