The questions in this exercise are based on Netflix, Inc. To answer the questions you will need to download Netilix’s Form 10-K for the year ended December 31, 2005 at www.sec.gov/edgar!searchedgar/companysearch.html. Once at this website, input CIK code 1065280 and hit enter. In the gray box on the right-hand side of your computer screen define the scope of your search by inputting 10-K and then pressing enter. Select the 10-K with a filing date of March 16, 2006. You do not need to print this document to answer the questions.

Required:

1. What is Netilix’s strategy for success in the marketplace? Does the company rely primarily on a customer intimacy, operational excellence, or product leadership customer value proposition? What evidence supports your conclusion?
2. What business risks does Netflix face that may threaten the company’s ability to satisfy stockholder expectations? Of the risks that you have identified, which ones are controllable and which ones are largely uncontrollable?
3. Prepare a comparative balance sheet similar to the one shown in Exhibit 15—4 (Use Netilix’s data from 2004 and 2005). For each account shown on Netilix’s balance sheet, calculate the change in the balance and whether the change represents a source or a use of cash.
4. Explain how each change shown in your comparative balance sheet is accounted for in Netflix’s 2005 statement of cash flows.