What is the impact on Netflix’s assets, liabilities, and equity from its new credit line?

In July 2017, Netflix, Inc., (NASDAQ: NFLX) obtained a new credit line for $500 million through five lenders. This credit line means that Netflix will be able to borrow as it needs cash to fund its operations. According to Netflix’s regulatory filing, it plans to use the funds for operations and general corporate needs.

The lenders involved in providing this credit line to Netflix include Deutsche Bank AG and Goldman Sachs Group Inc.

Discussion Questions

1. On the date that the lenders authorized the credit line of $500 million for Netflix, what would be the impact on Netflix’s assets, liabilities, and equity?
2. Assume now that Netflix borrows $100 million cash against this credit line on December 31, 2017. How will its assets, liabilities, and equity be impacted by this borrowing?
3. How would the balance sheet (assets, liabilities, and equity) of Deutsche Bank AG be impacted when Netflix borrows cash through the credit line?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

• Student handout (pdf) (word) (contains entire blog posting + discussion questions)
• PowerPoint file (brief article overview + discussion questions)

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