Netflix v Disney - Debt
- Adam Edwards
- Feb 8
- 3 min read
Accounting Ratio
Disney’s Asset Dominance The Walt Disney Company has significantly higher total assets than Netflix, indicating a larger balance sheet and a more asset-intensive business model.
Equity Base Difference Disney has a much larger equity base compared to Netflix, suggesting it relies more on shareholders' investment to finance its operations.
Liabilities Proportion While Disney has higher total liabilities than Netflix, the relative proportion of liabilities to total assets is more balanced, implying a structured financing approach.
Netflix’s Smaller Scale Netflix’s total assets, liabilities, and equity are substantially lower than Disney’s, showing that it operates on a leaner financial structure.
Equity vs Liabilities Disney's equity surpasses its liabilities, whereas Netflix's equity and liabilities are nearly equal, implying Disney has a more solid financial foundation.
Capital Structure Implication Disney’s capital structure leans more towards equity, whereas Netflix has a more even split between liabilities and equity, potentially reflecting a higher reliance on debt financing.
Debt Growth
Netflix’s Recent Debt Growth Netflix has experienced strong year-on-year debt growth, suggesting it has been increasing its borrowing to finance operations or expansion.
Disney’s Declining Debt Disney has seen a reduction in debt growth over a three-year period, implying efforts to stabilise or reduce leverage.
Netflix’s Multi-Year Trend Over the longer term (five years), Netflix’s debt growth has slowed, indicating a shift away from aggressive borrowing.
Disney’s Three-Year Struggles Disney’s three-year debt growth is negative, reflecting a period of debt reduction or restructuring, possibly post-COVID recovery.
Short-Term vs Long-Term Debt Strategy Netflix’s debt growth in the short term is high, but its long-term trend is stabilising, while Disney has cut debt in the mid-term but maintained some long-term debt growth.
Debt Management Contrast Netflix appears comfortable using debt for growth, while Disney has prioritised reducing or stabilising its debt levels, reflecting different financial strategies.
Equity vs Debt
Disney’s Stronger Equity Base Disney’s equity far surpasses its total debt, implying it relies more on shareholder funding rather than debt.
Netflix’s Balanced Equity and Debt Netflix’s total debt is nearly equal to its equity, indicating it has relied heavily on borrowing compared to Disney.
Higher Debt Levels at Disney Despite having more equity, Disney also carries significantly more debt than Netflix, showing it has historically used leverage to fund expansion.
Netflix’s Debt Dependency Netflix has a more leveraged financial position, with debt making up a large portion of its capital structure, unlike Disney’s equity-heavy model.
Debt-to-Equity Balance Disney’s financial stability is reinforced by higher equity relative to debt, whereas Netflix's financing appears more dependent on borrowed funds.
Corporate Finance Strategy Disney’s approach indicates a long-term, equity-driven growth strategy, while Netflix has embraced debt as a key component of its financial model.
Debt Ratios
Disney’s Higher Debt Ratios Disney has significantly higher debt-to-EBITDA and debt-to-FCF ratios, suggesting a greater reliance on earnings to service debt.
Netflix’s Lower Debt-to-Equity Netflix has a lower debt-to-equity ratio, indicating that its borrowing is more balanced in relation to shareholder funds.
Disney’s Debt Impact on Cash Flow Disney’s high debt-to-FCF ratio suggests that a large portion of its free cash flow is used for debt servicing, reducing flexibility.
Netflix’s Conservative Debt Levels Despite having debt, Netflix maintains a more moderate debt-to-EBITDA ratio, implying it has room to manage its obligations.
Higher Leverage at Disney Disney’s debt ratios suggest that it takes on debt relative to its profitability more aggressively than Netflix does.
Operational Cash Flow Differences Disney’s debt servicing is highly dependent on operational cash flow, while Netflix has a more cautious approach to borrowing in relation to its earnings.
Overall 10 Key Takeaways
Disney Operates on a Larger Financial Scale With significantly higher assets, liabilities, and equity, Disney’s financial structure is much larger than Netflix’s.
Netflix Has a Leaner Capital Structure Netflix operates with fewer assets and less equity but has a more even split between debt and shareholder funding.
Debt Growth Strategies Differ Netflix has increased debt in the short term, whereas Disney has been reducing or stabilising its borrowing over the past three years.
Equity is a Key Strength for Disney Disney’s larger equity base makes it less reliant on debt, offering greater financial stability.
Netflix Uses Debt More for Growth Netflix’s debt-to-equity and debt growth trends suggest it has relied on borrowing to fuel expansion.
Debt Servicing is More Critical for Disney Disney’s high debt-to-FCF ratio means it must allocate significant cash flow to debt repayments.
Disney Leverages Profitability More Aggressively Its high debt-to-EBITDA ratio suggests it is comfortable taking on debt relative to its earnings.
Netflix’s Debt-to-Equity is More Balanced While it has borrowed significantly, its debt remains more proportionate to its overall equity.
Cash Flow Flexibility Differs Disney’s reliance on operational cash flow to service debt is much stronger than Netflix’s.
Netflix May Need to be More Cautious with Debt While it currently manages debt well, any downturn in earnings could put pressure on Netflix’s ability to sustain its borrowing model.