PA1. LO 9.

3 Use the following information from Exercise EA3 to answer the questions that
follow.

A. Calculate the operating income percentage for each of the courses. Comment on how
your analysis has changed for each course.
B. Perform a vertical analysis for each course. Based on your analysis, what accounts would
you want to investigate further? How might management utilize this information?
C. Which method of analysis (using a dollar value or percentage) is most relevant and/or
useful? Explain.
PA2. LO 9.3 Use Netflix’s 2017 annual report
(https://s22.q4cdn.com/959853165/files/doc_financials/annual_reports/0001065280-18-
000069.pdf) to answer the following questions.
A. Using the revenue and contribution profit information, calculate the contribution profit
(loss) percentage for each of the divisions. Comment on how your analysis has changed
compared to your analysis of the dollar amounts for each division.
B. Since companies typically do not publicly provide more than macro levels of asset
values, let’s assume the following level of assets (investment):

Calculate the return on investment (ROI) for each division. Comment on the results.
C. Assume that Netflix uses a cost of capital of 7%. Calculate the residual income (RI) for
each of the divisions. Comment on the results.