Netflix Inc. (NASDAQ:NFLX)

The solvency position, as indicated by the presented ratios, demonstrates a generally stable trend over the analyzed period, spanning from March 31, 2022, to December 31, 2025. A consistent pattern of moderate leverage is observed, alongside improving coverage of interest expenses. Overall, the company appears to maintain a manageable debt structure and a strengthening ability to meet its financial obligations.

Debt Ratios (Debt to Equity, Debt to Capital, Debt to Assets)

The debt to equity ratio exhibits a gradual decline from 0.83 in March 2022 to 0.54 in December 2025, suggesting a decreasing reliance on equity financing relative to debt. Similar downward trends are evident in the debt to capital and debt to assets ratios, moving from 0.45 to 0.35 and 0.32 to 0.26 respectively, reinforcing the observation of decreasing leverage. These ratios indicate a consistent, albeit slow, de-leveraging of the capital structure throughout the period.

Financial Leverage

Financial leverage, as measured by the ratio, initially decreases from 2.58 to 2.23 between March 2022 and June 2023. It then experiences a slight increase to 2.37 by December 2023 before resuming a downward trajectory, concluding at 2.09 in December 2025. This pattern suggests a period of initial deleveraging followed by a modest increase in leverage, and then a renewed focus on reducing financial risk. The overall trend remains relatively stable.

Interest Coverage

The interest coverage ratio demonstrates a clear and consistent upward trend. Starting at 8.62 in March 2022, it steadily increases to 17.38 in December 2025. This indicates a significant improvement in the company’s ability to cover its interest expenses with earnings before interest and taxes. The increasing ratio suggests a strengthening financial position and reduced risk of default. The most substantial gains in coverage occurred between March 2024 and June 2025.

In summary, the observed trends suggest a company that is proactively managing its debt levels and improving its capacity to service its debt obligations. The decreasing debt ratios, coupled with the increasing interest coverage ratio, paint a picture of improving solvency and financial health.

The debt to equity ratio for the analyzed period demonstrates a generally decreasing trend, with some fluctuations. Initially, the ratio exhibited a decline from 0.83 in March 2022 to 0.63 in June 2023. A slight increase to 0.70 was observed in September 2023, followed by a return to 0.63 in December 2023. The ratio continued to decrease through June 2025, reaching a low of 0.54.

Overall Trend

The overarching trend indicates a strengthening of the company’s financial position with respect to debt relative to equity. The consistent decrease in the debt to equity ratio suggests a reduced reliance on debt financing or an increase in equity, or a combination of both. This generally implies lower financial risk.

Initial Decline (Mar 2022 - Jun 2023)

From March 2022 to June 2023, the debt to equity ratio decreased from 0.83 to 0.63. This represents a substantial reduction in leverage over this period. The decrease suggests the company was either actively reducing its debt burden or experiencing growth in stockholders’ equity at a faster rate than debt accumulation.

Fluctuations (Sep 2023 - Dec 2023)

A minor increase in the ratio from 0.63 to 0.70 between June 2023 and September 2023 was followed by a decrease back to 0.63 by December 2023. These fluctuations suggest short-term changes in the capital structure, potentially related to financing activities or revaluation of assets and liabilities. However, these changes were not sustained and did not alter the overall downward trend.

Continued Decrease (Mar 2024 - Dec 2025)

The ratio continued its downward trajectory from March 2024 through December 2025, decreasing from 0.66 to 0.54. This sustained decline reinforces the observation of improving financial leverage and a more conservative capital structure. The final value of 0.54 indicates that for every dollar of debt, the company holds approximately $1.85 in equity.

In summary, the observed trend in the debt to equity ratio suggests a positive development in the company’s solvency position over the analyzed period. The consistent reduction in the ratio indicates decreasing financial risk and a strengthening balance sheet.

The debt to capital ratio for the analyzed period demonstrates a generally decreasing trend, although with some fluctuation. Initially, the ratio stood at 0.45 and has generally trended downwards over the observed timeframe, concluding at 0.35.

Overall Trend

From March 31, 2022, through December 31, 2025, the debt to capital ratio exhibits a consistent, albeit gradual, decline. This suggests a decreasing reliance on debt financing relative to the company’s total capital structure. The most significant decrease occurred between September 30, 2025, and December 31, 2025, moving from 0.36 to 0.35.

Short-Term Fluctuations

While the overall trend is downward, there are instances of short-term increases. For example, the ratio increased from 0.39 in June 30, 2023, to 0.41 in December 31, 2023. Similarly, a rise is observed from 0.39 in March 31, 2024, to 0.41 in September 30, 2024. These fluctuations suggest potential temporary increases in debt or changes in the composition of capital.

Debt and Capital Movements

Total debt remained relatively stable throughout the period, fluctuating between approximately US$13.8 million and US$15.6 million. Total capital, however, demonstrated a more consistent upward trend, increasing from US$32.1 million to US$41.1 million. This growth in capital, coupled with relatively stable debt levels, is the primary driver of the observed decrease in the debt to capital ratio.

The observed trend suggests improving solvency, as the company is financing a greater proportion of its assets with equity or other forms of capital rather than debt. However, the fluctuations warrant further investigation to understand the underlying causes and potential implications for financial risk.

The debt-to-assets ratio for the analyzed period demonstrates a generally stable trend with some fluctuation. Initially, the ratio decreased from 0.32 in March 2022 to 0.29 by September 2022, indicating a decreasing reliance on debt financing relative to the company’s assets. A slight increase to 0.30 was observed at the end of 2022, followed by a continued decrease to 0.28 in June 2023.

Overall Trend

The ratio generally remained within a narrow band between 0.26 and 0.32 throughout the analyzed period. A noticeable downward trend emerged in the latter half of the period, with the ratio reaching a low of 0.26 in both September 2025 and December 2025.

A period of increase occurred between June 2024 and September 2024, with the ratio rising from 0.28 to 0.31. This suggests a temporary increase in debt relative to assets during that timeframe. However, this was followed by a decline, indicating a subsequent adjustment in the company’s financial leverage. The most recent values, from September 2025 and December 2025, show the lowest ratio observed during the entire period, suggesting improved solvency.

Fluctuations and Potential Drivers

Minor fluctuations in the ratio likely reflect routine financing activities, asset acquisitions, or changes in working capital. The increase observed in September 2024 warrants further investigation to understand the specific factors contributing to the increased debt level at that time. The subsequent decline suggests these factors were temporary or effectively addressed.

The consistent values suggest a relatively conservative approach to debt management. The observed decrease in the ratio towards the end of the period indicates a strengthening financial position, with a lower proportion of assets financed by debt. This could be viewed favorably by investors and creditors.

Recent Performance

The ratio’s stabilization around 0.26 in the final two quarters of the analyzed period suggests a deliberate effort to maintain a specific level of financial leverage. This could be part of a broader strategy to optimize capital structure and reduce financial risk.

Financial leverage, as indicated by the ratio of total assets to stockholders’ equity, demonstrates a generally decreasing trend over the observed period. Initially, the ratio stood at 2.58 and has progressively declined to 2.09. This suggests a diminishing reliance on debt financing relative to equity.

Overall Trend

The financial leverage ratio exhibits a consistent, albeit gradual, downward trajectory from March 31, 2022, through December 31, 2025. The most significant decrease occurred between September 30, 2022, and December 31, 2023, followed by a more moderate decline through the end of the observation period.

Initial Phase (Mar 31, 2022 – Dec 31, 2022)

From March 31, 2022, to December 31, 2022, the ratio decreased from 2.58 to 2.34, representing a reduction in financial leverage. This initial decline suggests a potential shift in capital structure towards greater equity financing or a reduction in asset base funded by debt.

Stabilization and Subsequent Decline (Jan 1, 2023 – Dec 31, 2025)

Following a slight increase to 2.37 in December 2023, the ratio continued its downward trend, reaching 2.09 by December 31, 2025. This period indicates a more sustained effort to reduce financial leverage. The ratio remained relatively stable between March 31, 2024, and September 30, 2025, fluctuating between 2.17 and 2.12 before the final decrease.

Equity Contribution

The concurrent increase in stockholders’ equity throughout the period likely contributed to the decreasing financial leverage ratio. As equity grows, the proportion of assets financed by debt diminishes, resulting in a lower leverage ratio. This suggests successful equity retention or issuance.

In conclusion, the observed trend in financial leverage indicates a strengthening financial position, characterized by a reduced dependence on debt and a growing equity base. This could potentially lower financial risk and improve the company’s long-term sustainability.

The interest coverage ratio exhibits a generally positive trend over the observed period, though with some fluctuations. Initially, the ratio demonstrates relative stability, followed by a period of decline, and then a significant improvement. This analysis details these movements and potential implications.

Initial Stability and Subsequent Decline (Mar 31, 2022 – Dec 31, 2022)

From March 31, 2022, to December 31, 2022, the interest coverage ratio remained relatively stable, fluctuating between 8.45 and 8.97. This indicates a consistent ability to meet interest obligations with earnings before interest and tax. However, a noticeable decline is observed in the final quarter of 2022, dropping to 8.45, suggesting a slight weakening in the capacity to cover interest expenses.

Continued Weakness and Recovery (Mar 31, 2023 – Dec 31, 2023)

The downward trend continued into the first half of 2023, with the ratio reaching a low of 7.86 by March 31, 2023. This suggests a further reduction in the earnings available to cover interest payments. However, a strong recovery commenced in the latter half of 2023, culminating in a ratio of 9.87 by December 31, 2023, indicating improved financial health and a strengthened ability to service debt.

Sustained Improvement and Peak Performance (Mar 31, 2024 – Sep 30, 2025)

The positive momentum continued into 2024 and 2025. The interest coverage ratio consistently increased, peaking at 17.45 on September 30, 2025. This substantial improvement signifies a significantly enhanced capacity to meet interest obligations, driven by strong earnings performance. A slight decrease to 17.38 is observed by December 31, 2025, but the ratio remains at a historically high level.

EBIT and Interest Expense Relationship

The observed trends in the interest coverage ratio are directly correlated with the movements in Earnings Before Interest and Tax (EBIT) and Interest Expense. While interest expense remained relatively stable throughout the period, fluctuations in EBIT significantly impacted the ratio. The substantial increase in EBIT from March 31, 2024, onwards is the primary driver of the improved interest coverage.

Overall, the company demonstrates a strengthening solvency position as indicated by the increasing interest coverage ratio. The ability to comfortably cover interest expenses has improved considerably, particularly in the latter part of the analyzed period.