So I am looking at this hype around Netflix (NFLX) and wondering: what is going on? Do people need special math skills to realize that Netflix is only today alive because it is popular around the country? The company's financials are a mess. To see confirm that, let us study the company's historical Income and Cash Flow statements: (Source: Q3 Report) I guess readers can see some key numbers declining: operating and net income have been going down over the last twelve months. Revenues are up. EPS are down. Looks like there is not much information we can read from this statement. Well, in order to make it more user-friendly, I turned the hard figures from the statement into ratios: (Source: historical income statements) Now readers can see what is really going on. While the cost of revenues has been declining over the last 2+ years, we can see that all expense categories have been growing as a percentage of sales. This is bad. As a result, operating income figures have been volatile, while the net income margin remains razor-thin. What is worse is the company's cash flow statement. Keep in mind that cash flows are more important that profits. A company may be losing money here and there but still operate normally. However, once cash in the bank dries up, the business is done. Historical figures have been confirming this tendency: (Source: historical cash flow statements) Think about this: Netflix's operating cash flows have been going down for years and have turned negative in the last twelve months, while capital expenditures are on the rise (up 45% since December 2013). Needless to say, cash has been burning at an increasing rate: look again at the Free Cash Flow figures. So, we see that the company is constantly depleting its cash balance. Where does the money come from, you would ask. There are two sources: 1) Issuing shares. Netflix has issued equity totaling ~$255M in the last 2+ fiscal years. This is not that bad in terms dilution for a company that has a market capitalization of over $54B. 2) Issuing debt. This is bad for two reasons. First, the total amount raised is quite substantial relative to what NFLX got from equity offerings: $2.4B. From this amount, $1.5B was raised during this fiscal year. Secondly, the company simply does not generate the necessary cash flows to service the debt, as the statements show. I would be troubled by these developments, if I were a shareholder of Netflix. You may, of course, start telling me about the brand value and how Netflix will take over the world in the future. Well, my friends, the company is in trouble right now: the faster it grows, the more cash it burns. Any other business operating like that would be dead by now (or at least be valued at cents per dollar). I think it is only a matter of time before the music stops and the stock goes down to zero.