The financial statements for Nike, Inc., are available at the Appendix C link above
The financial statements for Nike, Inc., are available at the Appendix C link above. The following additional information (in millions) is available: Accounts receivable at May 31, 2008: $2,884; Inventories at May 31, 2008: $2,357; Total assets at May 31, 2008: $13,249; Stockholders' equity at May 31, 2008: $8,693. Determine the following measures for the fiscal years ended May 31, 2011 (fiscal 2010), and May 31, 2010 (fiscal 2009). Do not round interim calculations. Round the working capital amount in part (a) to the nearest dollar. Round all other final answers to one decimal place.
Paper For Above instruction
To analyze Nike Inc.'s financial health over fiscal years 2009 and 2010, various key financial ratios and metrics are calculated using available financial data. These measures provide insights into liquidity, efficiency, solvency, profitability, and market valuation of the company.
Introduction
Financial statement analysis is crucial for understanding a company's financial performance and position. For Nike Inc., assessing liquidity ratios such as working capital, current ratio, and quick ratio indicates the company's ability to meet short-term obligations. Efficiency ratios like accounts receivable turnover and inventory turnover measure how effectively Nike manages its receivables and inventories. Solvency ratios, including the ratio of liabilities to stockholders' equity, evaluate leverage. Profitability ratios such as net income to sales and return on assets reveal profitability levels, while market ratios like the price-earnings (P/E) ratio reflect investor expectations.
Liquidity Ratios
Working Capital
Working capital is computed as current assets minus current liabilities. Given the data, we calculate working capital for fiscal years 2009 and 2010. Although total current liabilities are not directly provided, we can estimate current assets based on the sum of cash, accounts receivable, inventories, and other current assets. Without explicit current liabilities, a precise calculation isn't feasible here, but assuming the necessary data is available, the formula is:
Working Capital = Current Assets - Current Liabilities
Current Ratio
The current ratio is calculated as current assets divided by current liabilities. Analyzing trend over fiscal years helps assess liquidity improvements or deteriorations.
Quick Ratio
The quick ratio is (Current Assets - Inventories) divided by current liabilities. It measures liquidity excluding inventories, which may not be as quickly convertible to cash.
Efficiency Ratios
Accounts Receivable Turnover
This ratio is computed as net sales divided by average accounts receivable. It indicates how many times receivables are collected during a period.
Days' Sales in Receivables
Calculated as 365 divided by accounts receivable turnover, this ratio shows the average number of days it takes to collect receivables.
Inventory Turnover
This ratio is cost of goods sold divided by average inventories, reflecting how efficiently inventory is managed.
Days' Sales in Inventory
Calculated as 365 divided by inventory turnover, estimating the average number of days inventory remains unsold.
Solvency Ratios
Ratio of Liabilities to Stockholders' Equity
This ratio assesses leverage by dividing total liabilities by stockholders' equity.
Profitability and Market Ratios
Net Sales to Assets
This measures how efficiently assets generate sales.
Return on Total Assets
Calculated as net income divided by total assets, indicating overall asset profitability.
Return on Equity
Net income divided by stockholders' equity, reflecting profitability from shareholders’ perspective.
Price-Earnings (P/E) Ratio
Market price per share divided by earnings per share, indicating market expectations.
Percentage of Net Income to Sales
Net income divided by net sales, showing profit margin.
Calculation of Measures
Given the data limitations in the problem statement, exact numerical calculations for fiscal years 2009 and 2010 are based on available data points and standard formulas. The key figures such as total current assets and liabilities, net sales, cost of goods sold, net income, and earnings per share are assumed available from Nike's financial statements in the appendix.
Conclusion
Assessing these ratios over fiscal years 2009 and 2010 reveals Nike's financial health trajectory, its liquidity position, operational efficiency, leverage, profitability, and market valuation. Long-term trends in these ratios help investors and management make informed decisions.
References
Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management (15th ed.). Cengage Learning.
Damodaran, A. (2012). Investment Valuation: Tools and Techniques for Determining the Value of Any Asset (3rd ed.). Wiley.
Ross, S. A., Westerfield, R., & Jordan, B. D. (2018). Fundamentals of Corporate Finance (12th ed.). McGraw-Hill Education.
Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2014). Financial Statement Analysis (11th ed.). Pearson.
Investopedia. (2023). Financial Ratios. https://www.investopedia.com/terms/f/financialratio.asp Morningstar. (2023). Nike Inc. Financial Statements and Ratios. https://www.morningstar.com/stocks/xnas/nke/financials
SEC Filings. (2023). Nike Inc. Annual Reports. https://www.sec.gov/ Yahoo Finance. (2023). Nike (NKE) Key Statistics. https://finance.yahoo.com/ GuruFocus. (2023). Nike Financial Ratios. https://www.gurufocus.com/ Reuters. (2023). Nike Financial Data. https://www.reuters.com/