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Similar to BackgroundNike, originally called Blue Ribbon Sports (BRS), was.docx
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BackgroundNike, originally called Blue Ribbon Sports (BRS), was.docx
- 1. Background: Nike, originally called Blue Ribbon Sports (BRS), was founded by University of Oregon track athlete Philip Knight and his coach Bill Bowerman in January 1964 and then in 1971 it was officially called Nike, Greek name of the Goddess of victory. Nike is a USA multinational company that specialize in designing, developing and manufacturing of footwear, apparel, equipment and accessories. The company Headquarter is in Washington County, Oregon, in the Portland metropolitan area (Sage, 2008). Nike is present everywhere in the world thanks to its advanced supply chain and its broad line of products that it markets under its own brand, as well as Nike Golf, Nike Pro, Nike+, Air Jordan, Nike Blazers, Air Force 1, Nike Dunk, Air Max, Foamposite, Nike Skateboarding, and subsidiaries including Brand Jordan, Hurley International and Converse. Nike also sponsors high profile athletes like golf super star Tiger Woods under Nike golf and Also soccer Super star Cristiano Ronaldo and so many other Brilliant Athletes. Nike has offices located in 45 countries outside the United States. Most of the factories are located in Asia, including Indonesia, China, Taiwan, India, Thailand, Vietnam, Pakistan, Philippines, and Malaysia. Also, Nike employees more than 62,600 full-time employees as of the last fiscal year (Mergent, 2015). Nike is considered the major sports equipment supplier in the world, with more than $30 billion in revenues made in the fiscal year of 2015. In addition, Nike has a Market capitalization of $79 billion, net income of $3 billion with dividends of 1.12 and dividend yield of 0.96 (Mergent, 2015). Nike’s CEO Mark Parker aged 59 years was leading the company in other ways way before he took the position of the CEO. He was a competitive runner at the Penn State University, when he joined Nike as the first footwear designer back in 1979 and was the center of innovation since then. For 30 years in the
- 2. company he took the position of Vice President of global footwear and co-president of the Nike brand. He also was the leader in many industry breakthroughs in product design. Parker was also the leader in Nike’s global growth which included the acquisition of Converse and Hurley International LLC (Nike, 2015). Financial Statements: Standardized Annual Income Statement Report Date 05/31/2015 Currency USD Scale Thousands Total Revenue 30601000 Direct Costs 16534000 Gross Profit 14067000 Selling General & Admin 9892000 Other Operating Expense -58000 Total Indirect Operating Costs 9834000 Operating Income 4233000 Interest Income -28000 Other Non-Operating Income 0 Total Non-Operating Income -28000
- 3. Earnings Before Tax 4205000 Taxation 932000 Earnings After Tax 3273000 Discontinued Operations - Extraordinary Items 0 Accounting Changes 0 Net Income 3273000 (Mergent, 2015) Nike Total revenues in 2015 were $30.6 billion, while direct costs were $16.5 billion leading to a gross profit of $14.1 billion. After deducting total operating cost, operating income were $4.23 billion, removing interest income the EBT were $4.2 billion. After taking out $932 million in interests and taxes the net income was $3.27 billion, which is 10.7% of total revenues. Standardized Annual Balance Sheet Report Date 05/31/2015 Currency USD Scale Thousands Cash & Equivalents 3852000 Short Term Investments 2072000 Cash & Equivs & ST Investments 5924000 Receivables (ST) 3358000
- 4. Inventories 4337000 Current Tax Assets 389000 Other Current Assets 1968000 Total Current Assets 15976000 Gross Property Plant & Equip 6352000 Accumulated Depreciation 3341000 Net Property Plant & Equip 3011000 Intangible Assets 412000 Other Assets 2201000 Total Assets 21600000 Accounts Payable & Accrued Exps 6082000 Accounts Payable 2131000 Accrued Expenses 3951000 Current Debt 181000 Discontinued Ops (ST Liab) - Other Current Liabilities 71000 Total Current Liabilities 6334000 LT Debt & Leases 1079000
- 5. Other Liabilities 1480000 Total Liabilities 8893000 Common Share Capital 3000 Additional Paid-In Capital 6773000 Retained Earnings 4685000 Accum Other Comprehensive Income 1246000 For Curr Trans (BS) -11000 Other Equity 11000 Total Equity 12707000 Total Liabilities & Equity 21600000 (Mergent, 2015) Nike’s Balance sheet of 2015 shows that available cash of $3.8 billion, receivables of $3.3 billion and inventories of $4.3 billion leading to $15.97 billion in current assets. Also Nike has Net property plant and equipment of $3 billion, totaling $21.6 billion in Total Assets. Regarding liabilities, Nike’s Account payable has $2.3 billion and current liabilities are $6.3 billion. Nikes total liabilities in 2015 were $8.89 billion. Standardized Annual Cash Flows Report Date 05/31/2015 Currency USD Scale Thousands Net Income
- 6. 3273000 Adjustments from Inc to Cash 1151000 Change in Working Capital 256000 Cash Flow from Operations 4680000 Purchase of Pty Plant & Equip -963000 Purchase of Investments -5086000 Proceeds from Pty Plant & Equip 3000 Disposal of Investments 5871000 Change in Business Activities - Other Investing Cash Flows 0 Cash Flow from Investing -175000 Change in ST Debt -63000 Change in LT Debt -26000 Change in Equity -1802000 Payment of Dividends -899000 Other Financing Cash Flows 0 Cash Flow from Financing -2790000 Effect of Exchange Rate -83000 Change in Cash
- 7. 1632000 Opening Cash 2220000 Closing Cash 3852000 Depn & Amortn (CF) 649000 Net Purch of Pty Plant & Equip -960000 (Mergent, 2015) From Nike’s cash flow we see that Adjustment from Inc to Cash is $1.1 billion, the change in the working capital is $256 million, cash flow from operation is $4.68 billion, and disposal of investments is $5.8 billion. Cash was also spent on Purchase of investments $5 billion, purchase of property and equipment $963 million, change in equity was $1.8 billion; cash flow from financing was $2.79 billion. Common stock at stated value: In Thousands Class A convertible — 178 and 178 shares outstanding — Class B — 679 and 692 shares outstanding 3,000 Capital in excess of stated value 6,773,000 Accumulated other comprehensive income 1,246,000
- 8. Retained earnings 4,685,000 Total shareholders’ equity 12,707,000 In terms of equity, Nike common share Capital are $3 million, Paid in-capital of $6.7 billion and retained earnings of $4.68 billion, totaling equity to $12.7 billion. Ratios Calculation: Profitability Ratios Nike Industry ROA % (Net) 16.29 13.1 ROE % (Net) 27.82 NA ROI % (Operating) 32.36 18.8 EBITDA Margin % 15.81 15.4 Calculated Tax Rate % 22.16 NA Revenue per Employee 488,834 432,984 (Mergent, 2015)/(DailyFinance, 2015)
- 9. ROA is the return on assets it indicates how effectively assets are being used to produce profit. Nike, is above the industry average by 3.2 points. ROI is the annualized income expressed as a percentage of average invested capital. Nike has %32.36, %14.2 higher than the industry average. EBITDA is the earnings before interest, tax, depreciation and amortization, The higher the EBITDA margin, the less operating expenses eat into a company's bottom line, leading to a more profitable operation. In our Case Nike has %15.81, 0.4 points above industry average. Revenue per Employee Is the revenue that every employee generates for the company on average. Nike Revenue per employee is $55,850 higher than the industry. Liquidity Ratios Nike Industry Quick Ratio 1.47 1.4 Current Ratio 2.52 2.6 Net Current Assets % TA 44.64 NA (Mergent, 2015)/(DailyFinance, 2015) Quick Ratio measures whether assets readily convertible into cash could meet current obligations. A quick ratio over 1 is generally considered satisfactory and Nike quick ratio in 0.7 points higher the average. Current Ratio is measured by dividing current assets by current liabilities. A ratio of 2.5 is generally considered satisfactory; however, Nike current ratio is a bit below industry average.
- 10. Debt Management Nike Industry LT Debt to Equity 0.08 NA Total Debt to Equity 0.1 0.23 Interest Coverage 151.18 35.8 (Mergent, 2015)/(DailyFinance, 2015) Total Debt to Equity is long external funding compared with equity funding; Nike is below industry average by 0.13 points which good. Interest Coverage is how many times interest expense is covered by operating income; Nike’s interest expense is 151.18 times covered by operating income, which is 114 times more than industry average. Asset Management Nike Industry Total Asset Turnover 1.52 1.3 Receivables Turnover 9.01 10.3 Inventory Turnover 3.99 3.2 Accounts Payable Turnover 15.07 NA Accrued Expenses Turnover
- 11. 9.5 NA Property Plant & Equip Turnover 10.47 NA Cash & Equivalents Turnover 10.08 NA (Mergent, 2015)/(DailyFinance, 2015) Total Asset Turnover isthe ratio of the value of a company’s sales or revenues generated relative to the value of its assets. Nike has 1.52 turnover ratios, 0.22 points above industry average. Receivables Turnover measure is used to quantify a firm's effectiveness in extending credit and in collecting debts on that credit; Nike has a score of 9.01 below industry average of 10.3. Inventory Turnover is a measure of the number of times inventory is sold or used in a time period. The equation for inventory turnover equals the Cost of goods sold divided by the average inventory. Nike’s score is 0.79 points above industry average. Per Share Nike Industry Cash Flow per Share 5.43 NA Book Value per Share 14.83 NA (Mergent, 2015) References: DailyFinance. (2015). Retrieved Sep. 22,2015 from http://www.dailyfinance.com/quote/nyse/nike/nke/financial-
- 12. ratios Nike, Inc. (2015). Executives.Retrieved Sep.22,2015 from http://about.nike.com/pages/executives Mergent, Inc. (2015). Nike Inc. data report. Retrieved Sep. 22, 2015, from Mergent Online database. http://uk.reuters.com/article/2008/06/26/business-nike-results- dc-idUKWNAS924120080626 Sage, Alexandria ( 2008). "Nike profit up but shares tumble on U.S. concerns". Reuters. Retrieved 2008-07-10.