This document analyzes the financial performance of Nike Inc. over 2013-2014. It includes a company description noting Nike was founded in 1964 and is now a global brand in sports apparel and equipment. The document then provides detailed financial analysis including ratio calculations for profitability, liquidity, debt management, cash flow and market performance. Key ratios show Nike's gross margin and returns on assets and equity increased slightly from 2013 to 2014, indicating improved profitability.

1. Nike Inc.
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Nike Inc.
Financial Analysis
(2013-2014)
By
Drew Accimus

2. Nike Inc.
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Table of Contents
Company Description……………………………………………….………………………………………………………………..3
Financial Statement Ratios…………………………..……….……………………………………………………………………4
Ratio Analysis……………………………………………………………………………………………………………………….…...9
Trend Analysis………………………………………………………………………………………………………………………….13
Income Statement Analysis………..…………………………………………..……………………………………………….16
Balance Sheet Analysis…………………………………………………………………………………………………………….18
Statement of Cash Flows………………………………………………………………………………………………………….21
Statement of Stockholder’s Equity………………………………………………..…………………………………………22
Profitability………………………………………………………………………………………………………………………………23
Other Issues……………………………………………………………………….……………………………………………………26
Formal Recommendation………………………………………………...…………………………………………………....27

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Description of Nike
Blue Ribbon Sports was founded on January 25, 1964 by Bill Bowerman and
Phil Knight, and officially became NIKE, Inc., on May 30, 1971. Originally, Mr.
Bowerman and Knight were selling running shoes from a Japanese manufacturer out
of the back of a van at track meets. To see how far they have come today as a
company is a prime example of what quality products, effective marketing, and a
successful finance plan can do. Today, Nike offers products in eight categories,
including golf, action sports, sportswear, women’s training, men’s training, football,
basketball, and running. They also offer different products sold by companies they
decided to purchase, such as Jordan, Converse, Chuck Taylor, One star, Star Chevron,
and Hurley. In addition, the company sells sports accessories and apparel, and markets
apparel with licensed professional and college teams and team logos. In 2012, Nike
struck a deal with the NFL agreeing to become the sole provider of apparel for all 32
of the league’s teams. This contract was for five years, and was valued at 1.1 billion
US dollars. Football is the most watched sport in the United States right now, and
when people turn their televisions on to watch a game, they notice the Nike swoosh on
every jersey. Nike sells its products to sporting goods stores, footwear stores, athletic
specialty stores, department stores, Nike-owned retail stores, and also internet
websites. Nike is headquartered in Beaverton, Oregon, which is about 55 minutes
away from McMinnville. We decided to report on Nike because it is a brand both
Drew and I wear daily. The quality of their products, their success along the way, and
the fact that they are a local company helped us decide to analyze the financial side of
Nike as a company.
Nike has also been very successful being able to advertise their products. For
me personally, Nike was always seen as the “Cool” brand to support, because we
always see our favorite athletes and teams supporting them. There is a scene in the
movie Friday Night Lights, arguably one of the best football movies ever made,
supporting Nike. The movie is based around high school football in the state of Texas.
One morning before practice, the star running back named James “Boobie” Miles
walks up to his backup, who he notices wearing Adidas cleats. Boobie tells him that
the reason the backup doesn’t have a girlfriend is because he is wearing the wrong
cleats. He says “Everybody knows the shoe is Nike. It’s all about them black Nike
cleats.” There is a scene later in the movie where the running back is seen coloring his
white Adidas shoes black with a sharpie marker. This shows the dominance Nike has
in the sports world and how effective they have been in marketing to the younger
generations

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Financial Statement Ratios
Profitability Ratios
2014 2013
GrossMargin Percentage
Gross Margin/Sales
Gross Margin 12,446,000,000 11,034,000,000
Sales 27,799,000,000 25,313,000,000
Gross Margin Percentage 44.77% 43.59%
Return on Total Assets
{NetIncome+[InterestExpense*(1-Tax Rate)]}/Total Assets
NetIncome 2,693,000,000 2,485,000,000
InterestExpense 38,000,000 23,000,000
Total Assets 18,594,000,000 17,584,000,000
Effective Tax Rate 24.00% 24.70%
Returnon Total Assets 14.68% 14.23%
Return on Equity
NetIncome/Total Stockholder'sEquity
NetIncome 2,693,000,000 2,485,000,000
Average Total Stockholder'sEquity 10,952,000,000 11,156,000,000
Returnon Equity 24.58% 22.28%
NetProfit Margin Percentage
NetIncome/Sales
NetIncome 2,693,000 2,485,000,000
Sales 27,799,000,000 25,313,000,000
NetProfitMargin Percentage 9.68% 9.82%
Liquidity Ratios
WorkingCapital
CurrentAssets - CurrentLiabilities
CurrentAssets 13,696,000,000 13,626,000,000
CurrentLiabilities 5,027,000,000 3,926,000,000
WorkingCapital $ 8,669,000,000 $ 9,700,000,000

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Current Ratio
CurrentAssets/CurrentLiabilities
CurrentAssets 13,696,000,000 13,626,000,000
CurrentLiabilities 5,027,000,000 3,926,000,000
CurrentRatio 2.724487766 3.4707081
Acid-TestRatio
(Cash+Marketable Receivables+AccountsReceiveable+ShortTermNotesReceivable)/CurrentLiabil.
Cash 2,220,000,000 3,337,000,000
Marketable Receivables 2,922,000,000 2,628,000,000
A/R 3,434,000,000 3,117,000,000
Short TermNotesReceivable 2,947,000,000 2,630,000,000
CurrentLiabilities 5,027,000,000 3,926,000,000
Acid-TestRatio 2.292222001 2.983188996
Accounts Receivable Turnover
Sales/AccountsReceivable
Sales 27,799,000,000 25,313,000,000
AccountsReceivable 3,604,000,000 3,117,000,000
AccountsReceivable Turnover 7.713374029 8.120949631
Average CollectionPeriod
365/Accounts Receivable Turnover
365 365
A/RTurnover 7.713374029 8.120949631
Average CollectionPeriod(Days) 47.32040721 44.94548256
InventoryTurnover
Cost of Goods Sold/Inventory
COGS 15,353,000,000 14,279,000,000
Inventory 3,715,500,000 3,434,000,000
Inventory Turnover 4.132149105 4.158124636
Average Sale Period
365/InventoryTurnover
365 365
InventoryTurnover 4.132149105 4.158124636
Average Sale Period(Days) 88.33175927 87.77995658

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OperatingCycle
Average Sale Period+Average CollectionPeriod
Average Sale Period 88.33175927 87.77995658
Average CollectionPeriod 47.32040721 45.08831253
OperatingCycle(Days) 135.6521665 132.8682691
Total Asset Turnover
Sales/Total Assets
Sales 27,799,000,000 25,313,000,000
Total Assets 18,072,000,000 17,584,000,000
Total AssetTurnover 1.538235945 1.439547316
Debt Management Ratio
TimesInterestEarned
EarningsBefore InterestsandTaxes/InterestExpense
EarningsBefore InterestandTaxes 3,544,000,000 3,272,000,000
InterestExpense 38,000,000 23,000,000
TimesInterestEarned 93.26315789 142.2608696
Debt to Equity Ratio
Total Liabilities/Stockholder'sEquity
Total Liabilities 18,072,000,000 17,584,000,000
Stockholder's Equity 10,824,000,000 11,156,000,000
Debtto EquityRatio 1.66962306 1.576192184
Equity Multiplier
Total Assets/Stockholder'sEquity
Total Assets 18,072,000,000 17,584,000,000
Stockholder'sEquity 10,824,000,000 11,156,000,000
Equity Multiplier 1.66962306 1.576192184
Cash FlowAdequacy
Cash Flow Yield
Cash FlowFromOperations/NetIncome
CFFO 3,013,000,000 3,027,000,000
NetIncome 2,693,000,000 2,485,000,000
Cash FlowYield 1.118826587 1.218108652

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Cash Flow to Sales
Cash FlowFromOperations/NetSales
CFFO 3,013,000,000 3,027,000,000
NetSales 27,799,000,000 25,313,000,000
Cash FlowtoSales 0.108385194 0.119582823
Cash Flow to Assets
Cash FlowFromOperations/Assets
CFFO 3,013,000,000 3,027,000,000
Total Asset 18,072,000,000 17,584,000,000
Cash FlowtoAssets 0.166722001 0.172145132
Free Cash Flow
CFFO-(Dividends+CapitalExpenditures)
CFFO 3,013,000,000 3,027,000,000
Dividends 799,000,000 703,000,000
Capital Expenditures 880,000,000 636,000,000
Free CashFlow $1,334,000,000 $ 1,688,000,000
Market Performance
Earnings Per Share
NetIncome/SharesOutstanding
NetIncome 2,693,000,000 2,485,000,000
SharesOutstanding 905,800,000 916,400,000
EPS $ 2.97 $ 2.71
Price Earnings Ratio
Market Price PerShare/EarningsPershare
Market Price PerShare $76.91 $60.70
EarningsPerShare 3.01 2.71
Price EarningsRatio 25.55 22.38
DividendPayout Ratio
DividendsPerShare/EarningsPerShare
DividendsPerShare $0.93 $0.93
EarningsPerShare 2.97 2.71
DividendPayoutRatio 31.31% 34.30%

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Ratio Analysis
Profitability Ratios
Gross Margin Percentage represents the percent of total sales revenue that the company
retains after incurring the direct costs associated with producing the goods and services sold by a
DividendYieldRatio
DividendsPerShare/MarketPrice Per Share
DividendsPerShare $0.93 $0.93
Market Price PerShare $76.91 $60.70
DividendsYieldRatio 1.20% 1.53%
Book Value Per Share
Total Stockholder'sEquity/Numberof CommonSharesOutstanding
Total Stockholder'sEquity 10,824,000,000 11,156,000,000
# of CommonSharesOutstanding 692,000,000 716,000,000
BookValue PerShare $ 15.64 $ 15.58

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company. Over the year, Nike’s Gross Margin Percentage rose slightly. In 2013, they had a
percentage of 43.59, and then in 2014 a percentage of 44.77. While the gain of 1.18 in
percentage is relatively small, it shows that Nike is improving in their profitability over this past
year.
Return on Total Assets is a ratio that measures a company’s earnings before interest and
taxes against its total net assets. This ratio is considered an indicator of how effectively a
company is using its assets to generate earnings before contractual obligations must be paid.
Nike had a slight increase of 0.45% on their return on total assets to put them at 14.68% in 2014.
This means that in 2014 Nike earns a return on 14.68% of the total assets employed.
Return on Equity measures a corporation’s profitability by revealing how much profit a
company generates with the money shareholders have invested. It is a good way to get a better
idea of the historic growth of the company. Nike improved their return on equity by 2.3% over
this past year. This is another indication of an improvement in the profitability of Nike over the
past year.
Net Profit Margin is the percentage of revenue remaining after all operating expenses,
interest, taxes and preferred stock dividends have been deducted from a company’s total revenue.
It is a great way of determining the effectiveness of a company’s ability of converting sales into
profits. Nike had a percentage of 9.82 in 2013 and a percentage of 9.68 in 2014, which is a slight
decline of 0.14%. This decline in percentage is nothing to worry about however. Being in the
mid-to-upper nine percentage points puts Nike in a good spot compared to their competition and
other large businesses.
Liquidity Ratios
Working Capital is the difference between current assets and current liabilities. Current
assets are the most liquid of your assets, meaning they are cash or can be quickly converted to
cash. Current liabilities are any obligations due within one year. It is also a good way for
investors to get an idea of the company’s underlying operational efficiency. Nike’s working
capital fell from 9.7 billion in 2013 to 8.669 billion in 2014. Having a high working capital isn’t
always necessarily a good thing. It can indicate that the company has too much inventory or they
are not investing their excess cash. Nike has nothing to worry about with the decline to 8.669
billion.
Current Ratio shows the proportion of current assets to current liabilities. It is used as an
indicator of a company’s liquidity. It also gives an idea of a company’s ability to pay back short-
term and long-term obligations. Unfortunately, Nike’s current ratio fell from 3.47 to 2.72 in
2014. It is nothing to panic about however. They are still well above 1.0, meaning that their
assets are greater than their liabilities.
Acid-Test Ratio measures the ability of a company to use its near cash or quick assets to
extinguish or retire its current liabilities immediately. Nike’s acid-test ratio fell from 2.98 to 2.29
in 2014. They are well above 1.0, which is generally the number that companies don’t want to

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fall below. Their acid-test ratio is also similar to their current ratio, meaning that Nike is not a
company that is highly dependent on inventory to be successful.
Accounts Receivable Turnover is a measure of a company’s effectiveness in extending
credit and in collecting debts on that credit. It is used to measure how many times the company
turns their receivables into cash in a year. In 2014, Nike had an accounts receivable turnover of
7.78, meaning that they turned their receivables into cash roughly 8 times throughout the year.
This is a slight decline from 2013, where their turnover was at 8.12
Average Collection Period measures the number of days that it takes a company to collect
their accounts receivable. Nike went from 44.94 days in 2013 to 47.32 days in 2014, which
means that it is taking them a few extra days to gather all of their receivables.
Inventory Turnover is a measure of the number of times inventory is sold or used in a
time period such as a year. Nike’s inventory turnover was almost unchanged over the year. It
went from 4.15 in 2013 to 4.13 in 2014. Being at four could relate to the number of seasons in a
year. Nike has clothing apparel for spring, summer, winter, and fall, and need to have their stores
updated as the year goes on. It wouldn’t make sense for them to have their new rain jackets out
on display in the middle of summer, which provides the need for inventory turnover.
Average Sale Period measures the average number of days that it takes a company to sell
inventory. Nike’s average sales period is pretty similar over the two years. It went from 87.77 in
2013 to 88.33 in 2014, showing little change at all. This is to be expected because of the fact that
Nike’s inventory turnover is also similar at around four.
Operating Cycle measures the elapsed time from when inventory is received from
suppliers to when cash is received from customers. A company’s goal is to reduce the operating
cycle because it puts cash receipts in the company’s possession sooner. Nike went from 132.86
days in 2013 to 135.65 days in 2014. This is unfortunate because it means that they are receiving
cash at a slower rate now than they were in 2013.
Total Asset Turnover is a ratio that compares total sales to average total sales. It measures
how efficiently a company’s assets are being used to generate sales. Nike’s total asset turnover
increased slightly from 1.43 to 1.53 in 2014. Generally, it is a company’s goal to increase their
total asset turnover. This means that in 2014 Nike was slightly more efficient in turning their
assets into sales.
Debt ManagementRatios
Times Interest Earned is a metric used to measure a company’s ability to meet its debt
obligations. Due to the increase in interest expense, Nike’s Times Interest Earned fell from

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142.26 in 2013 to 93.26 in 2014. While the decrease is a little frightening, being at 93.26 is still
high enough where Nike shouldn’t have to panic.
Debt to Equity Ratio indicates the relative proportion of shareholder’s equity and debt
used to finance a company’s assets. Nike’s debt to equity ratio increased from 1.57 to 1.66 in the
year 2014. This slight increase shows that Nike is increasing their financial leverage. The debt to
equity numbers of Nike means for every dollar from a shareholder the creditor will provide $1.57
in 2013 and $1.66 in 2014.
Equity Multiplier is a measurement of a company’s financial leverage. Companies
finance the purchase of assets either through equity or debt, so a high equity multiplier indicates
that a larger portion of asset financing is being done through debt. Nike’s equity multiplier rose
from 1.57 in 2013 to 1.66 in 2014. This slight increase is a sign that shows that Nike is
increasing its financial leverage.
CashFlow Adequacy
Cash Flow Yield is an overall return evaluation ratio of stock, which standardizes the free
cash flow per share a company is expected to earn against its market price per share. It is an
indication of how much of the assets are turned into cash. Nike’s cash flow yield slightly
decreased from 1.21 in 2013 to 1.11 in 2014.
Cash Flow to Sales compares a company’s operating cash flow to its net sales or
revenues, which gives investors an idea of the company’s ability to turn sales into cash. Nike had
a slight decrease of 0.0112 in their Cash Flow to Sales. In 2013, they had 0.1195 and in 2014
they had 0.1083 as their cash flow to sales.
Cash Flow to Assets measures how well a company is able to generate cash from its
current operations. Nike’s cash flow to assets was decreased slightly over the year. In 2013 they
had 0.172 and in 2004 they had 0.166. This was a small decreases of 0.006.
Free Cash Flow represents the cash that a company is able to generate after laying out the
money required to maintain or expand its asset base. It is important because it allows a company
to pursue opportunities that enhance shareholder value. Nike’s free cash flow decreased by
354,000,000 in 2014. It fell from 1,688,000,000 in 2013 to 1,334,000,000 in 2014. This was
caused by an increase in dividends and capital expenditures by Nike in 2014.
MarketPerformance
Earnings per Share The portion of a company's profit allocated to each outstanding share
of common stock. Earnings per share serves as an indicator of a company's profitability. Nike’s
earnings per share improved from $2.71 in 2013 to $2.97 in 2014. This means that Nike has
made $2.97 for every common share outstanding in 2014. This increase helps improve Nike’s
market performance.

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Price Earnings Ratio expresses the relationship between a stock's market price per share
and it’s earning per share. Having a high price-earnings ratio means that investors are willing to
pay a premium for the company’s stock-presumably because the company is expected to have
higher than average future earnings growth. Nike’s price earnings ratio improved by 3.17 and is
now up to 25.55 in 2014. This means that the stock is selling for 25.55 times the earnings per
share. This is another example of Nike’s market performance improving in 2014.
Dividend Payout Ratio quantifies the percentage of current earnings being paid out in
dividends. Nike’s dividend payout ratio decreased by 2.99% in 2014 and fell to 31.31%. There is
no such thing as a “right” dividend payout ratio, although the ratio tends to be similar for
companies within the same industry. Companies with ample growth opportunities at high rates of
return tend to have low payout ratios, whereas companies with limited reinvestment
opportunities tend to have higher payout ratios.
Dividend Yield Ratio measures the rate of return in the form of cash dividends only that
would be earned by an investor who buys common stock at the current market price. Nike’s
dividend yield ratio fell from 1.53% in 2013 to 1.20% in 2014. Having a low dividend yield ratio
is neither a good or bad thing, it just measures the rate of return earned by investors who bought
common stock at current market price.
Book Value per Share measures the amount that would be distributed to holders of each
share of common stock if all assets were sold at their balance sheet carrying amounts and if all
creditors were paid off. Nike’s book value per share pretty much stayed the same in 2014, with a
slight increase of $0.06 to put them at $15.64 book value per share.
Trend Analysis

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Graph 1
Chart 1 Data 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sales 12,253 13,740 14,955 16,326 18,627 18,528 18,324 20,117 23,331 25,313 27,799
Cost of Sales 7,001 7,624 8,367 9,165 10,239 10,571 10,213 10,915 13,183 14,279 15,353
Gross Profits 5,252 6,115 6,587 7,161 8,387 8,324 8,498 9,202 10,148 11,034 12,446
Operating
Expenses 3,702 4,221 4,477 5,028 5,953 6,150 6,326 6,361 7,079 7,796 8,766
NetIncome 946 1,212 1,392 1,492 1,883 1,487 1,907 2,133 2,223 2,485 2,693
R & D Expenses N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
Graph 2
0
5,000
10,000
15,000
20,000
25,000
30,000
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Sales
Cost of Sales
Gross Profits
Operating
Expenses
Net Income

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Column1 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sales 100% 112% 122% 133% 152% 151% 150% 164% 190% 207% 226%
Cost of Sales 100% 109% 120% 131% 146% 151% 146% 156% 188% 204% 219%
Gross Profits 100% 116% 125% 136% 160% 158% 162% 175% 193% 210% 236%
Operating
Expenses 100% 114% 121% 136% 161% 166% 171% 172% 191% 211% 236%
NetIncome 100% 128% 147% 158% 199% 157% 202% 225% 235% 263% 284%
R & D Expenses N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A
A trend analysis is a side-by-side comparison of two or more years of a
company’s financial statements. For our graph we analyzed five accounts over a
ten year period. The accounts we analyzed are as follows; sales, costof sales, gross
profit, operating expenses, and net income. Graph one looks at the data as
numbers, while graph two looks at the data as percentages.
Graph one gives us the data in numerical form. In general, over the ten-year
period the company has experienced solid growth. One account that stands out is
the net income. It increases steadily every year except 2009, (1,487) but Nike
responded well in 2010 increasing their net income to (1,907.) Another account
that catches attention is gross profit. In 2004 the account was at 5,252, by 2014 it
had increased by 7,194 million dollars to 12,446. That is a huge amount of growth
even over a ten-year period.
Graph Two shows us the data in percentage form. When observing the chart
there appears to be only one outlier, the net income account shows a severe spike
in 2009, net income decreased by 42%. One contributing factor to this may have
100%
125%
150%
175%
200%
225%
250%
275%
300%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Sales
Cost of Sales
Gross Profits
Operating
Expenses
Net Income

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been the increase in operating expense, by five percent. Graph two does a better
job than graph one at showing how the changes affect specific accounts.
Income Statements

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Nike Inc.
Comparative Income Statement
Horizontal Analysis(All numbersin millions) Increase(Decrease)
2014 2013 Amount Percentage
Revenues 27,790 25,330 $ 2,460 9.70%
Cost of sales 14,820 14,279 $ 541 3.70%
Gross profit 12,446 11,034 $ 1,412 12.79%
Demandcreationexpense 3,031 2,745 $ 286 10.41%
Operatingoverheadexpense 5,735 5,035 $ 700 13.90%
Total sellingandadministrative expense 8,766 7,780 $ 986 12.67%
Interestexpense (income) $ 33 $ (3) $ 33 110.00%
Otherexpense (income) $ 103 $ (15) $ 118 786.66%
Income before income taxes 3,544 3,272 $ 272 7.20%
Income tax expense 851 808 $ 43 5.30%
NET INCOME FROMCONTINUEDOPERATIONS 2,690 2,464 $ 227 9.21%
NET INCOME (LOSS) FROMDISCONTINUED
OPERATIONS 0 (21) $ 21 100.00%
NET INCOME $ 2,690 $ 2,454 $ 236 9.60%
Nike Inc.
Common Size Income Statement

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Vertical Analysis(All numbers in millions) Common Size Percentage
2014 2013 2014 2013
Revenues 27,790 $ 25,313 100.00% 100.00%
Cost of sales 14,820 14,279 53.32% 56.40%
Gross profit 12,446 11,034 44.78% 43.59%
Demandcreation expense 3,031 2,745 10.90% 10.84%
Operatingoverheadexpense 5,735 5,035 20.63% 19.89%
Total sellingandadministrative expense 8,766 7,780 31.54% 30.73%
Interestexpense (income) $ (33) $ (3) (0.10%) (0.01%)
Otherexpense (income) $ (103) $ (15) (0.04%) (0.06%)
Income before income taxes 3,544 3,272 12.75% 12.93%
Income tax expense 851 808 0.03% 3.19%
NET INCOME FROMCONTINUEDOPERATIONS 2,690 2,464 9.68% 9.73%
NET INCOME (LOSS) FROMDISCONTINUED
OPERATIONS 0 (21) 0.00% 0.08%
NET INCOME $ 2,690 $ 2,485 9.68% 9.82%
Income Statement Analysis
Looking at the horizontal analysis of the income statement, we see that
revenue increased by 9.7% over the fiscal year. To get this increased revenue, Nike
ramped up production and increased spending across the board. We noticed that
every expense account increased during this time period. Nike increased revenue
more than they increased spending, which resulted in an increase in net income.
The common size or vertical comparative income statement shows how
much of Nike’s revenue was lost in expenses from 2013 to 2014. One accountthat
stands out is costof sales. Over the fiscal year, it decreased by roughly 3%. This
would imply that Nike somewhere along the production line became more
efficient, or were able to cut their costs. Nike spent 3,031,000,000, or 10.9%, of its
generated revenue on demand creation. This is clearly an area of emphasis for
Nike. I just saw a commercial for Nike that was quite elaborate and exceeded one
minute long in length. This must have been very expensive to produce, but clearly
they see the benefit of doing it.
Balance Sheet
Nike Inc. Comparative Balance Sheet

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Nike Inc.
Horizontal Analysis(In Millions)
2014 2013
Assets Increase (Decrease)
Currentassets: Amount Percentage
Cash andequivalents $ 2,220 $ 3,337. (1,117) (33.47%)
Short-terminvestments 2,922 2,628 294 11.18%
Accountsreceivable 3,434 3,117 317 10.17%
Inventories 3,947 3,434 513 14.93%
Deferredincome taxes 355 308 47 15.25%
Prepaid expenses andothercurrentassets 818 802 16 1.99%
Assetsof discontinuedoperations -
Total currentassets 13,696 13,626 70 0.51%
Property,plant,andequipment,net 2,834 2,452 382 15.57%
Identifiableintangible assets,net 282 382 (100) (26.17%)
Goodwill 131 131 0 0.00%
Deferredincome taxesandotherassets 1,651 993 658 66.26%
TOTAL ASSETS $ 18,594 $ 17,584 $ 1,010 5.74%
LIABILITIESANDSHARHOLDERS' EQUITY
CurrentLiabilities
Currentportionof long-termdebt $ 7 $ 57 (50) (87.71%)
NotesPayable 167 121 46 38.01%
Accountspayable 1,930 1646 284 17.25%
Accrued Liabilities 2,491 1986 505 25.42%
Income taxespayable 432 98 334 340.00%
Liabilitiesof discontinuedoperations
Total CurrentLiabilities 5,027 3926 1,101 28.04%
Long-termdebt 1,199 1210 (11) (0.90%)
Deferredincome taxesandotherliabilities 1,544 1292 252 19.50%
Redeemable PreferredStock
Shareholders'Equity:
Commonstockand statedvalue
ClassA convetible-178and180 sharesoutstanding x x
ClassB-679 and 692 sharesoutstanding 3 3 0 0.00%
Capital inexcessof statedvalue 5,865 5184 681 13.13%
Accumulated othercomprehensive income 85 274 (189) (68.97%)
Retainedearnings 4,871 5695 (824) (14.46%)
Total shareholder'sEquity 10,824 11156 (332) (2.90%)
TOTAL LIABILITIESANDSHAREHOLDERS' EQUITY $ 18,594 $ 17,584 $ 1,010 5.74%

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Common Sized Balance Sheet
Vertical Analysis(InMillions) Common-sizedPercentage
2014 2013 2014 2013
Assets
Currentassets:
Cash andequivalents $ 2,220 $ 3,337.00 11.93% 18.97%
Short-terminvestments 2,922 2,628 15.71% 14.94%
Accounts receivable 3,434 3,117 18.46% 17.72%
Inventories 3,947 3,434 21.22% 19.52%
Deferred income taxes 355 308 1.90% 1.75%
Prepaid expenses andothercurrentassets 818 802 4.30% 4.56%
Assetsof discontinuedoperations -
Total currentassets 13,696 13,626 73.65% 77.49%
Property,plant,andequipment,net 2,834 2,452 15.24% 13.94%
Identifiableintangible assets,net 282 382 1.51% 2.17%
Goodwill 131 131 0.70% 0.74%
Deferredincome taxesandotherassets 1,651 993 0.88% 5.64%
TOTAL ASSETS $ 18,594 $ 17,584 100.00% 100.00%
LIABILITIESANDSHARHOLDERS' EQUITY
CurrentLiabilities
Currentportionof long-termdebt $ 7 $ 57 0.37% 0.32%
NotesPayable 167 121 0.90% 0.68%
Accountspayable 1,930 1,646 10.37% 9.30%
Accrued Liabilities 2,491 1,986 13.41% 11.29%
Income taxespayable 432 98 2.32% 0.55%
Liabilitiesof discontinuedoperations
Total CurrentLiabilities 5,027 3,926 27.03% 22.32%
Long-termdebt 1,199 1,210 6.44% 6.88%
Deferredincome taxes andotherliabilities 1,544 1,292 8.30% 7.34%
Redeemable PreferredStock
Shareholders'Equity:
Commonstockand statedvalue
ClassA convetible-180sharesoutstanding x x
ClassB-679 and 692 sharesoutstanding 3 3 0.00% 0.00%
Capital inexcessof statedvalue 5,865 5,184 31.54% 29.48%
Accumulatedothercomprehensive income 85 274 0.45% 1.55%
Retainedearnings 4,871 5,695 26.19% 32.38%
Total shareholder'sEquity 10,824 11,156 58.21% 63.44%
TOTAL LIABILITIESANDSHAREHOLDERS'
EQUITY $ 18,594 $ 17,584 100.00% 100.00%
Balance Sheet Analysis

20. Nike Inc.
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Horizontal analysis is the process ofanalyzing financial data by computing
the dollar change in year and percentage change within a financial statement.
While it is nice to see the amount in which the given account changes the
percentage change puts the data into a better perspective for how the change
affected the account.
Our Horizontal analysis shows from the years 2013-2014 showed Nike’s
total assets increased from 17,584,000,000 to 18,549,000,000, an increase of 5.4%.
This increase is a sign of a healthy company that is willing to expand their
business. One change that sticks out on the liability side is the increase in income
taxes payable from 98,000,000 to 432,000,000. That is a gigantic increase of
340%. This increase must relate to the increase in total assets. My best guess is
Nike bumped itself up into a higher tax bracket which helped cause this jump in
taxes payable.
When observing our vertical analysis, one change really stands out is the
decrease in cash and cashequivalents. They go from 3,337,000,000 in 2013 to
2,220,000,000 in 2014. What really makes this interesting is that the total assets
actually increase. It appears Nike invested some cash back into itself by purchasing
more inventory, and also investing in property, plant, and equipment. Nike made
these investments with the intention to increase revenue.
Statement of Cash Flows

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In both 2013 and 2014, Nike’s main sourceof cash came from their
operating activities. This was due to purchases of short term investments and
repurchases of common stock. 2014 didn’t have much change from 2013, as both
years had cash provided by operating activities a little over 3 billion. However, that
is a huge jump from 2012, where cash provided by operating activities only
provided them with roughly 1.8 billion. Short term investments also made a large
increase. As of now, they are close to 3 billion, where back in 2012 they were a
little less than 1.5 billion. It has almost doubled in these two years. This increase in
cash provided by operating activities means that Nike has been producing more
revenue leading to cash. With this new money, they are able to pay off expenses
and debtthat they owe. This helps improve their debt-to-equity ratio which allows
them to improve financially as a company. They have also improved their total
asset turnover which has provided them with options on how they can improve as a
company. Ways they have been taking advantage of this increase in cash provided
by operating activities is by producing new products and expanding their stores. By
doing this, they are staying up to date on the latest trends and fashions, which
keeps them as an appealing option for customers. This increase in cash also helps
them turn over their inventory as much as they can to create sales. As of now, they
are turning over their inventory approximately four times a year. This puts them in
a good position because it allows them to make their changes around the four
seasons:summer, fall, winter, and spring. Different times of the year require them
to have different items in stockin order to maximize their sales. By renovating
their current stores, expanding the amount of stores they have, and improving their
inventory, Nike is using their increase in cash to improve their company. Due to
the increases since 2012, Nike is in good shape moving forward financially.
Statement of Stockholder’s Equity

22. Nike Inc.
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Nike’s bookvalue per share increased by 0.06 in 2014 to put them at $15.64.
This means that $15.64 is the amount that would be distributed to holders of each
share of common stockif all assets were sold at their balance sheet carrying
amounts and if all creditors were paid off.
Nike’s stockholder’s equity fell from 11,156,000,000 in 2013 to
10,824,000,000 in 2014. As a result of this, Nike’s debt-to-equity ratio increased
by 0.09 to 1.66 in 2014. The debt to equity numbers of Nike means for every dollar
from a shareholder the creditor will provide $1.57 in 2013 and $1.66 in 2014 and
that they are improving their financial leverage. In 2013, Nike spent $1,647,000 on
repurchases of common stockand $2,628,000 in 2014. In 2013, Nike repurchased
37 million class b common stockat a costof $2,628,000. In 2014, Nike
repurchased 29 million class b common stockat a costof 2,534,000. Nike’s
stockholder’s equity has remained pretty close over the past two years, meaning
that their transactions haven’t been hurting the company.
Nike does not currently show any treasuring stockon their balance sheet.
However, if they were to have it, it would be in case they need to make extra cash
should it be needed.
Profitability

23. Nike Inc.
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Nike’s four major lines of business include footwear, apparel, equipment,
and other. Due to their many resources, they are able to sell their products all over
the world. Their main geographic areas that the company operates in include North
America, Western Europe, Central and Eastern Europe, Greater China, Japan, and
emerging markets.
Footwear
As you can see from the chart, footwear is Nike’s most profitable line of
business, bringing in 57.8% of the profit. In 2013, the footwear department made
$14,635,000 which was 57% of the total revenue for Nike that year. The results
were the same in 2014, with Nike bringing in 15,210,000, which was
approximately 58% of their total revenue. Nike has made it an emphasis to sponsor
some of the top athletes in the world. They are currently in year two of a five year
deal with the NFL that gives Nike the rights to create the jerseys and cleats that the
teams use. As a result of this, many younger athletes want to wear Nike cleats,
because they see their favorite football player wearing them too. Japan and Europe
are the two places where Nike struggles most with their footwear sales. Part of this

24. Nike Inc.
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is due to their competition being based out of these areas. Adidas is based out of
Germany and Mizuno is based out of Japan, which puts Nike at a disadvantage in
these areas. However, Nike still does fairly well in these areas, which is why they
continue to put stores and operate in these geographical areas of the world.
Apparel
Apparel is Nike’s second most profitable line of business, bringing in
approximately 31% of their revenue. Nike is the top ranked apparel company in the
world. In 2013, Nike brought in $7,491,000 in apparel revenue and $8,120,000 in
2014. This improvement can also be partly due to their sponsorship with the NFL.
Nike gets to create all fan gear for NFL teams, meaning that they get part of the
profit when people order a sweatshirt of their favorite football team. Nike’s top
two geographical locations for their apparel products are North America and
Western Europe, bringing in over 50% of all apparel revenue. Reasons for their
success being much greater in these areas compared to other areas of the world
could be due to their competition. Socceris a very popular sportglobally, and
Adidas is one of the biggest international brands for soccerproducts. With Adidas
sponsoring many international soccerclubs, it allows their products to be
purchased in more areas throughout the world. Nike still does well globally, but
their dominance in North America could be due to the fact that they are based out
of the United States and have the sponsorship rights to the most popular sporthere,
which is football.
Equipment
Nike’s most successfularea of equipment revenue is once again North
America. In terms of revenue, equipment is the fastest rising percentage wise of the
four major lines of business. Since 2012, equipment sales have increased over
40%. This could be due to their new sponsorships in college and professional
sports and also improved equipment. Nike produces more money than any of their
competition, meaning that they have extra to spend on making advancements to
improve their product. Another part of this could be their marketing strategies. By
sponsoring professional and collegiate athletics, it is leading to their equipment
being purchased at a higher rate. People see their favorite athlete using a certain
Nike productwhich leads them to want to choosethat rather than a similar item
from another brand. Equipment only brings in a little more than 5% of Nike’s total
revenue, but it is improving at a steep pace.

25. Nike Inc.
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In terms of revenue, Nike is dominating their competition. They are the top
footwear and apparel brand in the world, which are also the two most profitable
lines of business. Founded in the United States, their most successfulgeographical
area is North America. They sponsormany professional and collegiate teams here,
which leads to their products being purchased more than any other brand here.
Globally, they still do very well, competing against brands from different areas of
the world. It is expected for footwear to bring in more revenue than apparel
because they have less competition to deal with. With apparel, there are trends and
fashions that can change throughout the world. There are many more options out
there for people who are trying to dress in different styles to compete with.
However, footwear sales are straighter to the point. Nike is on top of both footwear
and apparel products, meaning that their plan of attack has been working and still
is.

26. Nike Inc.
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Other Issues
In the letter to the shareholders, current Nike CEO Mark Parker states “Our
brands have never been stronger, and we’ve never had greater competitive
separation in the marketplace.” In the fiscal year 2014, revenues grew 10% to
reach 27.8 billion, Gross margin increased 120 points, despite a rising cost
environment, and the earnings per share grew 11%. These increases should give
shareholders comfort in knowing that the company is never satisfied with where
they are at and are always committed to growing and improving their business.
Nike possesses the ability to withstand an economic downturn. During the
recession of 2008, net income dropped by42%. However, by the next year, they
were able to gain back all the lost income plus 3%. It is amazing that they were
able to recover so quickly. Most companies wouldn’t survive losing 42% of their
net income, let alone stay in business. From 2009 to 2014, Nike’s revenue
increased by 9 billion dollars. The CPA firm reviewed the financial statements of
Nike and its subsidiaries were completed in accordancewith generally accepted
accounting principles, or GAAP. One of the ideas presented in the letter that I was
not aware of was the fact that Nike provided high performance jackets at the winter
Olympic Games in Sochi. These are the top athletes in the world using Nike
products, which looks great for their brand. Another was that they developed three
new innovative soccerboots that were given to players to wear in the 2014 World
Cup played in Brazil. This is a great marketing scheme because if you put the
boots onthe best players in the world in the most high profile tournament you are
going to create some serious demand. One theme I took away from this letter is
how involved Nike is internationally. They are becoming more and more popular
in European and Asian markets. Overall, I would say that I would agree with the
letter. They are on top of the sports apparel market, and plan to continue growing
to remain on top.

27. Nike Inc.
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Formal Recommendation
After doing such a detailed analysis on Nike, we have become much more
familiar with the inner workings of the financial side of the company. We were both
knowledgeable about their products because we are both Nike supporters, but learning
about their finances has allowed us to recommend Nike as a company to invest in,
work for, and sell to as a supplier.
Based on the steady growth that Nike has experienced, we would recommend
investing in this company. During the economic downturn of 2008, Nike’s net income
dropped a whopping 42%. The following year, they were able to gain all of the lost
income back plus 3%. This should give potential investors comfort in knowing the
company has shown it can make it through tough times. This example gives us
confidence to recommend investment in this stock. While we do believe Nike holds its
value, having a common stock price of $131 isn’t something we would bet to strike
rich on, but we would expect the stock to grow consistently over time because that is
what history has proven to us.
Nike is the hottest name is sports apparel and has been for some time now.
They attract some of the best young minds in the business. They are able to do this by
being innovative and offering great benefits to their employees, making them a very
attractable job. These benefits include accident, health, and life insurance, discounts
on purchase of stock, and if you wish to continue your schooling while at Nike they
have a tuition assistance program. The tuition assistance program would be very
enticing for me because I would be able to continue my schooling while working for
the best sports apparel company in the world. Another cool benefit the employees
have access to is the Nike Employee Store. Having been there a couple of times
myself I can tell you it is the real deal, nearly 40% off everything in the store. This is
another example of how Nike takes care of its employees. We would recommend
working for Nike because we see it as a great company to have on your résumé.
With Nike being as large and popular as it is it would be very enticing to want
to be a supplier for them. This could have positive benefits for your company having
exposure next to the Nike name. According to the results of our acid-test ratio it is
safe to say you have a good chance of receiving payment consistently. One thing I
would caution against with a big company like Nike is letting them be too much of
your business. If they were to walk away you would lose the majority of your sales,
crippling your company. I would feel comfortable giving them 20% of my total sales
because if that number is closer to 50% it would be extremely difficult to pick those
sales back up.