Question

Compute and interpret the Z-score Information from the balance sheet, income statement, and statement of cash flows for Nike follows. Refer to thes NIKE, INC. Consolidated Statements of Income Year Ended December 31 (In millions) 2019 2018 Revenues $39,117 $36,397 Cost of sales 21,643 20,441 Gross profit 17,474 15.956 Demand creation expense 3,753 3,577 Operating overhead expense 8,949 7.934 Total selling and administrative expense 12,702 11,511 Interest expense (income), net 49 54 Other (income) expense, net (78) 66 Income before income taxes 4,801 4.325 Income tax expense 772 2.392 Net income $ 4,029 $1,933

Answer 1

55 Z score for 2019 1.2 X1 + 1.4 X2 +3.3 X3 + 6 X 4+ 1. X5 56 57 X1 (16525-7866) 58 23717 Working Capital Total Assets 59 60 8659 23717 61 62 63 0.3651 64 65 66 X2 Retained Earnings Total Assets 1643 23717 67 68 69 0.0693 70 71 11 72 X3 EBIT TA 4772 23717 73 74 75 0.2012

77 78 X4 Market Value of Equity Total Liabilities 96656.42 14677 79 80 81 6.59 82 83 84 X5 Sales Total Assets 39117 23717 85 86 87 1.6493 88 89 Z score for 2019 1.2 (.3651) + 1.4 (693) + 3.3.2012) + 6 (6.59) +1(1.6493) 90 91 Z score for 2019 6.80 92

Z score for 2018 11 1.2 X1 + 1.4 X2 +3.3 X3 + 6 X 4+ 1 X5 93 94 95 96 97 (15134 -6040) X1 Working Capital Total Assets 22536 98 99 9094 22536 100 101 0.4035 102 103 104 X2 Retained Earnings Total Assets 3517 22536 105 106 107 0.1561 108 109 = 110 X 3 EBIT TA 4445 22536 111 112 113 0.1972

115 116 X4 Market Value of Equity TotalDebt 91330 12724 117 118 119 7.18 120 121 122 X 5 Sales Total Assets 36397 22536 123 124 125 1.6151 126 Z score for 2018 1.2 (.4035) + 1.4 (-1561) +3.3(-1972) + 6(7.18) +1(1.6151) 127 128 129 130 Z score for 2018 7.28