Question

Financial Statement Analysis The financial statements for Nike, Inc., are presented in Appendix D. Use the following additional information (in thousands): Accounts receivable at May 31, 2014: $3,117 Inventories at May 31, 2014: 3,947 Total assets at May 31, 2014: 18,594 Stockholders' equity at May 31, 2014: 12,000 1. Determine the following measures for the fiscal years ended May 31, 2016, and May 31, 2015. 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. When required, use the rounded final answers in subsequent computations. May 31, 2015 May 31, 2016 Working capital (in millions) a. b. Current ratio Quick ratio c. Accounts receivable turnover d. days days Number of days sales in receivables e. Inventory turnover days days Number of days sales in inventory Ratio of liabilities to stockholders equity h. Asset tumover % Return on total assets Return on common stockholders equity k. Price earnings ratio, assuming that the market price was $54.90 per 1. Determine the following measures for the fiscal years ended May 31, 2016, and May 31, 2015. Do not round interim čalculadons. RBUnU e capital amount in part (a) to the nearest dollar. Round all other final answers to one decimal place. When required, use the rounded final answers in subsequent computations. May 31, 2015 May 31, 2016 Working capital (in millions) a. Current ratio b. Quick ratio C. d. Accounts receivable turnover days days Number of days' sales in receivables e. Inventory turnover f. days days Number of days sales in inventory g. Ratio of liabilities to stockholders' equity h. Asset turnover i. % 9% Return on total assets 6 Return on common stockholders' equity k. Price-earnings ratio, assuming that the market price was $54.90 per share on May 29, 2016, and $52.81 per share on May 30, 2015 Percentage relationship of net income to sales 9% 96 m. during 2016. The accounts between 2015 and 2016, The current and quick ratios both 2. The working capital slightly, The margin of protection to creditors The and number of days' sales in receivables receivable turnover during 2016. The return on common stockholders equity The return on total assets during 2016 percent of net income to sales NIKE,Inc. Consolidated Statements of Income Year Ended May 31 (In millons, except per share date) 2016 32,376 17,405 14,971 3,278 7,191 10,469 19 (140) 4,623 863 3,760 2015 2014 Revenues Cost of sales Gross profit Demand creation expense Operating overhead expense Total selling and administrative expense Interest expense (iIncome), net Other (Income) expense, net Income before income taxes Income tax expense NET INCOME 30,601 16,534 27,799 15,353 12,446 3,031 5,735 8,766 33 103 3,544 14,067 3,213 6,679 9,892 28 (58) 4,205 932 3,273 851 2,693 Earnings per common share: Basic S 1.90 2.21 $ 1.52 1.49 Diluted 2.16 1.85 $ Dividends declared per common share 0.62 0.54 S 0.47 The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement The Notes may be found on the companion website at CengageBrain.com Selected Excerpts from Nike Inc, Form 10-K for the Fiscal Year Ended May 31, 2016 Appendx D D-5 NIKE, Inc. Consolidated Statements of Comprehensive Income Year Ended May 31, (In millions) 2016 2015 2014 Net income $ 3,760 3,273 S 2,693 Other comprehensive income (loss), net of tax: Change in net foreign currency translation adjustment) Change in net gains (losses) on cash flow hedges Change in net gains (losses) on other Total other comprehensive income (loss), net of tax TOTAL COMPREHENSIVE INCOME (1) Net of tax benefit (expense) of $0 million, $0 million and S0 million, respectively (2) Net of tax benefit (expense) of $35 million, $(31) million and $18 million, respectively (3) Net of tax benefit (expense) of $0 million, $0 milion and $0 million, respectively (176) (757) (20) (32) (161) (2) 1,188 (7) 1,161 4,434 5 (189) 2,504 (928) 2,832 $ The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement The Notes may be found on the companion website at CengageBrain.com NIKE, Inc. Consolidated Balance Sheets May 31, (In millions) ASSETS 2016 2015 Current assets: Cash and equivalents Short-term investments Accounts receivable, net Inventories Prepaid expenses and other current assets Total current assets Property, plant and equipment, net Identifiable intangible assets, net 3,138 2,319 3,241 4,838 1,489 15,025 3,520 281 3,852 2,072 3,358 4,337 1,968 15,587 3,011 281 Goodwill Deferred income taxes and other assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt Notes payable Accounts payable 131 131 2,587 2,439 21,396 $ 21,597 107 44 74 1 2.131 3,949 2.191 3,037 Accrued liabilities Income taxes payable Total current liabilities 71 85 6,332 1,079 1,479 5.358 Long-term debt Deferred income taxes and other liabilities Commitments and contingencies 2,010 1,770 Redeemable preferred stock Shareholders' equity: Common stock at stated value: Class A convertible-353 and 355 shares outstanding Class B-1,329 and 1,357 shares outstanding 3 3 7,786 318 6.773 Capital in excess of stated value Accumulated other comprehensive income Retained earnings Total shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 1,246 4,685 12,707 21,597 4,151 12,258 21,396 The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement NIKE, Inc. Consolidated Statements of Cash Flows Year Ended May 31, (In millions) Cash provided by operations: 2014 2016 2015 2,693 3,760 $ 3,273 $ Net income Income charges (credits) not affecting cash: Depreclation Deferred income taxes 649 (80) 236 13 98 606 518 (11) 177 68 (113) 191 Stock-based compensation Amortization and other Net forelgn currency adjustments Changes in certain working capital components and other assets and liabilities: 43 424 56 (298) (505) (210) 60 (216) (621) (144) Decrease (increase) in accounts recelvable (Increase) in inventories (Increase) in prepaid expenses and other current assets (Decrease) increase in accounts payable, accrued liabilities and income taxes payable Cash provided by operations Cash used by Investing activitles (590) (161) 525 3,013 (889) 3,096 1,237 4,680 (4,936) 3,655 2,216 (5,386) 3,932 (5,367) 2,924 2,386 Purchases of short-term investments Maturities of short-term investments Sales of short-term investments 1,126 (150) (963) 3 150 (1,143) 10 6 Investments in reverse repurchase agreements. Additions to property, plant and equipment Disposals of property, plant and equipment Decrease (increase) in other assets, net of other liabilities Cash used by investing activities Cash used by financing activities Net proceeds from long-term debt issuance Long-term debt payments, including current portion (Decrease) increase in notes payable Payments on capital lease obligations Proceeds from exercise of stock options and other stock issuances Excess tax benefits from share-based payment arrangements Repurchase of common stock Dividends-common and preferred Cash used by financing activities (880) (2) (1,034) (175) (1,207) 981 (106) (67) (7) 507 281 (3,238) (1,022) (2,671) (105) (714) 3,852 3,138 (60) 75 (17) 383 (7) (63) (19) 514 218 132 (2,628) (799) (2,914) (9) (1,117) 3.337 2,220 (2,534) (899) (2,790) (83) 1,632 Effect of exchange rate changes on cash and equivalents Net (decrease) increase in cash and equilvalents Cash and equivalents, beginning of year CASH AND EQUIVALENTS, END OF YEAR Supplemental disclosure of cash flow information: Cash paid during the year for Interest, net of capitalized interest Income taxes Non-cash additions to property, plant and equipment Dividends deciared and not paid 2,220 3,852 53 $ 748 252 271 70 53 1,262 856 167 206 209 240 The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement NIKE, Inc. Consolldated Statements of Shareholders' Equity Capital In Excess of Stated Value 6,184 445 Accumulated Common Stock Class B Amount Shares 1,433$ 22 Other Class A Comprehensive Retained (In millions, except per share data) Shares Balance at May 31, 2013 Stock options exercised Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on common stock ($0.47 per share) Issuance of shares to employees Stock-based compensation Forfeiture of shares from employees Net income Other comprehensive incone (loss) Balance at May 31, 2014 Stock options exercised Repurchase of Class B Common Stock Dividends on common stock ($0.54 per share) Issuance of shares to employees Stock-based compensation Forfeiture of shares from employees Net income Other comprehensive income (loss) Balance at May 31, 2015 Stock options exercised Amount 3 S Total $ 5,820 $ 11,081 445 Income Eamrings 356 274 (1) (73) (2,617) (2,628) (11) (821) 78 177 (821) 78 177 (4) (12) 2.693 (189) $ 4,871 $ 10,824 639 (1) (8) 2693 (189) 85 3 S 6,865 639 355$ 1,385 27 (2.525) (2,534) (58) (9) (931) (931) 92 191 92 3 191 (8) 3.273 1,161 S 4,685 $ 12,707 680 (3) 3.273 (5) 1,161 1,246 3 S 6,773 680 355 1,357 22 Conversion to Class B Common Stock 2 (2) Repurchase of Class B Common (3,238) (3,230) (8) (55) Stock Dividends on common stock ($o.62 per share) Issuance of shares to employees Stock-based compensation Forfeiture of shares from employees Net income Other comprehensive income (loss) Balance at May 31, 2016 (1,053) (1,053) 115 236 115 236 (21) (11) (10) 3,760 (928) 3,760 (928) 4,151 $ 12,258 1,329 7,786 $ 318 353 3 The accompanying Notes to the Consoldated Financial Statements are an integral part of this statement The Notes may be found on the companion website at CengageBrain.com

Answer 1

a) Working Capital = Total Current Assets - Total Current Liabilities

2015:

Working Capital = $15,587 million - $6,332 million

= $9,255 million

2016:

Working Capital = $15,025 million - $5,352 million

= $9,673 million

b) Current Ratio = Total Current Assets / Total Current Liabilities

2015:

Current Ratio = $15,587 million / $6,332 million

= 2.46

2016:

Current Ratio = $15,025 million / $5,352 million

= 2.81

c) Acid-test ratio = (Total current assets - Inventory - Prepaid Expenses) / Total Current Liabilities

2015:

Acid-test ratio = ($15,587 million - $4,337 million - $1,968 million) / $6,332 million

= $9,282 million / $6,332 million

= 1.47

2016:

Acid-test ratio = ($15,025 million - $4,838 million - $1,489 million) / $5,352 million

= $8,698 million / $5,352 million

= 1.63

d) Accounts Receivable Turnover = Net Sales / Average Accounts Receivable

2015:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2

= (Accounts Receivable as on May 31, 2014 + Accounts Receivable as on May 31, 2015) / 2

= ($3,117 million + $3,358 million) / 2

= $6,475 million / 2

= $3,237.5 million

Accounts Receivable Turnover = $30,601 million / $3,237.5 million

= 9.45

2016:

Average Accounts Receivable = (Beginning Accounts Receivable + Ending Accounts Receivable) / 2

= (Accounts Receivable as on May 31, 2015 + Accounts Receivable as on May 31, 2016) / 2

= ($3,358 million + $3,241 million) / 2

= $6,599 million / 2

= $3,299.5 million

Accounts Receivable Turnover = $32,376 million / $3,299.5 million

= 9.81

Note: As per HOMEWORKLIB RULES, the first four sub parts were answered, hence, please post the remaining questions separately.