Financial Analysis of Nike Inc.

Financial Analysis of Nike Inc.

Introduction

Nike Incorporation is an American based multinational company that is successfully operating in apparel and accessories industry. Company was founded on 25th January 1964 by Phil Knight (businessman) and Bill Bower man (Track & Field Coach). Initially it was known as Blue Ribbon Sport but from 30th March 1978 it became Nike, It's headquarter is present in Beaverton, Oregon. Company derives its name from Nike (Greeks god of Victory). Nike is included in Fortune 500 list and its reported revenue for 2012 is $24.1billion. There are more than 44,000 employees working for Nike all over the world. Nike has a brand value of $10.7 billion, and is considered as the most popular brand in sport industry (Nike). Nike's share are actively traded on NYSE. Nike consists of more than 700 shops around the world, and its offices are present in 45 countries. Most of its manufacturing factories are present in Asia due to cheap labor and availability of good quality leather. Nike is worldwide seller of sports footwear and athletic apparels.

Discussion

Answer to Question Number 1 (Firm's auditors and their audit Opinion regarding the financial disclosures)

Nike is taking help of PriceWaterHouseCoopers LLP in conducting its audit. PWC is very reputable and experienced service firm headquartered in London, it was also included in the list of Big Four companies based on the revenue earned. Yes, the opinion of PriceWaterHouseCoopers audit report is clean about NIKE (PriceWaterCoopers, 2012). According to PWC, Nike has presented financial statements as well as other relevant information fairly, and Nike's financial position is clearly portrayed in their financial statements. They are following all guideline of GAAP in their accounting and reporting procedures.

Financial Statements of Selected Company (NIKE)

Balance Sheet of Nike For the Fiscal Year 2012-2011

2012

2011

% Change

ASSETS

Cash

3,757

4,538

-17.2%

Receivables ,total

3,132

3,138

-0.2%

Inventory

3,222

2,715

18.7%

Prepaid expenses

598

594

0.7%

Extra current assets, Net

1,136

312

264.1%

Net current assets

11,845

11,297

4.9%

Total Property & Plant

2,209

2,115

4.4%

Goodwill / Brand Equity

131

205

-36.1%

Intangibles

370

487

-24.0%

Overall assets

15,465

14,998

3.1%

LIABILITIES

Net Accounts payable

1,549

1,469

5.4%

Total Accrued expenses

1,552

1,654

-6.2%

Notes payable, net

108

187

-42.2%

long-term debt, net

49

200

-75.5%

Additional current liabilities

624

448

39.3%

Total current liabilities Net

3,882

3,958

-1.9%

Total long term debt, net

228

276

-17.4%

Total debt

385

663

-41.9%

Postponed income tax, net

974

921

5.8%

Total liabilities

5,084

5,155

-1.4%

SHAREHOLDERS EQUITY

Common stock

3

3

0.0%

Paid-in capital (Additional)

4,641

3,944

17.7%

Retained earnings, net

5,588

5,801

-3.7%

Other equity

149

95

56.8%

Total equity, net

10,381

9,843

5.5%

Total liabilities & equity

15,465

14,998

3.1%

(Amount in Million dollars)

Income Statement of Nike for the Fiscal Year 2012-2011

2012

2011

% Change

Sales Revenue

23,331

20,117

16 %

Less Cost of good sold

13,183

10,915

20.8 %

Gross Profit (Revenue - Operating expenses)

10,148

9,202

10.3 %

Less: Total Operating Expenses

General and Administrative expenses

7,065

6,361

11.1 %

Operating Income or Loss

3,083

2,841

8.5 %

Income generated from Continuing Operations

Other Income

-54

25

-306 %

EBIT

3,025

2,862

5.7 %

Income Before Tax

3,025

2,862

5.7 %

Income Tax Expense

756

690

9.6 %

Net Income From Continuing Ops

2,269

2,172

4.5 %

Non-recurring Events

Discontinued Operations

-46

-39

17.9 %

Net Income

2,223

2,133

4.2 %

Net Income for common sharholders

2,223

2,133

4.2 %

(Amount in Million dollars)

Answer to Question Number 2 (Errors and irregularities in financial statement)

Nike's Board of Directors approved the dividend of $ 165 per share to its shareholders in 2012 which is 14% more than the declared dividend of $ 145 in ...