SCHICKELE Théo Introduction of Financial

OLIVEIRA Théo Analysis

VANDENBERG Tom
NGUYEN Anthony

NIKE
Presentation of the company

Nike is an American multinational corporation, founded in 1964, created by phil

Knight and bower man. Nike is engaged in the design, development, manufacturing,
worldwide marketing and sales of footwear, apparel, equipment, accessories, and services.
The company is headquartered near Beaverton, Oregon.

It is the world's largest supplier of athletic shoes and apparel and a major manufacturer
of sports equipment.

Nike means wing “goddess of victory”

The swoosh symbol was created by Carolyn Davidson graphic-design student from Portland
State University. She got only paid 35$ for her design.
In 1980 Nike goes public, then one year later in 1981 Nike begins to focus on promoting their
products overseas in markets all across Europe, Asia, Japan, Africa, and Latin America. 
In 1985 Nike furthered the success of the company by having Michael Jordan to sign a
contract to endorse one of its versions of the Nike Air shoe and called this one the “Air
Jordan.”
In 1988 the very popular slogan “Just Do It” was introduced to the world
Then 1990 Nike, Inc. opened up NikeTown retail outlets which began in Portland Oregon.

Nowadays nike is known by the entire world in fact this company is the leader and it is a very
profitable company who stood out from the start.

Some important financial data of nike could be :

The gross margin of Nike is actually about 51,8 so it’s pretty high.
Moreover the turnover of Nike in 2018 was about 22 billion of dollars.
Then the operating income is about 9,8 %.
 Nike income statement

Horizontal Analysis

Increase (or Increase (or

Breakdown 5/30/2018 5/30/2017 5/30/2016 decrease) decrease)
2018 2017
Percen
Amount Amount Percent
t
Total revenue 36,397,000 34,350,000 32,376,000 2,047,000 5.9 1,974,000 6
Cost revenue 20,441,000 19,038,000 17,405,000 1,403,000 7.3 1,633,000 9,3
Gross profit 15,956,000 15,312,000 14,971,000 644,000 4.2 341,000 2,2
Operating
11,511,000 10,563,000 10,469,000 948,000 9 94,000 0.9
expense
Operating
4,445,000 4,749,000 4,502,000 -304,000 -6.4 247,000 5.4
income or loss
Interest expense - - -
Total other
income/ -66,000 196,000 140,000 -262,000 -133.7 56,000 40
expense net
Income before
4,325,000 4,886,000 4,623,000 -561,000 -11.4 263,000 5.6
tax
Income tax
2,392,000 646,000 863,000 1,746,000 270.3 -217,000 -25.1
expense
Income from
continuing 1,933,000 4,240,000 3,760,000 -2,307,000 -54.4 480,000 12.7
operations
Net Income 1,933,000 4,240,000 3,760,000 -2,307,000 -54.4 480,000 12.7
Vertical Analysis

Breakdown 5/30/18 5/30/17 5/30/16 2018 2017 2016

Percen
Percent Percent
t
36,397,00
Total revenue 34,350,000 32,376,000 100 100 100
0
20,441,00
Cost revenue 19,038,000 17,405,000 56.2 55.4 53.7
0
15,956,00
Gross profit 15,312,000 14,971,000 43.8 44.6 46.2
0
11,511,00
Operating expense 10,563,000 10,469,000 31.6 30.7 32.3
0
Operating income or loss 4,445,000 4,749,000 4,502,000 12.2 13.8 13.9
Interest expense - - -
Total other income/ expense net -66,000 196,000 140,000 -181.3 0.6 0.4
Income before tax 4,325,000 4,886,000 4,623,000 11.9 14.2 14.3
Income tax expense 2,392,000 646,000 863,000 6.5 1.9 2.7
Income from continuing
1,933,000 4,240,000 3,760,000 5.3 12.3 11.6
operations
Net Income 1,933,000 4,240,000 3,760,000 5.3 12.3 11.6

Formula : GPM = Gross profit / Sales

OPM = Operating income / Sales

NPM = Net income / Sales

Margin analysis of NIKE

2018 2017 2016

Gross profit margin in % 43.8 44.5 46.2
Operating profit margin in
12.2 13.8 13.9
%
Net profit margin in % 5.3 12.3 11.6

Question 2 :
*all value in thousand

Liquidity analysis

2016

Current ratio : 15,025,000/5,358,000 = 2.80

Quick ratio : (15,025,000-4,838,000-272,000)/5,358,000 = 1.85
2017
Current ratio : 16,061,000/5,474,000 =2.93
Quick ratio : (16,061,000-5,055,000-311,000)/5,474,000 =1.95

2018
Current ratio : 15,134,000/6,040,000 = 2.50
Quick ratio : (15,134,000-5,261,000-359,000)/6,040,000 = 1.57

Profitability analysis

NIKE in 2016
ROE = 3,760,000/12,258,000 = 31% ROA = 3,760,000/21,396,000 =17% EPS = $2.16

NIKE in 2017

ROE = 4,240,000/12,407,000 = 34% ROA = 4,240,000/23,259,000 =18% EPS = $2.56

NIKE in 2018

ROE = 1,933,000/9,812,000 = 19% ROA = 1,933,000/22,536,000 = 8.6% EPS = $1.17

Solvency analysis

Formula : (Net income - depreciation) / (Short term debt - long term debt)
2016 = (3,760,000 + 649,000) / (1,000 + 1,993,000) = 4,409,000 / 1,994,000 = 221% 2017 =
(4,240,000 + 706,000) / (325,000 + 3,471,000) = 4,946,000 / 3,796,000 = 130% 2018 =
( 1,933,000 + 747,000) / (336,000 + 3,468,000) = 2,680,000 / 3,804,000 = 70%

Leverage effect of NIKE : Formula = Operating income / Net income

2018 : 2.29 2017 : 1.12 2016 : 1.19

Formula : GPM = Gross profit / Sales

OPM = Operating income / Sales
NPM = Net income / Sales
 Margin analysis of NIKE

*all value in thousand

Liquidity analysis

2016

Current ratio : 15,025,000/5,358,000 = 2.80

Quick ratio : (15,025,000-4,838,000-272,000)/5,358,000 = 1.85

2017
Current ratio : 16,061,000/5,474,000 =2.93
Quick ratio : (16,061,000-5,055,000-311,000)/5,474,000 =1.95

2018
Current ratio : 15,134,000/6,040,000 = 2.50
Quick ratio : (15,134,000-5,261,000-359,000)/6,040,000 = 1.57

Profitability analysis
NIKE in 2016
ROE = 3,760,000/12,258,000 = 31%
ROA = 3,760,000/21,396,000 =17%
EPS = $2.16

NIKE in 2017

ROE = 4,240,000/12,407,000 = 34%

ROA = 4,240,000/23,259,000 =18%
EPS = $2.56

NIKE in 2018

ROE = 1,933,000/9,812,000 = 19%

ROA = 1,933,000/22,536,000 = 8.6%
EPS = $1.17

Solvency analysis

Formula : (Net income - depreciation) / (Short term debt - long term debt)

2016 = (3,760,000 + 649,000) / (1,000 + 1,993,000) = 4,409,000 / 1,994,000 = 221%

2017 = (4,240,000 + 706,000) / (325,000 + 3,471,000) = 4,946,000 / 3,796,000 = 130%

2018 = ( 1,933,000 + 747,000) / (336,000 + 3,468,000) = 2,680,000 / 3,804,000 = 70%

Leverage effect of NIKE : Formula = Operating income / Net income

2018 : 2.29
2017 : 1.12
2016 : 1.19

Financial policy of the firm, analysis of the components of the nature and the
components of working capital. (3 years)

Definition: Financial Policy

Financial Policies refers to the regulation, supervision and oversight of the financial and
payment systems, including markets and institutions, with the view to promoting financial
stability. market efficiency and client-asset and consumer protection.

Financial Policy Nike :

PURPOSE
The purpose of the Finance Committee (the "Committee") of the Board of Directors (the
"Board") of NIKE, Inc. (the "Company") is to oversee the financial policies and activities of
the Company that may have a material impact on the results of operations or the financial
position of the Company.
MEMBERSHIP
The Committee will consist of at least three directors appointed by the Board from time to
time, the majority of whom are not officers or employees of NIKE or its affiliates. The Board
may appoint or remove members of the Committee at any time.
MEETINGS
The Committee will meet from time to time as determined by the Committee in conjunction
with regular meetings of the Board and at such other times determined by the Committee or
the chair of the Committee. The Committee may permit attendance at meetings by such ex
officio members as the Committee may determine appropriate or advisable from time to time.
The Committee may form and delegate authority to any subcommittee of the Committee it
deems appropriate or advisable. The Committee will report regularly to the Board on matters
within the Committee's responsibilities and will maintain minutes of Committee meetings.
RESPONSIBILITIES
The Committee shall:
1. Review the annual budget for the Company and recommend approval by the Board.
2. Review proposed capital expenditures, lease commitments and asset disposals within limits
as established by Committee resolution and recommend approval by the Board.
3. Review proposed mergers, acquisitions and business divestitures, and recommend approval
by the Board.
4. Review proposed capital market transactions and other financing arrangements within
limits as established by Committee resolution and recommend approval by the Board.
5. Review proposed dividend policy and recommend approval by the Board.
6. Review and approve management proposed programs for repurchasing shares of the
Company's common stock.
7. Review and approve policies and procedures for managing the Company's financial (i.e.
interest rate and foreign exchange), casualty and liability risks.
8. Review and approve the Company's entry into all swap transactions, as defined in 7
U.S.C.§ 1a (47) and the rules and regulations of the Commodity Futures Trading
Commission thereunder; and
approve, on swap-by-swap and/or on an annual basis, any decision by the Company
or its subsidiaries to enter into swaps that are exempt from the clearing and
execution requirements of sections 2(h)(1) and 2 (h)(8) of the Commodity
Exchange Act for the purpose of satisfying the requirements necessary to elect
the End-User Exception to such clearing and execution requirements as
provided for by 17 C.F.R § 39.6; and
review, no less frequently than annually any such annual approval issued by the
Committee.
9. Perform such other duties and functions as may, from time to time, be assigned to the
Committee by the Board.

Definition: Working Capital

Working capital represents the relationship between a firm's short-term assets and its short-
term liabilities. The goal of working capital management is to ensure that a company can
afford its day-to-day operating expenses while, at the same time, investing the company's
assets in the most productive way. A well-run firm manages its short-term debt and current
and future operational expenses through its management of working capital, the components
of which are inventories, accounts receivable, accounts payable, and cash.

Components of the Working Capital - 3 Main Components

1. Accounts Receivable
Accounts receivable are revenues due—what customers and debtors owe to a company for
past sales. A company must collect its receivables in a timely manner so that it can use
those funds to meet its own debts and operational costs. Accounts receivable appear as
assets on a company's balance sheet, but they do not become assets until they are
collected. Days sales outstanding is a metric used by analysts to assess a company's
handling of accounts receivables. The metric reveals the average number of days a
company takes to collect sales revenues.
2 Accounts Payable
&Accounts payable is the amount that a company must pay out over the short term and is a key
component of working capital management. Companies endeavor to balance payments
with receivables to maintain maximum cash flow. Companies may delay payments as
long as is reasonably possible with the goal of maintaining positive credit ratings while
sustaining good relationships with suppliers and creditors. Ideally, a company's average
time to collect receivables is significantly shorter than its average time to settle payables
3 Inventory
Inventory is a company's primary asset that it converts into sales revenues. The rate at
which a company sells and replenishes its inventory is a measure of its success.
Investors also consider the inventory turnover rate to be an indication of the strength of
sales and how efficient the company is in its purchasing and manufacturing. Low
inventory means that the company is in danger of losing out on sales, but excessively
high inventory levels could be a sign of wasteful use of working capital.
Nike - Balance Sheet

Working Capital Nike :

A negative working capital means the company has has more current liabilities than current
assets.
Financial structure

Debt ratio analysis of NIKE over the 3 years

Debt ratio formula : Total Liabilities / Total Assets

Nike total liabilities

2018 : 12,724,000
2017 : 10,852,000
2016 : 9,138,000

Nike total assets

2018 : 22,536,000
2017 : 23,259,000
2016 : 21,396,000

In 2018 : 12,724,000 / 22,536,000 = 56.4%

In 2017 : 10,852,000 / 23,259,000 = 46.6%
In 2016 : 9,138,000 / 21,396,000 = 42.7%

The debt ratio is a measure of financial leverage. A company that has a debt ratio of more
than 50% is known as a "leveraged" company. In 2016 and 2017, NIKE had a lower debt ratio
with 42.7% and 46.6% respectively, which implies a more stable business with the potential
of longevity because a company with lower ratio also has lower overall debt. In 2018, its ratio
is 56.4% which is basically considered to be less risky. This means that the company has
twice as many assets as liabilities so only creditors own half of the company’s assets and the
shareholders own the rest of the assets.

Debt-Equity ratio formula : Long-term debt / Equity

Nike long term debt

2018 : 3,468,000
2017 : 3,471,000
2016 : 2,010,000

NIKE total equity

2018 : 9,812,000
2017 : 12,407,000
2016 : 12,258,000

For 2018 : 3,468,000 / 9,812,000 = 35.3%

2017 : 3,471,000 / 12,407,000 = 27.9%
2016 : 2,010,000 / 12,258,000 = 16.4%

During the last 3 years, the company has increased its Debt-equity ratio from 16.4% in 2016
to 35.3% in 2018, and all its ratios are under 50% which mean that it implies a more
financially stable business. Indeed, NIKE with its low debt to equity ratio are considered more
safe to creditors and investors than companies with a higher ratio so they tend to invest and
support the company, which is a good thing.

STRENGHTS AND WEAKNESS OF NIKE

The main strengths of this company are principally the strong global brand indeed nike is the
mast valuable sports brand in the world. Moreover, the logo of Nike is instantly recognizable
all over the world. Nike has also a lot of partnership with iconic sporty such as Michael
Jordan or Cristiano Ronaldo, tiger woods for example. Nike’s ability to maintain and enhance
its iconic brands has allowed it to enjoy continued success for decades.

Regarding the number Nike is also a low-cost manufacturing brand.  Virtually all of Nike’s
footwear is manufactured outside of the United States by independent contract manufacturers
who operate multiple factories. In fiscal 2014, Vietnam, China, and Indonesia manufactured
roughly 43%, 28%, and 25% of total Nike Branded footwear. It also has operations in
Argentina, Brazil, India, and Mexico. The low cost of producing products in these countries
continues to boost the bottom line.

In addition, Nike is very serious about research and development and always invest a high
budget to develop new quality of clothes because they believe that this is one of the key
factors of its success.
Virtually all of Nike’s footwear is manufactured outside of the United States by independent
contract manufacturers who operate multiple factories. In fiscal 2014, Vietnam, China, and
Indonesia manufactured roughly 43%, 28%, and 25% of total Nike Branded footwear. It also
has operations in Argentina, Brazil, India, and Mexico. The low cost of producing products in
these countries continues to boost the bottom line.
Technical innovation in both the design and manufacturing process of its footwear, apparel,
and athletic equipment has helped the company continue to produce better products, which
have enhanced athletic performance and reduced injuries.

However Nike has also some weakness in fact high prices due to its strong brand, Nike can
typically command a premium on the products it sells, which in turn supports higher margins
and profitability. However, the cost of its footwear is higher than most of its competitors,
which make its products out of reach for many customers around the globe, particularly in
emerging markets. There is also the risk of declining demand when an economy falls into
recession, as consumers have lower discretionary spending for non-essential items. Many
customers of Nike think that it is expensive. Nike is not a luxury brand. : It wasn’t long ago
that Nike was facing intense criticism of its labor practices and work conditions. However,
over the past 20 years, it has undertaken efforts to improve conditions for its roughly one
million contract workers. While conditions have improved, many of its factories in
developing countries still do not meet Nike’s own standards. The company itself has
acknowledged that the low wages for some of its workers remains a concern. Safety issues at
certain locations are also an issue. If some type of disaster were to occur at one of its
facilities, this would no doubt hurt the company’s image.