(Appendix B Question 2) Please answer all questions with a red X next to them. Thank you!

QUESTION 2 Partially correct Marked out of 1.00 Flag question Operating Section of Statement of Cash Flows (Indirect Method) Assume following are the income statement and balance sheet for Nike for the year ended May 31, 2012, and a forecasted income statement and balance sheet for 2013. Income Statement ($ millions) Revenues Cost of sales Gross margin Selling and administrative expense Operating profit Interest income, net Other (expense) income, net Income before income taxes Income taxes Net income 2012 actual 2013 Est. $18,627.0 $21,253.0 10,239.6 11,689.0 8,387.4 9,564.0 5,953.7 6,801.0 2,433.7 2,763.0 77.1 (7.9) 2,502.9 2,832.2 706.0 $1,883.4 2,126.2 77.1 (7.9) 619.5 Balance Sheet $ millions) 2012 actual 2013 Est. Assets Cash and equivalents Short-term investments Accounts receivable, net Inventories Deferred income taxes Prepaid expenses and other current assets Total current assets Property, plant and equipment Accumulated depreciation Property, plant and equipment, net Goodwill and other current assets Deferred income taxes and other assets Total Assets 2,181.9 3,285.4 642.2 2,753.3 3,188.0 2,438.4 2,810.0 259.0 680.0 8,839.3 10,864.6 4,103.0 4,613.0 (2,211.9) (2,556.9) 1,891. 2,056.1 191.9 1,152.9 594.0 12,442.7 $14,667.6 642.2 227.2 596.3 520.4 Liabilities and Equity Current portion of long-term debt Notes payable Accounts payable Accrued liabilities Income taxes payable Total current liabilities Long-term debt Deferred income taxes and other liabilities Total liabilities Redeemable preferred stock Common stock Capital in excess of stated value Accumulated other comprehensive income Retained earnings Stockholders' equity Total liabilities and equity Gross property, plant and equipment and accumulated depreciation are inserted in the balance sheet; $31.3 193.7 1,287.6 1,430.0 1,761.9 2,029.0 110.0 3,321.5 3,794.0 408.8 976.0 4,617.15,178.8 0.3 $6.3 88.0 441.1 854.5 0.3 2.8 2,497.8 2,497.8 251.4 5,073.3 6,736.5 7,825.6 9,488.8 12,442.7 $14,667.6 251.4 both are taken from footnotes to the financial statements * Gross property, plant and equipment and accumulated depreciation are inserted in the balance sheet; both are taken from footnotes to the financial statements Prepare the net cash flows from operating activities section of a forecasted statement of cash flows for 2013 using the indirect method. Treat current and noncurrent deferred tax assets and liabilities as operating. Operating expenses (such as Cost of sales and Selling and administrative expense) for 2013 include estimated depreciation expense of $367 million and amortization expense of $39 million Estimated 2013 retained earnings includes dividends of $467 million Enter answers using one decimal place as shown in the above financial statements Use negative signs with answers to show a decrease in cash Nike, Inc. STATEMENT OF CASH FLOWS (S MILLIONS) Forecasted FOR YEAR ENDED May 31, 2013 Net income 173X Add (Deduct) Items to Convert Net Income to Cash Basis Depreciation 367 Amortization Accounts receivable (3,000) x Inventories 2,810 X Deferred Income taxes (2,000) Prepaid expenses and other current assets 3,000 Deferred income taxes and other assets Accounts payable Accrued liabilities Income taxes payable Deferred income taxes and other liabilities Net cash flow from operating activities 159,000X Check