+ BU Q 100% Q QOR G A Q , BO. BIBI HUSTHE Nike Basic Ratio Analysis Nike Inc design, develop and markets, both domenically and internationally, a wide variety of athletic and leisure footwear and apparel for competitive and recreationale. Nel bed in Beaverton, Orepair Learning Objectives Compute busic solvency and profitability ratios. Interpret basic solvency and profitability ratios Refer to the 1995 Consolidated Financial Statements of Nike, loc. Concepts In general, what do measures of solvency and profitability represent? Why might users of Nike's financial statements calculate soch measures? Analysis b. Using the information in Nike's 1995 financial statements, compute the following (note that at May 31, 1993, total shareholders' equity was 51,642,819 and totales were $2.186.209) Current Current ratio at May 31, 1995 and 1994. The current ratio is defined as Carrello Working capital May 31, 1995 and 1994. Working capital is defined as current sets leur current limbilier Gross margin percent for 1995 and 1994. Gross margin percent is defined Sales Cast of Good Sold Sol iv. Retum on equity for local 1995 und 1994. Return on equity is defined Nelecom Preferred Dividende Note the exact amount of preferred dividends Army Commareholder in not provided Asume that there were no prefered divided in 1995 1994 w + BE 10046 Q 1/4 : 2 DE XA - Q Analysis b. Using the information in Nike's 1995 financial statements, compute the following (note that at May 31, 1993, total shareholders' equity was $1.642,819 and total assets were $2,186,269): i. Current ratio at May 31, 1995 and 1994. The current ratio is defined as: Current Asset Current Liabilier . Working capital May 31, 1995 and 1994. Working capital is defined as: Current assets less current liabilities iii. Gross margin percent for 1995 and 1994. Gross margin percent is defined Sales - Cont of Goods Sold x 100 Sales iv. Return on equity for fiscal 1995 and 1994 Return on equity is defined Net Income. Preferred Dividende Average Common Shareholders' Equity Note: the exact amount of preferred dividends is not provided. Assume that there were no preferred dividends in 1995 and 1994 v. Return on assets for fiscal 1995 and 1994. Return on assets is defined as: Net Income Interest Expert Average Total Art c. Did Nike am more or less money in 1995 than 19947 Use the financial statements to determine the major reasons for the change. d. Was Nike more or less profitable in 1995 than 19947 (Hint: Simply comparing net income year to year ignore the changing level of assets or shareholders' equity used to gence the income To determine whether Nike's profitability changed, determine whether Nike's turn on assets increased or decreased and whether return on equity increased or decreased.) . How much cash did Nike have at May 31, 1995? f. Was Nike in a position to pay its short-term obligations at May 31, 19957 (Hint: what was Nike's current ratio at May 31, 1993) Did Nike have positive working capital? 8 Were Nike's operations a source or a use of cash in fiscal 1995 h. What were Nike's major sources and uses of cash in fiscal 1995? TX + TA RA Q 10096 QQ 2/4 QQ > EI : NIKE, INC. CONSOLIDATED BALANCE SHEET (In Thousanda) May 31 1995 1994 $ 216.071 $ 518,816 Assets Current Assets: Cash and equivalents Accounts receivable, less allowance for doubtful accounts of $ 32,663 and $ 28, 291 Inventories Note 2) Deferred Income taxes (Note 6) Prepaid expenses 1,053,237 629,742 72,657 703,682 470,023 37.603 40.302 Total current sets 2.045,928 1,770,431 Property, plant and equipment, net (Note 3 and 5) Goodwill Note 1) Other asset 554.879 495.907 452021 405,845 263,036 24.503 $3202-705 $2,273815 $ $ Liabilities and shareholders' Equity Current Liabilities: Current portion of long-term des Note 53 sotee payable thote 41 Accounts payable Note 4) Accrued liabilitie Income tases payable 31.943 397.100 397,656 345,224 3.857 127.375 210,576 181.889 Total current liabilities 1.107.55 561.587 10.15 long-term dubt thaton 5 And Boncurrunt deferred in Note 61 Other current cliente 12.364 17.228 4X + QR 100% ODOBRE