Compute and Interpret Liquidity, Solvency and Coverage Ratios Information from the balance sheet, income statement, and statement of cash flows for Nike follows. Refer to these financial statements to answer the requirements. NIKE, INC. Consolidated Statements of Income Year Ended December 31 (In millions) Revenues Cost of sales Gross profit 2019 2018 $39,117 $36,397 21,643 20,441 17,474 15,956 Demand creation expense 3,753 3,577 Operating overhead expense 8,949 7,934 Total selling and administrative expense 12,702 11,511 Interest expense (income), net 49 54 Other (income) expense, net (78) 66 Income before income taxes 4,801 4,325 Income tax expense 772 2,392 Net income $4,029 $1,933 Consolidated Balance Sheets May 31 (in millions) 2019 2018 Current Assets Cash and cash equivalents $4,466 $4,249 vay in tons) 2015 2010 Current Assets Cash and cash equivalents $ 4,466 $4,249 Short-term investments 197 996 Accounts receivable, net. 4,272 3,498 Inventories 5,622 5,261 Prepaid expenses and other current assets 1,968 1,130 Total current assets Property, plant and equipment, net Identifiable intangible assets, net 16,525 15,134 4,744 4,454 283 285 Goodwill 154 154 Deferred income taxes Total assets Liabilities and stockholders' equity 2,011 2,509 $23,717 $22,536 Current Liabilities Current portion of long-term debt Notes payable Accounts payable Accrued pension liabilities Income taxes payable Total current liabilities Long-term debt Deferred income taxes and other liabilities Shareholders' equity Class A convertible-315 and 329 shares outstanding Class B-1,253 and 1,272 shares outstanding $6 $6 9 336 2,612 2,279 5,010 3,269 229 150 7,866 6,040 3,464 3,468 3,347 3,216 - 3 3 Capital in excess of stated value 7,163 6,384 Accumulated other comprehensive income (loss) 231 (99) Capital in excess of stated value Accumulated other comprehensive income (loss) Retained earnings Total shareholders' equity Total liabilities and stockholders' equity 7,163 6,384 231 (92) 1,643 3,517 9,040 $23,717 $22,536 9,812 Cash provided by operations: Net income Consolidated Statement of Cash Flows Year Ended May 31 (in millions) Adjustments to reconcile net income to net cash provided by operations: Depreciation Deferred income taxes Stock-based compensation Amortization and other Net foreign currency adjustments 2019 2018 $4,029 $1,933 705 747 34 647 325 218 15 27 233 (99) Changes in certain working capital components and other assets and liabilities: (Increase) decrease in accounts receivable (Increase) decrease in inventories (Increase) decrease in prepaid expenses and other current and non-current assets Increase (decrease) in accounts payable, accrued liabilities and other current and non-current liabilities Cash provided by operations (270) 187 (490) (255) (203) 35 1.525 1.515 5.903 4.955 Cash provided (used) by investing activities: Purchases of short-term investments Maturities of short-term investments Sales of short-term investments (2.937) (4.783) 1.715 3,613 2072 2496 (Increase) decrease in inventories (Increase) decrease in prepaid expenses and other current and non-current assets Increase (decrease) in accounts payable, accrued liabilities and other current and non-current liabilities Cash provided by operations Cash provided (used) by investing activities: Purchases of short-term investments Maturities of short-term investments Sales of short-term investments Additions to property, plant and equipment Disposals of property, plant and equipment Other investing activities. Cash provided (used) by investing activities Cash used by financing activities: Long-term debt payments, including current portion Increase (decrease) in notes payable Payments on capital lease and other financing obligations (490) (255) (203) 35 1,525 1,515 5,903 4,955 (2,937) (4,783) 1,715 3,613 2,072 2,496 (1,119) (1,028) 5 3 - (25) (264) 276 (6) (6) (325) 13 (27) (23) 700 733 Proceeds from exercise of stock options and other stock issuances Repurchase of common stock Dividends-common and preferred Tax payments for net share settlement of equity awards Cash used by financing activities Effect of exchange rate changes on cash and equivalents Net increase (decrease) in cash and equivalents Cash and equivalents, beginning of year Cash and equivalents, end of year (4.286) (4,254) (1,332) (1,243) (17) (55) (5.293) (4.835) (129) 45 217 441 4,249 3,808 $4.466 $4,249 (b) Compute total liabilities-to-equity ratio and total debt-to-equity ratio for 2018 and 2019. HINT: Nike's total debt has three components reported on the balance sheet. Note: Round answers to two decimal places. 2019 total liabilities-to-equity = 1.62 2018 total liabilities-to-equity= 1.29 2019 total debt-to-equity = 0 2018 total debt-to-equity = 0 x X (c) Compute times interest earned ratio, cash from operations to total debt ratio, and free operating cash flow to total debt ratios. Financial statements included the following footnote: "Included in Interest expense (income), net was interest income related to the Company's investment portfolio of $82 million and $70 million for the years ended May 31, 2019 and 2018, respectively." Note: Round answers to two decimal places. 2019 times interest earned = 81.09 x 2018 times interest earned = 81.09 x 2019 cash from operations to total debt 40.22 2018 cash from operations to total debt = 38.94 x 2019 free operating cash flow to total debt= 32.59 2018 free operating cash flow to total debt = 30.86 x X