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Forecasting the Income Statement, Balance Sheet, and Statement of Cash Flows Asume the following are the financial statements of Nike, Inc. Consolidated Statements of Income

Forecasting the Income Statement, Balance Sheet, and Statement of Cash Flows Asume the following are the financial statements of Nike, Inc.

Consolidated Statements of Income
Year ended May 31
(in Millions) 2013 2012 2011
Income from continuing operations:
Revenues $25,313 $23,331 $20,117
Cost of sales 14,279 13,183 10,915
Gross profit 11,034 10,148 9,202
Demand creation expense 2,745 2,607 2,344
Operating overhead expense 5,035 4,458 4,017
Total selling and administrative expense 7,780 7,065 6,361
Interest expense (income), net (3) 4 4
Other (income) (15) 54 (25)
Income before income taxes 3,272 3,025 2,862
Income tax expense 808 756 690
Net income from continuing operations 2,464 2,269 2,172
Net income (loss) from discontinued operations 21 (46) (39)
Net income $ 2,485 $ 2,223 $ 2,133

Consolidated Balance Sheets
In Millions 2013 2012
Assets
Cash and equivalents $ 3,337 $ 2,317
Short-term investments 2,628 1,440
Accounts receivable, net 3,117 3,132
Inventories 3,434 3,222
Deferred income taxes 308 262
Prepaid expenses and other current assets 802 857
Assets of discontinued operations -- 615
Total current assets 13,626 11,845
Property, plant and equipment, net 2,452 2,209
Identifiable intangible assets (net) 382 370
Goodwill 131 131
Deferred income taxes and other assets 993 910
Total assets $ 17,584 $ 15,465
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 57 $ 49
Notes payable 121 108
Accounts payable 1,646 1,549
Accrued liabilities 1,986 1,941
Income taxes payable 98 65
Liabilities of discontinued operations 18 170
Total current liabilities 3,926 3,882
Long-term debt 1,210 228
Deferred income taxes and other liabilities 1,292 974
Commitments and contingencies -- --
Redeemable preferred stock -- --
Shareholders' Equity
Common sotck at stated value
Class A covertible -- 178 and 180 shares outstanding -- --
Class B -- 716 and 736 shares outstanding 3 3
Capital in excess of stated value 5,184 4,641
Accumulated other comprehensive income 274 149
Retained earnings 5,695 5,588
Total shareholders' equity 11,156 10,381
Total liabilities and shareholders' equity $ 17,584 $ 15,465

We forecast Nike using the following forecast assumptions:
Revenue growth based on growth in revenues from 2012 to 2013 8.0%
Cost of sales/Revenues 56.4%
Demand creation expense/Revenues 10.8%
Operating overhead expenses/Revenues 19.9%
Net Income from discontinued operations $0
Income tax expense/Income before income taxes 24.7%

Instructions: Forecast Nike's fiscal year 2014 income statement. Assume no change for: other expense or income and interest expense. Round forecasts to $ millions.

NOTE: Do not adjust income statement for interest income or interest expense. You will adjust the forecasted statements in Part 2 of this problem.

Enter negative signs with answers where parenthesis are used with given data.

Nike's Forecasted Income Statement
($ millions) 2013 2014
Revenues $25,313 $Answer
Cost of sales 14,279 Answer
Gross margin 11,034 Answer
Demand creation expense 2,745 Answer
Operating overhead expense 5,035 Answer
Interest expense (income), net (3) Answer
Other (income) (15) Answer
Income before income taxes 3,272 Answer
Income taxes 808 Answer
Net income from continuing operations 2,464 Answer
Net Income from discontinued operations 21 $Answer
Net Income $ 2,485 $Answer

Instructions: Forecast Nike's fiscal year 2014 balance sheet. Assume no change for: goodwill, notes payable, liabilities from discontinued operations, common stock, capital in excess of stated value and accumulated other comprehensive income. Round forecasts to $ millions.

We forecast Nike using the following forecast assumptions:

Cash/Revenues 13.2%
Accounts receivable/Revenues 12.3%
Inventories/Revenues 13.6%
Deferred income taxes/Revenues 1.2%
Prepaid expenses and other current assets/Revenues 3.2%
Depreciation expense/Prior-year PPE, net (incl. in overhead) 19.8%
Amortization expense/Prior-year intangible assets, net (incl. in overhead) 20.3%
L-T deferred income taxes and other assets/Revenues 3.9%
Accounts payable/Revenues 6.5%
Accrued liabilities/Revenues 7.8%
Income taxes payable/Income taxes 12.1%
Deferred income taxes and other liabilities/Revenues 5.1%
Capital expenditures/Revenues 2.5%
Dividends/Net income 28.3%
Current portion of L/T debt due in 2015 $46

Nike's Forecasted Balance Sheet
($ millions) 2013 2014
Assets
Cash and equivalents $ 3,337 $Answer
Short-term investments 2,628 Answer
New short-term investments (plug) 0 Answer
Accounts receivable, net 3,117 Answer
Inventories 3,434 Answer
Deferred income taxes 308 Answer
Prepaid expenses and other current assets 802 Answer
Total current assets 13,626 Answer
Property, plant and equipment, net 2,452 Answer
Identifiable intangible assets, net 382 Answer
Goodwill 131 Answer
Deferred income taxes and other assets 993 Answer
Total assets $17,584 $Answer
Liabilities and Shareholders' Equity
Current portion of long-term debt $ 57 $ Answer
Notes payable 121 Answer
Accounts payable 1,646 Answer
Accrued liabilities 1,986 Answer
Income taxes payable 98 Answer
Liabilities of discontinued operations 18 Answer
Total current liabilities 3,926 Answer
Long-term debt 1,210 Answer
Deferred income taxes and other liabilities 1,292 Answer
Common stock at stated value 3 Answer
Capital in excess of stated value 5,184 Answer
Accumulated other comprehensive income 274 Answer
Retained earnings 5,695 Answer
Total shareholders' equity 11,156 Answer
Total liabilities and shareholders' equity $17,584 $ Answer

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