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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