Forecasting the Income Statement, Balance Sheet, and Statement of Cash Flows Assume the following are the financial statements of Nike, Inc. Consolidated Statements of Income Year ended May 31 In Millions 2011 2010 Revenues $ 21,862 $ 20,014 Cost of sales 11,354 10,214 Gross profit 10,508 9,800 Demand creation expense 3,248 2.356 Operating overhead expense 4.345 3,970 Total selling and administrative expense 7.5936,326 Interest expense (income), net Other (income) (33) (49) Income before income taxes 2,9443,517 Income taxes 811 Net income $ 2,133 $2.907 610 Balance Sheets May 31 2011 2010 In Millions 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, net Identifiable intangible assets (net) Goodwill Deferred income taxes and other assets Total assets Liabilities and Shareholders' Equity Current portion of long-term debt Notes payable Accounts payable Accrued liabilities Income taxes payable Total current liabilities Long-term debt $ 1,955 $3,079 2,583 2,067 3,138 2,650 2.715 2,041 312 249 594873 11,297 10,959 2,115 1,932 487 467 205 188 894 873 $ 14,998 $ 14,419 $200 $7 187139 1,469 1.255 1.985 1,904 11759 3,958 3,364 276 446 3,958 276 921 5,155 3,364 446 855 4,665 Total current liabilities Long-term debt Deferred income taxes and other liabilities Total liabilities Common stock at stated value Capital in excess of stated value Accumulated other comprehensive income Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 3,944 3,441 95 215 5,801 6,095 9,843 9.754 $14.998 $ 14,419 We forecast Nike's income statement using the following forecast assumptions: Revenue growth based on growth in revenues from 2010 to 2011 996 Cost of sales/Revenues 51.996 Demand creation expense/Revenues 14.996 Operating overhead expenses/Revenues 19.996 Income taxes/Income before income taxes 27.596 Instructions: Forecast Nike's fiscal year 2012 income statement. Assume no change for: other income and interest expense. Round forecasts to $ millions. Do not use negative signs with your answers in the income statement. Consolidated Statements of Income ($ millions) 2011 2012 Revenues $21,862 $ Cost of sales 11,354 Gross profit 10,508 Demand creation expense 3,248 Operating overhead expense 4,345 Interest expense, net Other income 33 Income before income taxes 2,944 Income taxes 811 Net Income $ 2,133 $ Oooooooooo We forecast Nike's balance sheet using the following forecast assumptions: Accounts receivable/Revenues 14.496 Inventories/Revenues 12.496 We forecast Nike's balance sheet using the following forecast assumptions: Accounts receivable/Revenues 14.496 Inventories/Revenues 12.496 Deferred income taxes/Revenues 1.496 Prepaid expenses and other current assets/Revenues 2.796 L-T deferred income taxes and other assets/Revenues 4.196 Depreciation expense/Prior-year PPE, net (incl. in overhead) 17.3% Amortization expense $24 Accounts payable/Revenues 6.796 Accrued liabilities/Revenues 9.196 Income taxes payable/Revenues 0.596 Deferred income taxes and other liabilities/Revenues 4.296 Capital expenditures/Revenues 2.096 Dividends/Net income 23.496 Current portion of UT debt due in 2013 $50 Instructions: Forecast Nike's fiscal year 2012 balance sheet. Assume no change for: short-term investments, goodwill, notes payable, common stock, capital in excess of stated value and accumulated other comprehensive income. Round forecasts to $ millions. Balance Sheet 2011 2012 Balance Sheet ($ millions) 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, net Identifiable intangible assets, net Goodwill Deferred income taxes and other assets Total assets Liabilities and Shareholders' 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 $ 1,955 $ 2,583 3,138 2,715 312 594 11,297 2,115 487 205 894 $14.998 $ oooooooooo oo $ 200 $ 187 1,469 1,985 117 3.958 276 921 ooooooo Income taxes payable 1170 Total current liabilities 3,958 Long-term debt 276 Deferred income taxes and other liabilities 921 Total liabilities 5,155 Common stock at stated value Capital in excess of stated value 3,944 Accumulated other comprehensive income 95 Retained earnings 5,801 Total shareholders' equity 9,843 Total liabilities and shareholders' equity $14,998 $ oooooooooo 0 Instructions: Forecast Nike's fiscal year 2012 statement of cash flows. Use negative signs with your answers below, when appropriate. Nike's Forecasted Statement of Cash Flows ($ millions) 2012 Est. Net income Add: depreciation Add: amortization Change in Accounts receivable Change in Inventories Change in Deferred income taxes Change in Prepaid expenses & other current assets 0 0 0 0 0 0 G Add: amortization Change in Accounts receivable Change in Inventories Change in Deferred income taxes Change in Prepaid expenses & other current assets Change in LT Deferred income taxes & other assets Change in Accounts payable Change in Accrued liabilities Change in Income taxes payable Change in LT Deferred income taxes and other liabilities Net cash from operating activities Capital expenditures Net cash from investing activities Dividends Payments of LT debt Net cash from financing activities Net change in cash Beginning cash Ending cash ooooooooooooooooo Check Forecasting the Income Statement, Balance Sheet, and Statement of Cash Flows Assume the following are the financial statements of Nike, Inc. Consolidated Statements of Income Year ended May 31 In Millions 2011 2010 Revenues $ 21,862 $ 20,014 Cost of sales 11,354 10,214 Gross profit 10,508 9,800 Demand creation expense 3,248 2.356 Operating overhead expense 4.345 3,970 Total selling and administrative expense 7.5936,326 Interest expense (income), net Other (income) (33) (49) Income before income taxes 2,9443,517 Income taxes 811 Net income $ 2,133 $2.907 610 Balance Sheets May 31 2011 2010 In Millions 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, net Identifiable intangible assets (net) Goodwill Deferred income taxes and other assets Total assets Liabilities and Shareholders' Equity Current portion of long-term debt Notes payable Accounts payable Accrued liabilities Income taxes payable Total current liabilities Long-term debt $ 1,955 $3,079 2,583 2,067 3,138 2,650 2.715 2,041 312 249 594873 11,297 10,959 2,115 1,932 487 467 205 188 894 873 $ 14,998 $ 14,419 $200 $7 187139 1,469 1.255 1.985 1,904 11759 3,958 3,364 276 446 3,958 276 921 5,155 3,364 446 855 4,665 Total current liabilities Long-term debt Deferred income taxes and other liabilities Total liabilities Common stock at stated value Capital in excess of stated value Accumulated other comprehensive income Retained earnings Total shareholders' equity Total liabilities and shareholders' equity 3,944 3,441 95 215 5,801 6,095 9,843 9.754 $14.998 $ 14,419 We forecast Nike's income statement using the following forecast assumptions: Revenue growth based on growth in revenues from 2010 to 2011 996 Cost of sales/Revenues 51.996 Demand creation expense/Revenues 14.996 Operating overhead expenses/Revenues 19.996 Income taxes/Income before income taxes 27.596 Instructions: Forecast Nike's fiscal year 2012 income statement. Assume no change for: other income and interest expense. Round forecasts to $ millions. Do not use negative signs with your answers in the income statement. Consolidated Statements of Income ($ millions) 2011 2012 Revenues $21,862 $ Cost of sales 11,354 Gross profit 10,508 Demand creation expense 3,248 Operating overhead expense 4,345 Interest expense, net Other income 33 Income before income taxes 2,944 Income taxes 811 Net Income $ 2,133 $ Oooooooooo We forecast Nike's balance sheet using the following forecast assumptions: Accounts receivable/Revenues 14.496 Inventories/Revenues 12.496 We forecast Nike's balance sheet using the following forecast assumptions: Accounts receivable/Revenues 14.496 Inventories/Revenues 12.496 Deferred income taxes/Revenues 1.496 Prepaid expenses and other current assets/Revenues 2.796 L-T deferred income taxes and other assets/Revenues 4.196 Depreciation expense/Prior-year PPE, net (incl. in overhead) 17.3% Amortization expense $24 Accounts payable/Revenues 6.796 Accrued liabilities/Revenues 9.196 Income taxes payable/Revenues 0.596 Deferred income taxes and other liabilities/Revenues 4.296 Capital expenditures/Revenues 2.096 Dividends/Net income 23.496 Current portion of UT debt due in 2013 $50 Instructions: Forecast Nike's fiscal year 2012 balance sheet. Assume no change for: short-term investments, goodwill, notes payable, common stock, capital in excess of stated value and accumulated other comprehensive income. Round forecasts to $ millions. Balance Sheet 2011 2012 Balance Sheet ($ millions) 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, net Identifiable intangible assets, net Goodwill Deferred income taxes and other assets Total assets Liabilities and Shareholders' 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 $ 1,955 $ 2,583 3,138 2,715 312 594 11,297 2,115 487 205 894 $14.998 $ oooooooooo oo $ 200 $ 187 1,469 1,985 117 3.958 276 921 ooooooo Income taxes payable 1170 Total current liabilities 3,958 Long-term debt 276 Deferred income taxes and other liabilities 921 Total liabilities 5,155 Common stock at stated value Capital in excess of stated value 3,944 Accumulated other comprehensive income 95 Retained earnings 5,801 Total shareholders' equity 9,843 Total liabilities and shareholders' equity $14,998 $ oooooooooo 0 Instructions: Forecast Nike's fiscal year 2012 statement of cash flows. Use negative signs with your answers below, when appropriate. Nike's Forecasted Statement of Cash Flows ($ millions) 2012 Est. Net income Add: depreciation Add: amortization Change in Accounts receivable Change in Inventories Change in Deferred income taxes Change in Prepaid expenses & other current assets 0 0 0 0 0 0 G Add: amortization Change in Accounts receivable Change in Inventories Change in Deferred income taxes Change in Prepaid expenses & other current assets Change in LT Deferred income taxes & other assets Change in Accounts payable Change in Accrued liabilities Change in Income taxes payable Change in LT Deferred income taxes and other liabilities Net cash from operating activities Capital expenditures Net cash from investing activities Dividends Payments of LT debt Net cash from financing activities Net change in cash Beginning cash Ending cash ooooooooooooooooo Check