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

Consolidated Statements of Income
	Year ended May 31
In Millions	2011	2010
Revenues	$ 20,862	$ 19,014
Cost of sales	11,354	10,214
Gross profit	9,508	8,800
Demand creation expense	2,448	2,356
Operating overhead expense	4,245	3,970
Total selling and administrative expense	6,693	6,326
Interest expense (income), net	4	6
Other (income)	(33)	(49)
Income before income taxes	2,844	2,517
Income taxes	711	610
Net income	$ 2,133	$ 1,907

Balance Sheets
	May 31
In Millions	2011	2010
Assets
Cash and equivalents	$ 1,955	$ 3,079
Short-term investments	2,583	2,067
Accounts receivable, net	3,138	2,650
Inventories	2,715	2,041
Deferred income taxes	312	249
Prepaid expenses and other current assets	594	873
Total current assets	11,297	10,959
Property, plant and equipment, net	2,115	1,932
Identifiable intangible assets (net)	487	467
Goodwill	205	188
Deferred income taxes and other assets	894	873
Total assets	$ 14,998	$ 14,419
Liabilities and Shareholders' Equity
Current portion of long-term debt	$ 200	$ 7
Notes payable	187	139
Accounts payable	1,469	1,255
Accrued liabilities	1,985	1,904
Income taxes payable	117	59
Total current liabilities	3,958	3,364
Long-term debt	276	446
Deferred income taxes and other liabilities	921	855
Total liabilities	5,155	4,665
Common stock at stated value	3	3
Capital in excess of stated value	3,944	3,441
Accumulated other comprehensive income	95	215
Retained earnings	5,801	6,095
Total shareholders' equity	9,843	9,754
Total liabilities and shareholders' equity	$ 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	10%
Cost of sales/Revenues	54.4%
Demand creation expense/Revenues	11.7%
Operating overhead expenses/Revenues	20.3%
Income taxes/Income before income taxes	25.0%

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	$20,862	Answer Mark 0.00 out of 1.00
Cost of sales	11,354	Answer Mark 0.00 out of 1.00
Gross profit	9,508	Answer Mark 0.00 out of 1.00
Demand creation expense	2,448	Answer Mark 0.00 out of 1.00
Operating overhead expense	4,245	Answer Mark 0.00 out of 1.00
Interest expense, net	4	Answer Mark 0.00 out of 1.00
Other income	33	Answer Mark 0.00 out of 1.00
Income before income taxes	2,844	Answer Mark 0.00 out of 1.00
Income taxes	711	Answer Mark 0.00 out of 1.00
Net Income	$ 2,133	Answer Mark 0.00 out of 1.00

We forecast Nike's balance sheet using the following forecast assumptions:

Accounts receivable/Revenues	15.0%
Inventories/Revenues	13.0%
Deferred income taxes/Revenues	1.5%
Prepaid expenses and other current assets/Revenues	2.8%
L-T deferred income taxes and other assets/Revenues	4.3%
Depreciation expense/Prior-year PPE, net (incl. in overhead)	17.3%
Amortization expense	$24
Accounts payable/Revenues	7.0%
Accrued liabilities/Revenues	9.5%
Income taxes payable/Revenues	0.6%
Deferred income taxes and other liabilities/Revenues	4.4%
Capital expenditures/Revenues	2.1%
Dividends/Net income	26.0%
Current portion of L/T due in 2013	$48

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
($ millions)	2011	2012
Assets
Cash and equivalents	$ 1,955	Answer Mark 0.00 out of 1.00
Short-term investments	2,583	Answer Mark 0.00 out of 1.00
Accounts receivable, net	3,138	Answer Mark 0.00 out of 1.00
Inventories	2,715	Answer Mark 0.00 out of 1.00
Deferred income taxes	312	Answer Mark 0.00 out of 1.00
Prepaid expenses and other current assets	594	Answer Mark 0.00 out of 1.00
Total current assets	11,297	Answer Mark 0.00 out of 1.00
Property, plant and equipment, net	2,115	Answer Mark 0.00 out of 1.00
Identifiable intangible assets, net	487	Answer Mark 0.00 out of 1.00
Goodwill	205	Answer Mark 0.00 out of 1.00
Deferred income taxes and other assets	894	Answer Mark 0.00 out of 1.00
Total assets	$14,998	Answer Mark 0.00 out of 1.00
Liabilities and Shareholders' Equity
Current portion of long-term debt	$ 200	Answer Mark 0.00 out of 1.00
Notes payable	187	Answer Mark 0.00 out of 1.00
Accounts payable	1,469	Answer Mark 0.00 out of 1.00
Accrued liabilities	1,985	Answer Mark 0.00 out of 1.00
Income taxes payable	117	Answer Mark 0.00 out of 1.00
Total current liabilities	3,958	Answer Mark 0.00 out of 1.00
Long-term debt	276	Answer Mark 0.00 out of 1.00
Deferred income taxes and other liabilities	921	Answer Mark 0.00 out of 1.00
Total liabilities	5,155	Answer Mark 0.00 out of 1.00
Common stock at stated value	3	Answer Mark 0.00 out of 1.00
Capital in excess of stated value	3,944	Answer Mark 0.00 out of 1.00
Accumulated other comprehensive income	95	Answer Mark 0.00 out of 1.00
Retained earnings	5,801	Answer Mark 0.00 out of 1.00
Total shareholders' equity	9,843	Answer Mark 0.00 out of 1.00
Total liabilities and shareholders' equity	$14,998	Answer Mark 0.00 out of 1.00

Instructions: Forecast Nike's fiscal year 2012 stastement of cash flows.

Remember to use negative signs with your answers below, when appropriate.

Nike's Forecasted Statement of Cash Flows
($ millions)	2012 Est.
Net income	Answer Mark 0.00 out of 1.00
Add: depreciation	Answer Mark 0.00 out of 1.00
Add: amortization	Answer Mark 0.00 out of 1.00
Change in Accounts receivable	Answer Mark 0.00 out of 1.00
Change in Inventories	Answer Mark 0.00 out of 1.00
Change in Deferred income taxes	Answer Mark 0.00 out of 1.00
Change in Prepaid expenses & other current assets	Answer Mark 0.00 out of 1.00
Change in LT Deferred income taxes & other assets	Answer Mark 0.00 out of 1.00
Change in Accounts payable	Answer Mark 0.00 out of 1.00
Change in Accrued liabilities	Answer Mark 0.00 out of 1.00
Change in Income taxes payable	Answer Mark 0.00 out of 1.00
Change in LT Deferred income taxes and other liabilities	Answer Mark 0.00 out of 1.00
Net cash from operating activities	Answer Mark 0.00 out of 1.00
Capital expenditures	Answer Mark 0.00 out of 1.00
Net cash from investing activities	Answer Mark 0.00 out of 1.00
Dividends	Answer Mark 0.00 out of 1.00
Payments of LT debt	Answer Mark 0.00 out of 1.00
Net cash from financing activities	Answer Mark 0.00 out of 1.00
Net change in cash	Answer Mark 0.00 out of 1.00
Beginning cash	Answer Mark 0.00 out of 1.00
Ending cash	Answer Mark 0.00 out of 1.00