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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

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 7,593 6,326
Interest expense (income), net 4 6
Other (income) (33) (49)
Income before income taxes 2,944 3,517
Income taxes 811 610
Net income $ 2,133 $ 2,907

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 9%
Cost of sales/Revenues 51.9%
Demand creation expense/Revenues 14.9%
Operating overhead expenses/Revenues 19.9%
Income taxes/Income before income taxes 27.5%

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 Answer
Cost of sales 11,354 Answer
Gross profit 10,508 Answer
Demand creation expense 3,248 Answer
Operating overhead expense 4,345 Answer
Interest expense, net 4 Answer
Other income 33 Answer
Income before income taxes 2,944 Answer
Income taxes 811 Answer
Net Income $ 2,133 Answer

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

Accounts receivable/Revenues 14.4%
Inventories/Revenues 12.4%
Deferred income taxes/Revenues 1.4%
Prepaid expenses and other current assets/Revenues 2.7%
L-T deferred income taxes and other assets/Revenues 4.1%
Depreciation expense/Prior-year PPE, net (incl. in overhead) 17.3%
Amortization expense $24
Accounts payable/Revenues 6.7%
Accrued liabilities/Revenues 9.1%
Income taxes payable/Revenues 0.5%
Deferred income taxes and other liabilities/Revenues 4.2%
Capital expenditures/Revenues 2.0%
Dividends/Net income 23.4%
Current portion of L/T 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

($ millions)

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

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 Answer
Add: depreciation Answer
Add: amortization Answer
Change in Accounts receivable Answer
Change in Inventories Answer
Change in Deferred income taxes Answer
Change in Prepaid expenses & other current assets Answer
Change in LT Deferred income taxes & other assets Answer
Change in Accounts payable Answer
Change in Accrued liabilities Answer
Change in Income taxes payable Answer
Change in LT Deferred income taxes and other liabilities Answer
Net cash from operating activities Answer
Capital expenditures Answer
Net cash from investing activities Answer
Dividends Answer
Payments of LT debt Answer
Net cash from financing activities Answer
Net change in cash Answer
Beginning cash Answer
Ending cash Answer

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