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

Forecasting the Income Statement, Balance Sheet, and Statement of Cash Flows 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
Total liabilities 6,428 5,084
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 income and interest income.

  • Round forecasts to $ millions.

  • Do not use negative signs with your answers in the income statement.
Nike's Forecasted Income Statement
($ millions) 2014
Revenues Answer
Cost of sales Answer
Gross profit Answer
Demand creation expense Answer
Operating overhead expense Answer

Interest income, net

Answer
Other income Answer
Income before income taxes Answer
Income taxes Answer
Net income Answer

Instructions: Forecast Nike's fiscal year 2014 balance sheet.

  • Assume no change for: short-term investments, 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's balance sheet using the following forecast assumptions:

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 $78
L-T deferred income taxes and other assets/Revenues 3.9%
Accounts payable/Revenues 6.5%
Accrued liabilities/Revenues 7.8%
Income taxes payable/Revenues 0.4%
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

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