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 $ 19,014 Cost of sales 11,354 10,214 Gross profit 10,508 8,800 Demand creation expense 2,948 2,356 Operating overhead expense 4,845 3,970 Total selling and administrative expense 7,793 6,326 Interest expense (income), net Other (income) (33) (49) Income before income taxes 2,744 2,517 Income taxes 611 610 Net income $ 2,133 $1,907 Balance Sheets May 31 2011 2010 $ 1,955 $3,079 2,583 2,067 3,138 2,650 2,715 2,041 312 249 594 873 11,297 10,959 2,115 1,932 487 467 205 894 873 $14,998 $ 14,419 188 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 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 $ 200 187 1,469 1,985 117 3,958 276 $7 139 1,255 1,904 59 3,364 446 921 5,155 855 4,665 3,944 3,441 95 215 5,801 6,095 9,843 9,754 $14,998 $ 14,419 We forecast Nike using the following forecast assumptions: Revenue growth based on growth in revenues from 2010 to 2011 15% Cost of sales/Revenues 51.996 Demand creation expense/Revenues 13.596 Operating overhead expenses/Revenues 22.296 Income taxes/Income before income taxes 22.396 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 $ 25,141 Cost of sales 11,354 13,048 Gross profit 10,508 12,093 Demand creation expense 2,948 3,394 Operating overhead expense 4,845 5,581 Interest expense, net 4 Other income 33 33 Income before income taxes 2,744 3,147 Income taxes 611 702 Net Income $2,133 $ 2,445 We forecast Nike's balance sheet using the following forecast assumptions: Accounts receivable/Revenues 14.496 Inventories/Revenues 12.496 Deferred income taxes/Revenues 1.49 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 Accrued liabilities/Revenues 9.1% Income taxes payable/Revenues 0.5% Deferred income taxes and other liabilities/Revenues 4.2% Capital expenditures/Revenues 2.096 Dividends/Net income 26.096 Current portion of L/T debt due in 2013 $48 6.796 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 $1,955 $ 2,583 3,138 2,715 312 594 11,297 2,115 487 205 894 $14,998 $ 2,967 2,583 3,620 3,117 352 679 13,318 2,252 463 205 1,032 17,269 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 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 $200 $ 187 1,469 1,985 117 3,958 276 921 5,155 3 3,944 95 5,801 9843 $14,998 $ 48 187 1,684 2,288 126 4,333 228 1,056 5,617 3,944 95 7,610 11 652 17,269 Instructions: Forecast Nike's fiscal year 2012 stastement of cash flows. Remember to use negative signs with your answers below, when appropriate. 366 (40) Nike's Forecasted Statement of Cash Flows ($ millions) 2012 Est. Net income $ 2,445 Add: depreciation Add: amortization 24 Change in Accounts receivable (482) Change in Inventories (402) Change in Deferred income taxes Change in Prepaid expenses & other current assets (85) Change in LT Deferred income taxes & other assets (137) Change in Accounts payable 215 Change in Accrued liabilities 303 Change in Income taxes payable Change in LT Deferred income taxes and other liabilities 135 Net cash from operating activities 2,351 Capital expenditures (503) Net cash from investing activities (503) Dividends (636) Payments of LT debt (200) Net cash from financing activities (836) Net change in cash 1,012 Beginning cash 1,955 Ending cash $ 2,967 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 $ 19,014 Cost of sales 11,354 10,214 Gross profit 10,508 8,800 Demand creation expense 2,948 2,356 Operating overhead expense 4,845 3,970 Total selling and administrative expense 7,793 6,326 Interest expense (income), net Other (income) (33) (49) Income before income taxes 2,744 2,517 Income taxes 611 610 Net income $ 2,133 $1,907 Balance Sheets May 31 2011 2010 $ 1,955 $3,079 2,583 2,067 3,138 2,650 2,715 2,041 312 249 594 873 11,297 10,959 2,115 1,932 487 467 205 894 873 $14,998 $ 14,419 188 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 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 $ 200 187 1,469 1,985 117 3,958 276 $7 139 1,255 1,904 59 3,364 446 921 5,155 855 4,665 3,944 3,441 95 215 5,801 6,095 9,843 9,754 $14,998 $ 14,419 We forecast Nike using the following forecast assumptions: Revenue growth based on growth in revenues from 2010 to 2011 15% Cost of sales/Revenues 51.996 Demand creation expense/Revenues 13.596 Operating overhead expenses/Revenues 22.296 Income taxes/Income before income taxes 22.396 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 $ 25,141 Cost of sales 11,354 13,048 Gross profit 10,508 12,093 Demand creation expense 2,948 3,394 Operating overhead expense 4,845 5,581 Interest expense, net 4 Other income 33 33 Income before income taxes 2,744 3,147 Income taxes 611 702 Net Income $2,133 $ 2,445 We forecast Nike's balance sheet using the following forecast assumptions: Accounts receivable/Revenues 14.496 Inventories/Revenues 12.496 Deferred income taxes/Revenues 1.49 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 Accrued liabilities/Revenues 9.1% Income taxes payable/Revenues 0.5% Deferred income taxes and other liabilities/Revenues 4.2% Capital expenditures/Revenues 2.096 Dividends/Net income 26.096 Current portion of L/T debt due in 2013 $48 6.796 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 $1,955 $ 2,583 3,138 2,715 312 594 11,297 2,115 487 205 894 $14,998 $ 2,967 2,583 3,620 3,117 352 679 13,318 2,252 463 205 1,032 17,269 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 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 $200 $ 187 1,469 1,985 117 3,958 276 921 5,155 3 3,944 95 5,801 9843 $14,998 $ 48 187 1,684 2,288 126 4,333 228 1,056 5,617 3,944 95 7,610 11 652 17,269 Instructions: Forecast Nike's fiscal year 2012 stastement of cash flows. Remember to use negative signs with your answers below, when appropriate. 366 (40) Nike's Forecasted Statement of Cash Flows ($ millions) 2012 Est. Net income $ 2,445 Add: depreciation Add: amortization 24 Change in Accounts receivable (482) Change in Inventories (402) Change in Deferred income taxes Change in Prepaid expenses & other current assets (85) Change in LT Deferred income taxes & other assets (137) Change in Accounts payable 215 Change in Accrued liabilities 303 Change in Income taxes payable Change in LT Deferred income taxes and other liabilities 135 Net cash from operating activities 2,351 Capital expenditures (503) Net cash from investing activities (503) Dividends (636) Payments of LT debt (200) Net cash from financing activities (836) Net change in cash 1,012 Beginning cash 1,955 Ending cash $ 2,967