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 $20112010$

Revenues $ $20,862$ $ $19,014$

Cost of sales $11,35410,214$

Gross profit $9,5088,800$

Demand creation expense $2,4482,356$

Operating overhead expense $4,2453,970$

Total selling and administrative expense $6,6936,326$

Interest expense $($income$),$ net $46$

Other $($income$)(33)(49)$

Income before income taxes $2,8442,517$

Income taxes $711610$

Net income $ $2,133$ $ $1,907$

Balance Sheets

May $31$

In Millions $20112010$

Assets

Cash and equivalents $ $1,955$ $ $3,079$

Short$-$term investments $2,5832,067$

Accounts receivable, net $3,1382,650$

Inventories $2,7152,041$

Deferred income taxes $312249$

Prepaid expenses and other current assets $594873$

Total current assets $11,29710,959$

Property, plant and equipment, net $2,1151,932$

Identifiable intangible assets $($net$)487467$

Goodwill $205188$

Deferred income taxes and other assets $894873$

Total assets $ $14,998$ $ $14,419$

Liabilities and Shareholders' Equity

Current portion of long$-$term debt $ $200$ $ $7$

Notes payable $187139$

Accounts payable $1,4691,255$

Accrued liabilities $1,9851,904$

Income taxes payable $11759$

Total current liabilities $3,9583,364$

Long$-$term debt $276446$

Deferred income taxes and other liabilities $921855$

Total liabilities $5,1554,665$

Common stock at stated value $33$

Capital in excess of stated value $3,9443,441$

Accumulated other comprehensive income $95215$

Retained earnings $5,8016,095$

Total shareholders' equity $9,8439,754$

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 $201110\%$

Cost of sales$/$Revenues $54\mathrm{.}4\%$

Demand creation expense$/$Revenues $11\mathrm{.}7\%$

Operating overhead expenses$/$Revenues $20\mathrm{.}3\%$

Income taxes$/$Income before income taxes $25\mathrm{.}0\%$

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$)20112012$

Revenues $$20,862$ Answer $1$

$0$

Cost of sales $11,354$ Answer $2$

$0$

Gross profit $9,508$ Answer $3$

$0$

Demand creation expense $2,448$ Answer $4$

$0$

Operating overhead expense $4,245$ Answer $5$

$0$

Interest expense, net $4$ Answer $6$

$0$

Other income $33$ Answer $7$

$0$

Income before income taxes $2,844$ Answer $8$

$0$

Income taxes $711$ Answer $9$

$0$

Net Income $ $2,133$ Answer $10$

$0$

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

Accounts receivable$/$Revenues $15\mathrm{.}0\%$

Inventories$/$Revenues $13\mathrm{.}0\%$

Deferred income taxes$/$Revenues $1\mathrm{.}5\%$

Prepaid expenses and other current assets$/$Revenues $2\mathrm{.}8\%$

L$-$T deferred income taxes and other assets$/$Revenues $4\mathrm{.}3\%$

Depreciation expense$/$Prior$-$year PPE, net $($incl$.$ in overhead$)17\mathrm{.}3\%$

Amortization expense $$24$

Accounts payable$/$Revenues $7\mathrm{.}0\%$

Accrued liabilities$/$Revenues $9\mathrm{.}5\%$

Income taxes payable$/$Revenues $0\mathrm{.}6\%$

Deferred income taxes and other liabilities$/$Revenues $4\mathrm{.}4\%$

Capital expenditures$/$Revenues $2\mathrm{.}1\%$

Dividends$/$Net income $26\mathrm{.}0\%$

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$)20112012$

Assets

Cash and equivalents $ $1,955$ Answer $11$

$0$

Short$-$term investments $2,583$ Answer $12$

$0$

Accounts receivable, net $3,138$ Answer $13$

$0$

Inventories $2,715$ Answer $14$

$0$

Deferred income taxes $312$ Answer $15$

$0$

Prepaid expenses and other current assets $594$ Answer $16$

$0$

Total current assets $11,297$ Answer $17$

$0$

Property, plant and equipment, net $2,115$ Answer $18$

$0$

Identifiable intangible assets, net $487$ Answer $19$

$0$

Goodwill $205$ Answer $20$

$0$

Deferred income taxes and other assets $894$ Answer $21$

$0$

Total assets $$14,998$ Answer $22$

$0$

Liabilities and Shareholders' Equity

Current portion of long$-$term debt $ $200$ Answer $23$

$0$

Notes payable $187$ Answer $24$

$0$

Accounts payable $1,469$ Answer $25$

$0$

Accrued liabilities $1,985$ Answer $26$

$0$

Income taxes payable $117$ Answer $27$

$0$

Total current liabilities $3,958$ Answer $28$

$0$

Long$-$term debt $276$ Answer $29$

$0$

Deferred income taxes and other liabilities $921$ Answer $30$

$0$

Total liabilities $5,155$ Answer $31$

$0$

Common stock at stated value $3$ Answer $32$

$0$

Capital in excess of stated value $3,944$ Answer $33$

$0$

Accumulated other comprehensive income $95$ Answer $34$

$0$

Retained earnings $5,801$ Answer $35$

$0$

Total shareholders' equity $9,843$ Answer $36$

$0$

Total liabilities and shareholders' equity $$14,998$ Answer $37$

$0$

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

Remember to use negative signs