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Nike has launched a new line of sports apparel. The financial performance for the first year is as follows. Income Statement for the Year Ended
Nike has launched a new line of sports apparel. The financial performance for the first year is as follows.
Income Statement for the Year Ended December 31, 2023:
- Sales revenue: $2,500,000
- Cost of goods sold: $1,500,000
- Gross margin: $1,000,000
- Operating expenses: $400,000
- Depreciation expense: $100,000
- Operating income: $500,000
- Non-operating items: $20,000
- Net income: $480,000
Balance Sheet as of December 31, 2023:
- Assets:
- Cash: $100,000
- Accounts receivable: $300,000
- Merchandise inventory: $200,000
- Equipment (less accumulated depreciation): $400,000
- Total assets: $1,000,000
- Liabilities:
- Accounts payable: $200,000
- Notes payable: $300,000
- Total liabilities: $500,000
- Stockholders' equity: $500,000
Required:
- Calculate the ROI for Nike’s new sports apparel line.
- Nike’s headquarters has $150,000 available for investment, expecting an ROI of 14%. Calculate the new ROI if the funds are invested at an ROI of 18%.
- Determine the effect on ROI if the funds are invested at an ROI of 10%.
- Evaluate the strategic benefits and potential risks of investing additional funds in the sports apparel line.
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