Nikes FSA 3

Statement of Income.

	5/31/18	5/31/17	change	% change
Revenues	36,397	34,350	2,047	5.96%
Cost of sales	20,441	19,038	1.403	7.37%
Gross profit	15,956	15,312	644	4.21%
Total selling and admin exp	11,511	10,563	948	8 970
Interest expense	54	59	-5	-8 47%
Other expense (income)	66	(196)	262	-133.67%
Income before taxes	4,325	4,886	-561	-11.48%
Income tax expense	2,392	646	1,746	270.28%
Net Income	1,933	4,240	-2.307	-54.41%

FSA 3: Inventory Turnover and number of days sales in inventory

You will use the NIKE financial statements in appendix C for these ratios. They are also located under the FSA module under the content tab in Cobra.

The formula for inventory turnover is = Cost of merchandise sold

average merchandise inventory

Average inventory is the sum of the beginning and ending added together and then divided by 2. The beginning inventory for 5/31/18 is the ending inventory for 5/31/17. The beginning inventory for 5/31/17 is 4,838. You will round the average inventory to the nearest tenth before diving into the cost of merchandise sold (Nike uses cost of sales). Then round the ratio to the nearest tenth.

5/31/18 ratio

5/31/17 ratio

This ratio measures the number of times inventory is turned over during the year. The higher the number, the more efficiently the company is buying, selling and replacing the inventory, and managing its inventory well.

Comment on NIKEs inventory efficiency and management between the two years.

The formula for number of days sales in inventory is:

Average merchandise inventory

Average daily cost of merchandise sold

Average inventory is the sum of the beginning and ending added together and then divided by 2. The beginning inventory for 5/31/18 is the ending inventory for 5/31/17. The beginning inventory for 5/31/17 is 4,838. You will round the average inventory to the nearest tenth before diving into the cost of merchandise sold (Nike uses cost of sales). Then round the ratio to the nearest tenth.

The average daily cost of merchandise sold is Cost of merchandise sold / 365. You will round this to the nearest tenth before dividing into average inventory

This ratio is a rough measure of the number of days it takes to purchase, sell and replace the inventory.

5/31/18 ratio

5/31/17 ratio

Comment on NIKEs inventory efficiency and management between the two years