Q12.

Nike Inc.: Statement of Cash Flows (amounts in millions) Year 1 Year 2 Year 3 Operations

Net income

167

243

297

Depreciation and amortization

15

17

34

Other Addbacks/Subtractions

(5)

5

3

Working Capital provided by Operations

177

265

324

(Increase) Decrease in Accounts Receivable

(38)

(105)

(120)

(Increase) Decrease in Inventories

(25)

(86)

(275)

(Increase) Decrease in Other Operating Current Assets

(2)

(5)

(6)

(Increase) Decrease in Accounts Payable

21

36

59

(Increase) Decrease in Other Operating Current Liabilities

36

22

32

Cash Flow from Operations

169

127

14

Investing

Sale of Property, Plant and Equipment

3

1

2

Acquisition of Property, Plant and Equipment

(42)

(87)

(165)

Acquisition of Investment

(1)

(3)

(48)

Cash Flow from Investing

(40)

(89)

(211)

Financing

Increase in Short-term Debt

0

0

269

Increase in Long-term Debt

0

1

5

Issue of Common Stock

3

2

3

Decrease in Short-term Debt

(96)

(8)

0

Decrease in Long-term Debt

(4)

(2)

(10)

Dividends

(22)

(26)

(41)

Cash Flow from Financing

(119)

(33)

226

Change in Cash

10

5

29

Cash, Beginning of the Year

74

84

89

Cash, End of the Year

84

89

118

Answer the following questions:

1.Why did Nike experience increasing net income but decreasing cash flow from operations during this three-year period? (5 points)

2.2. How did Nike finance its investing activities during the three-year period? Evaluate the appropriateness of Nike's choice of financing during Year 3. (5 points)