Ratios: accounts receivable turnover and # of days sale in receivables You will use the NIKE financial statements in appendix C for these ratios The formula for accounts receivable turnover is = Sales (Revenues)/ average accounts receivable Average accounts receivable is the sum of the beginning and ending accounts receivable added together and then divided by 2. The beginning accounts receivable for 5/31/18 is the ending accounts receivable from 5/31/17. The beginning accounts receivable for 5/31/17 is 3,241. Round the average accounts receivable to the nearest tenth before dividing into the sales. Then round the ratio to the nearest tenth. 5/31/18 ratio 5/31/17 ratio The formula for number of days sales in receivables is: Average accounts receivable Average daily sales Average accounts receivable is the sum of the beginning and ending accounts receivable added together and then divided by 2. The beginning accounts receivable for 5/31/18 is the ending accounts receivable from 5/31/17. The beginning accounts receivable for 5/31/17 is 3,241. Round the average accounts receivable to the nearest tenth. The average daily sales is equal to sales (Revenues)/365. Round the average daily sales to the nearest tenth before dividing into the average accounts receivable. Then round the ratio to the nearest tenth 5/31/18 ratio 5/31/17 ratio This ratio is an estimate of the number of days the receivables have been outstanding. The ratio is compared to the credit terms to see how well the company is doing with collection. If the terms are net 30, you would want this number to be close to 30. Comment on NIKEs accounts receivable collection and management between the two years. NIKE, Inc. Consolidated Statements of Income (In millions, except per share data) 2018 Revenues 36,397 $ 34,350 $ 32,376 Cost of sales 20,441 19,038 17,405 Gross profit 15,956 15,312 14,971 Demand creation expense 3,577 3,341 3,278 Operating overhead expense 7,934 7,222 7,191 Total selling and administrative expense 11,511 10,563 10,469 Interest expense (income), net 54 59 19 Other expense (income), net 66 (196) (140) Income before income taxes 4,325 4,886 4,623 Income tax expense 2,392 646 863 NET INCOME $ 1,933 $ 4,240 $ 3,760 Earnings per common share: Basic $ 1.19 $ 2.56 $ 2.21 Diluted $ 1.17 $ 2.51 $ 2.16 Dividends declared per common share $ 0.78 $ 0.70 $ 0.62 The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement. NIKE, Inc. Consolidated Statements of Comprehensive Income Year Ended May 31, 2017 (In millions) 2018 2016 Net income $ 4,240 $ Other comprehensive income (loss), net of tax: Change in net foreign currency translation adjustment 16 Change in net gains (losses) on cash flow hedges (515) Change in net gains (losses) on other (32) Total other comprehensive income (loss), net of tax (531) TOTAL COMPREHENSIVE INCOME $ 3,709 $ The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement. NIKE, Inc. Consolidated Balance Sheets (In millions) ASSETS Current assets: Cash and equivalents Short-term investments Accounts receivable, net Inventories von Prepaid expenses and other current assets Total current assets Total current Property, plant and equipment, net Property, Identifiable intangible assets, net Goodwill Scoawi Deferred income taxes and other assets TOTAL ASSETS LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: 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 Commitments and contingencies (Note 15) Redeemable preferred stock Shareholders' equity: Common stock at stated value: Class A convertible - 329 and 329 shares outstanding Class B 1,272 and 1,314 shares outstanding Capital in excess of stated value Accumulated other comprehensive loss Retained earnings Total shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,933 $ (6) $ Year Ended May 31, 2017 104 2,037 $ $ $ 76 34 S 2018 May 31, 4,249 $ 996 3,498 5,261 1,130 1,130 15,134 0,104 4,454 285 154 2,509 22,536 $ 6 $ 336 2,279 3,269 150 6,040 3,468 3,216 3 6,384 (92) 3,517 9,812 22,536 $ 2016 2017 3,760 (176) (757) 5 (928) 2,832 3,808 2,371 3,677 5,055 3,000 1,150 16,061 10,00 3,989 3,309 283 139 2,787 23,259 6 325 2,048 3,011 84 5,474 3,471 1,907 3 5,710 (213) 6,907 12,407 23,259 NIKE, Inc. Consolidated Statements of Cash Flows Year Ended May 31, 2017 (In millions) 2018 Cash provided by operations: Net income 4,240 $ Adjustments to reconcile net income to net cash provided by operations: Depreciation 706 Deferred income taxes (273) 215 Stock-based compensation Amortization and other 10 Net foreign currency adjustments (117) Changes in certain working capital components and other assets and liabilities: Decrease (increase) in accounts receivable (426) (Increase) in inventories (231) (120) Decrease (increase) in prepaid expenses and other current and non-current assets Increase (decrease) in accounts payable, accrued liabilities and other current and non-current liabilities (158) Cash provided by operations Cash provided (used) by investing activities: Purchases of short-term investments Maturities of short-term investments Sales of short-term investments Investments in reverse repurchase agreements Additions to property, plant and equipment Disposals of property, plant and equipment Other investing activities Cash provided (used) by investing activities Cash used by financing activities: Net proceeds from long-term debt issuance Long-term debt payments, including current portion Increase (decrease) in notes payable Payments on capital lease and other financing obligations Proceeds from exercise of stock options and other stock issuances Repurchase of common stock Dividends - common and preferred Tax payments for net share settlement of equity awards Cash used by financing activities Effect of exchange rate changes on cash and equivalents Net increase (decrease) in cash and equivalents Cash and equivalents, beginning of year CASH AND EQUIVALENTS, END OF YEAR Supplemental disclosure of cash flow information: Cash paid during the year for: Interest, net of capitalized interest Income taxes Non-cash additions to property, plant and equipment Dividends declared and not paid The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement. ||||| 9 69 1,933 $ 747 647 218 27 (99) 187 (255) 35 1,515 4,955 (4,783) 3,613 2,496 (1,028) 3 (25) 276 (6) 13 (23) 733 (4,254) (1,243) (55) (4,835) 45 441 3,808 4,249 $ 125 $ 529 294 320 3,846 (5,928) 3,623 2,423 (1,105) 13 (34) (1,008) 1,482 (44) 327 (17) 489 (3,223) (1,133) (29) (2,148) (20) 670 3,138 3,808 S 98 $ 703 266 300 2016 3,760 649 (80) 236 13 98 60 (590) (161) (586) 3,399 (5,367) 2,924 2,386 150 (1,143) 10 6 (1,034) 981 (106) (67) (7) 507 (3,238) (1,022) (22) (2,974) (105) (714) 3,852 3,138 70 748 252 271 NIKE, Inc. Consolidated Statements of Shareholders' Equity Common Stock Capital in Excess Accumulated Other Class A Class B Amount Shares Amount of Stated Comprehensive Retained Value Income Earnings Total (In millions, except per share data) Balance at May 31, 2015 Stock options exercised $ $ 4,165 $ 1,246 $ 1,357 $ 3 22 680 2 (55) (148) Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on common stock ($0.62 per share) and preferred stock ($0.10 per share) Issuance of shares to employees, net of shares withheld for employee taxes Stock-based compensation 3 105 236 Net income Other comprehensive income (loss) Balance at May 31, 2016 1,329 $5,038 Stock options exercised 17 525 24 (60) (189) Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on common stock ($0.70 per share) and preferred stock ($0.10 per share) Issuance of shares to employees, net of shares withheld for employee taxes Stock-based compensation 121 215 Net income Other comprehensive income (loss) Balance at May 31, 2017 3 $5,710 1,314 24 Stock options exercised 600 (70) (254) Conversion to Class B Common Stock Repurchase of Class B Common Stock Dividends on common stock ($0.78 per share) and preferred stock ($0.10 per share) Issuance of shares to employees, net of shares withheld for employee taxes Stock-based compensation 4 110 218 Net income Other comprobonci in income (ona) Other comprehensive income (loss) Reclassifications to retained earnings in accordance with ASU 2018-02 Balance at May 31, 2018 329 $ 1,272 $ The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement. Shares 355 (2) $ 353 (24) 329 $ - - $ $ 3 $ $ 3 $ 6,384 $ (928) 318 $ (531) (213) $ 104 104 17 (92) $ 7,293 $12,707 680 (3,090) (3,238) (1,053) (1,053) (11) 94 236 3,760 3,760 (928) 6,899 $ 12,258 525 - (3,060) (3,249) (1,159) (1,159) (13) 108 215 4,240 4,240 (531) 6,907 $12,407 600 (4,013) (4,267) (1,265) (1,265) (28) 82 218 1,933 104 1,933 (17) 3,517 $ 104 9,812