The three things that you are required to do are:

Do a horizontal analysis for Nikes Income Statement for 2013

Do a vertical analysis for Nikes Income Statement for 2013

Do a ratio analysis for Nike for 2012 and 2013 for the ratios listed in the Nike, Inc., Problem on pages 748-749 of your textbook. You also need to comment on each set of ratios that you calculate.

B-4 Appendix B Nike Inc., Form 10-K For the Fiscal Year Ended May 31, 2013 NIKE, Inc. Consolidated Statements of Income Year Ended May 31, 2012 2013 2011 $ (In millions except per share data) Income from continuing operations: Revenues Cost of sales Gross profit Demand creation expense Operating overhead expense Total selling and administrative expense Interest (income) expense, net (Notes 6, 7 and 8) Other (income) expense, net (Note 17) Income before income taxes Income tax expense (Note 9) NET INCOME FROM CONTINUING OPERATIONS NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS NET INCOME 25,313 14,279 11,034 2,745 5,035 7,780 23,331 $ 13,183 10.148 2,607 4.458 7,065 20.117 10,915 9,202 2,344 4,017 6,361 (25) (15) 3.272 808 2,464 21 54 3,025 756 2.269 (46) (46) 2,223 $ 2.862 690 2,172 (39) 2,133 2,485 $ Earnings per share from continuing operations: Basic earnings per common share (Notes 1 and 12) Diluted earnings per common share (Notes 1 and 12) 2.75 2.69 $ $ 2.47 S 2.42 $ 2.28 2.24 Earnings per share from discontinued operations: Basic earnings per common share (Notes 1 and 12) Diluted earnings per common share (Notes 1 and 12) 0.02 $ 0.02 $ (0.05) $ (0.05) $ (0.04) (0.04) Dividends declared per common share 0.81 $ 0.70 $ 0,60 The accompaviying notes to consolidated financial statements are an integral part of this statement Appendix B Nike Inc Form 10K For the Fiscal Year Ended May 31, 2013 IKE, Inc. Consolidated Statements of Comprehensive Income 3-5 NIKE. In 2013 Year Ended May 31, 2012 2.485 $ 2.223 $ 2011 2,133 (295) 203 117 255 1242) (57) 45 (in millions) Net Income Other comprehensive income (loss), net of tax Foreign currency translation and other Net gain (loss) on cash flow hedges Net gain (loss) on net investment hedges Reclassification to net income of previously deferred (gains) losses related to hedge derivative instruments Pelease of cumulative translation loss related to Umbro (Notes 14 and 15) Total other comprehensive income, net of tax TOTAL COMPREHENSIVE INCOME Net of tax (expense) benefit of $(12) milion. So million, and $(121) milion respectively. 12 Mer of tax (expense) benefit of 8/22) million, 5(8) milion, and 566 milion, respectively 3) Net of tax benefit of $0 million, 80 million, and $28 milion, respectively 4 Net of tax (benefit) expense of $0 million, $(14) milion, and $24 milion, respectively 9 Net of tax (benefit of $(47) million, 50 milion, and 50 milion, respectively The accompanying notes to consolidated financial statements are an integral part of this statement (105) 83 125 2.610 54 2,277 $ (120) 2,013 $ B-6 Appendix B Nike Inc., Form 10-K for the Fiscal Year Ended May 31, 2015 NIKE, Inc. Consolidated Balance Sheets May 31, 2013 2012 3,337 2.317 2,628 3,117 3,434 308 802 11,845 2,209 13,626 2,452 382 131 993 17,584 $ 370 131 910 15,465 $ 57 $ 121 In millions) ASSETS Current assets: Cash and equivalents Short-term investments (Note 6) Accounts receivable, net (Note 1) Inventories (Notes 1 and 2) Deferred income taxes (Note 9) Prepaid expenses and other current assets (Notes 6 and 17) Assets of discontinued operations (Note 15) Total current assets Property, plant and equipment, net (Note 3) Identifiable intangible assets, net (Note 4) Goodwill (Note 4) Deferred income taxes and other assets (Notes 6, 9 and 17) TOTALASSETS LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt (Note 8) Notes payable (Note 7) Accounts payable (Note 7) Accrued liabilities (Notes 5, 6 and 17) Income taxes payable (Note 9) Liabilities of discontinued operations (Note 15) Total current liabilities Long-term debt (Note 8) Deferred income taxes and other liabilities (Notes 6, 9 and 17) Commitments and contingencies (Note 16) Redeemable Preferred Stock (Note 10) Shareholders' equity: Common stock at stated value (Note 11): Class A convertible - 178 and 180 shares outstanding Class B-716 and 736 shares outstanding Capital in excess of stated value Accumulated other comprehensive income (Note 14) Retained earnings Total shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 49 108 1,549 1,941 1,646 1,986 98 18 3,926 1,210 1,292 170 3,882 4,641 149 5.184 274 5,695 11.156 17,584 5,588 10,381 15,465 $ The accompanying notes to consolidated financial statements are an integral part of this statement 44 Fiscal Year Ended May 31, 2013 Appendix B Nike Inc. Form 10-K for the Fiscal Year Ended May 31, 2015 B-7 KE. Inc. Consolidated Statements of Cash Flows In millions Year Ended May 31, 2012 Cash provided by operations: 2013 2011 Nel income $ 2,485 $ 2,223 $ 2,133 438 373 335 174 130 105 (124) 142 (197) (28) (323) (805) (141) 470 1,899 (273) (551) (35) 151 1,812 3,027 (3,702) 1,501 998 (636) (2,705) 2,585 1,244 (597) (7,616) 4,313 2.766 (432) 14 2 Income charges (credits) not affecting cash; Depreciation Deferred income taxes Stock-based compensation (Note 11) Amortization and other Net gain on divestitures Changes in certain working capital components and other assets and liabilities: Decrease increase) in accounts receivable Increase) in inventories (Increase) in prepaid expenses and other current assets Increase in accounts payable, accrued liabilities and income taxes payable Cash provided by operations Cash (used) provided by investing activities: Purchases of short-term investments Maturities of short-term investments Sales of short-term investments Additions to property, plant and equipment Disposals of property, plant and equipment Proceeds from divestitures Increase in other assets, net of other liabilities Settlement of net investment hedges Dash (used) provided by investing activities Cash used by financing activities: Net proceeds from long-term debt issuance Long-term debt payments, including current portion hcrease (decrease) in notes payable Proceeds from exercise of stock options and other stock issuances excess tax benefits from share-based payment arrangements Repurchase of common stock Dividends-common and preferred th used by financing activities Effect of exchange rate changes ncrease (decrease) in cash and equivalents cash and equivalents, beginning of year LASH AND EQUIVALENTS, END OF YEAR emental disclosure of cash flow information: cash paid during the year for Interest, net of capitalized interest 786 (28) (30) (23) (1.021) (1,067) (203) (65) (8) 41 345 986 (49) 15 313 72 (1,674) (703) (1.040) 100 1,020 2,317 468 115 (1.814) (619) (2,118) 67 (1.859) (555) (1.972) 57 (1.124) 3,079 1,955 362 3,337 $ 1,955 2,317 $ Supplemental Income taxes 20 $ $ 32 29 638 165 dends declared and not paid 188 736 145 The staying panying notes to consolidated financial statements are an integral part of this statement . B-8 Appendix B Nike Inc., Form 10-K For the Fiscal Year Ended May 31, 2013 NIKE, Inc. Consolidated Statements of Shareholders' Equity Retained Capital in Common Stock Excess of Accumulated Other Class A Class B Stated Comprehensive Shares Amount Shares Amount Value Income 180 $ - 788 $ 3 $ 3,441 $ Earnings Total 215 $ 6,095 $ 9,754 368 (1,857) (1,871) 14 368 (14) (48) (569) 49 105 (5) (569) 49 105 (120) 95 $ 180 $ - 3 $ $ (In millions, except per share data) Balance at May 31, 2010 Stock options exercised Repurchase of Class B Common Stock Dividends on Common stock ($0.60 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Net income Other Comprehensive Income Balance at May 31, 2011 Stock options exercised Repurchase of Class B Common Stock Dividends on Common stock ($0.70 per share) Issuance of shares to employees Stock-based compensation (Note 11) Forfeiture of shares from employees Net income Other comprehensive income Balance at May 31, 2012 Stock options exercised Conversion to Class B Common Stock - Repurchase of Class B Common Stock Dividends on Common stock ($0.81 per Share) 756 $ 18 (40) 3,944 528 (12) 2,133 2,133 (120) 5,801 $ 9,843 528 (1.793) (1,805) (639) (639) 57 130 (4) (10) 2,223 2,223 54 5,588 $ 10,381 130 (6) 54 180 $ - 736 $ 3 $ $ 4,641 322 149 $ 322 (2) (10) (1,647) (1.657) (727) (727) Issuance of shares to employees Stock-based compensation (Note 11) Fortelture of shares from employees Net income Other comprehensive income Balance at May 31, 2013 65 174 174 (8) (4) 2.485 (12) 2.485 178 $ 125 125 The accompanying notes to consolidated financial statements are an integral part of this statement - 716 $ 3 $ 5,184 $ 274 $ $ 5,695 5,69 $ 11,156 46 the years on the hori Instructions 1. Prepare four line graphs with the ratio on the vertical axis and the ve zontal axis for the following four ratios (rounded to one decimal pla a. Rate earned on total assets b. Rate eamed on stockholders' equity c. Number of times interest charges are earned d. Ratio of liabilities to stockholders' equity Display both the company ratio and the industry benchmark on each cach graph should have two lines. Prepare an analysis of the graphs in (1). on each graph. That is Nike, Inc., Problem opendix B at the end of the Financial Statement Analysis The financial statements for Nike, Inc., are presented in Appendix B at the text. The following additional information in thousands) is available: Accounts receivable at May 31, 2010 $ 3,138 Inventories at May 31, 2010 2,715 Total assets at May 31, 2010 14,998 Stockholders'equity at May 31, 2010 9,843 Instructions 1. Determine the following measures for the fiscal years ended May 31, 2013 (fiscal 2012 and May 31, 2012 (fiscal 2011), rounding to one decimal place. 1. Working capital b. Current ratio c. Quick ratio d. Accounts receivable turnover J. 2, 3 012 0.000 50,000 20,000 -2,000 Chapter 15 Financial Statement Analysis 749 e. Number of days' sales in receivables f. Inventory turnover 8. Number of days' sales in inventory h. Ratio of liabilities to stockholders' equity i. Ratio of sales to assets 1. Rate earned on total assets, assuming interest expose is $23 million for the year ending May 31, 2013, and $31 million for the year ending May 31, 2012 k. Rate carned on common stockholders' equity 1. Price-earnings ratio, assuming that the market price was $61.66 per share on May 31, 2013, and $53.10 per share on May 31, 2012 m. Percentage relationship of net income to sales What conclusions can be drawn from these analyses? 0,000 5.000 .000 the Cases & Projects CP 15-1 Analysis of financing corporate growth Assume that the president of Freeman Industries Inc, made the following statement in the Annual Report to Shareholders: "The founding family and majority shareholders of the company do not believe in using debt to finance future growth. The founding family learned from hard experience during Prohibition and the Great Depression that debt can cause loss of flexibility and eventual loss of corporate control. The company will not place itself at such risk. As such all future growth will be financed either by stock sales to the public or by internally generated resources." As a public shareholder of this company, how would you respond to this policy? CP 15-2 Receivables and story over Rodgers Industries Inc o re calor on December 31. The auditor, Josh McCoy, has approached it , h a ndling the war and receivables and inventory levels of Rodgers k es place: Josh: We are beginning our audit of Redocilind o determine if there have been significant changes in operations or fint post s . The indicates that the inventory turnover has decreased from St. G a llo decreased from 11 to 7. Could you explain this change in operation Aaron: There is little need for concern. The inventory representi com holiday buying season. We are confident, however, that we will be able t next fiscal year. Josh: What gives you this confidence? Aaron: We will increase our advertising and provide some very attractive price con t her We have no choice. Newer technology is already out there, and we have to unload thirty Josh:... and the receivables? Aaron. Ac une may be aware the company is under tremendous pressure to expand sales and profes lowered our credit standards to our commercial customers so that we would be able to sell produs customer base. As a result of this policy change, we have been able to expand sales by 35 Josh: Your responses have not been reassuring to me. Agron: I'm a little confused. Assets are good d Assets are good, right? Why don't you look at our current ratio? It has improved hasn't it? that yery favorably