In 250 words please tell me whether or not you would recommend that I invest in Nike - you will need to substantiate your recommendation with your ratio findings from the first part of this assignment.

A: Working Capital:

Working Capital = Current Assets - Current Liabilities

For 2018: $15,134 - $6,040 = $9,094

For 2017: $16,061 - $5,474 = $10,587

Interpretation: This ratio determines a company's ability to weather financial crunch. Banking institutions are interested for this ratio before granting a loan.

B: Current Ratio:

Current Ratio = Current Assets / Current Liabilities

For 2018: $15,134 / $6,040 = 2.5

For 2017: $16,061 / $5,474 = 2.9

Interpretation: Current ratio is a measure of short term solvency which measures the entity's capability to cover up its current liabilities through its current resources.

C: Quick Ratio:

Quick Ratio = Quick Assets / Current Liabilities

Where, Quick assets = Current assets - Inventories - Prepaid expenses

For 2018: Quick assets = $15,134 - $5,261 - $1,130 = $8,743

Quick Ratio = $8,743 / $6,040 = 1.4

For 2017: Quick assets = $16,061 - $5,055 - $1,150 = $9,856

Quick Ratio = $9,856 / $5,474 = 1.8

Interpretation: It is more conservative in terms of short-term liquidity. Quick assets only include cash and cash equivalents so it can measure a company's ability to pay off its current liabilities without having to worry about assets generated from sales.

D: Accounts Receivable Turnover:

Accounts Receivable Turnover = Credit Sales / Average Accounts Receivable

For 2018: Average accounts receivable = ($3,498 + $3,677) / 2 = $3,587.5

Accounts receivable turnover = $36,397 / $3,587.5 = 10.1

For 2017: Average accounts receivable = ($3,677 + $3,241) / 2 = $3,459

Accounts receivable turnover = $34,350 / $3,459 = 9.9

Interpretation: The ratio measures the speed with which the receivables are converted into cash.

E: Number of days sales in receivables:

Number of days sales in receivables = 365 Days / Accounts Receivable Turnover

For 2018: Days Sales in Receivables = 365 / 10.1 = 36.1 days

For 2017: Days Sales in Receivables = 365 / 9.9 = 36.9 days

Interpretation: This ratio measures the average number of days it takes to collect the accounts receivable.

F: Inventory Turnover:

Inventory Turnover = Cost of Goods Sold / Average Inventory

For 2018: Average inventory = ($5,261 + $5,055) / 2 = $5,158

Inventory Turnover = $20,441 / $5,158 = 4

For 2017: Average inventory = ($5,055 + $4,838) / 2 = $4,946.5

Inventory Turnover = $19,038 / $4,946.5 = 3.8

Interpretation: It measures the efficiency with which the entity manages its inventory.

G: Number of Days Sales in Inventory:

Days Sales in Inventory = 365 Days / Inventory Turnover

For 2018: 365 / 4 = 91.3 days

For 2017: 365 / 3.8 = 96 days

Interpretation: It measures the number of days the company takes to sell its inventory in a year.

H: Ratio of Liabilities to Stockholders Equity:

For 2018: Total liabilities = $6,040 + $3,468 + $3,216 = $12,724

Liabilities to Stockholders equity = $12,724 / $9,812 = 1.3

For 2017: Total liabilities = $5,474 + $3,471 + $1,907 = $10,852

Liabilities to Stockholders equity = $10,852 / $12,407 = 0.9

Interpretation: Shows the relationship between the liabilities and the owners’ equity. This ratio measures the claims of creditors over the claims of owners in financing the assets. A lower ratio indicates that the company has good ability to pay off the creditor’s obligations.

I: Asset Turnover:

Asset Turnover = Sales / Total Assets

For 2018: $36,397 / $22,536 = 1.6

For 2017: $34,350 / $23,259 = 1.5

Interpretation: It measures the efficiency with which an entity manages its assets to generate revenue.

J: Return on Total Assets:

Return on Assets = Net Profit / Average Total Assets

For 2018: Average total assets = ($22,536 + $23,259) / 2 = $22,897.5

ROA = $1,933 / $22,897.5 = 0.08 or 8%

For 2017: Average total assets = ($23,259 + $21,379) / 2 = $22,319

ROA = $4,240 / $22,319 = 0.19 or 19%

Interpretation: It measures the profitability of the entity in terms of assets employed into it.

K: Return on Common Stockholders’ Equity

Return of Common shareholders’ equity= Net Income-Preferred dividend/Average common shareholders’ equity

For 2018: 1933/((12407+9812)/2)=0.17

For 2017: 4240/((12258+12407)/2)=0.34

L: Price-Earnings Ratio, assuming that the market price was $72.12 per share on May 29,2018, and $53.06 per share on May 30, 2017.

Price Earning= Market price per share/Basic earning per share

For 2018= 72.12/1.19=60.61

For 2017= 53.06/2.56=20.73