Question

For your company Nike:

1. Evaluation of Financial Statements (note key word is “evaluation”)
2. 1. Overview
   2. Short-term liquidity
   3. Activity Ratios
   4. Financial Leverage (Debt Ratios)
   5. Profitability and Market Ratios
   6. Common-sized Income Statement Analysis
   7. Discussion of the Company’s capital structure

Answer 1

Answer:

NIKE- It is an American multinational corporation which is into footwear, clothing and accessories manufacturing, it manufactures clothing and footwear for sports also. Company head quarter is in Oregon.  

Nike's ratio analysis- Data as on May 31, 2019:

Short-term liquidity- Tells the liquidity position of the company.

Its current ratio is 2.1 that shows, company is liquid and is able to meet its short term obligations.

Activity Ratios- Tell the efficiency of assets to generate revenue and profit and also the time taken in collecting the payment.

1. Company's asset turnover is 1.64 that shows, company is able to generate sales from its assets and assets are efficiently utilized.
2. Inventory turnover ratio is 3.85 that shows company's inventory is sold 3.85 times in a year.
3. Company's days sales in receivable is 39.8 that shows, company takes 39 days to collect the payment of its customers.

Financial Leverage (Debt Ratios)- Tell how much debt/loan a company has.

1. Company's long term debt to capital ratio is .277 that shows, company has lower long term debt with respect to its capital.
2. Debt to equity ratio is .38 that shows, company has less debt as compare to equity.

Profitability ratios- Tell how much a company is profitable.

1. Company's gross margin is 44% that is good.
2. EBIT margin is 12%
3. Net profit margin is 10% that shows company's profitability position is good.
4. Return on equity is 44% that is good. Company is providing higher return on equity.
5. Return on asset is 16.9% that shows, company is able to generate profit from its assets.

Common-sized Income Statement Analysis- Company's total revenue is $39117000 that increased from previous year. Cost of revenue is $21643000 that also increased from previous year. Company's net income is $4029000.

Discussion of the Company’s capital structure-

1. Nike's long term debt is $3.46 Billion and total liabilities are $14.67 Billion.
2. Its shareholder's equity is $9.04 Billion that is higher than the long term debt.

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