Question

Forecasting the Income Statement, Balance Sheet, and Statement of Cash Flows
Assume the following are the financial statements of Nike, Inc.

Consolidated Statements of Income
	Year ended May 31
In Millions	2011	2010
Revenues	$ 21,862	$ 19,014
Cost of sales	11,354	10,214
Gross profit	10,508	8,800
Demand creation expense	2,948	2,356
Operating overhead expense	4,845	3,970
Total selling and administrative expense	7,793	6,326
Interest expense (income), net	4	6
Other (income)	(33)	(49)
Income before income taxes	2,744	2,517
Income taxes	611	610
Net income	$ 2,133	$ 1,907

Balance Sheets
	May 31
In Millions	2011	2010
Assets
Cash and equivalents	$ 1,955	$ 3,079
Short-term investments	2,583	2,067
Accounts receivable, net	3,138	2,650
Inventories	2,715	2,041
Deferred income taxes	312	249
Prepaid expenses and other current assets	594	873
Total current assets	11,297	10,959
Property, plant and equipment, net	2,115	1,932
Identifiable intangible assets (net)	487	467
Goodwill	205	188
Deferred income taxes and other assets	894	873
Total assets	$ 14,998	$ 14,419
Liabilities and Shareholders' Equity
Current portion of long-term debt	$ 200	$ 7
Notes payable	187	139
Accounts payable	1,469	1,255
Accrued liabilities	1,985	1,904
Income taxes payable	117	59
Total current liabilities	3,958	3,364
Long-term debt	276	446
Deferred income taxes and other liabilities	921	855
Total liabilities	5,155	4,665
Common stock at stated value	3	3
Capital in excess of stated value	3,944	3,441
Accumulated other comprehensive income	95	215
Retained earnings	5,801	6,095
Total shareholders' equity	9,843	9,754
Total liabilities and shareholders' equity	$ 14,998	$ 14,419

We forecast Nike's income statement using the following forecast assumptions:

Revenue growth based on growth in revenues from 2010 to 2011	15%
Cost of sales/Revenues	51.9%
Demand creation expense/Revenues	13.5%
Operating overhead expenses/Revenues	22.2%
Income taxes/Income before income taxes	22.3%

Instructions: Forecast Nike's fiscal year 2012 income statement.

Assume no change for: other income and interest expense.

Round forecasts to $ millions.

Do not use negative signs with your answers in the income statement.  

Consolidated Statements of Income
($ millions)	2011	2012
Revenues	$21,862	$Answer 0.00 points out of 1.00
Cost of sales	11,354	Answer 0.00 points out of 1.00
Gross profit	10,508	Answer 0.00 points out of 1.00
Demand creation expense	2,948	Answer 0.00 points out of 1.00
Operating overhead expense	4,845	Answer 0.00 points out of 1.00
Interest expense, net	4	Answer 0.00 points out of 1.00
Other income	33	Answer 0.00 points out of 1.00
Income before income taxes	2,744	Answer 0.00 points out of 1.00
Income taxes	611	Answer 0.00 points out of 1.00
Net Income	$ 2,133	$Answer 0.00 points out of 1.00

Instructions: Forecast Nike's fiscal year 2012 balance sheet.

Assume no change for: short-term investments, goodwill, notes payable, common stock, capital in excess of stated value and accumulated other comprehensive income.

Round forecasts to $ millions.

We forecast Nike's balance sheet using the following forecast assumptions:

Accounts receivable/Revenues	14.4%
Inventories/Revenues	12.4%
Deferred income taxes/Revenues	1.4%
Prepaid expenses and other current assets/Revenues	2.7%
L-T deferred income taxes and other assets/Revenues	4.1%
Depreciation expense/Prior-year PPE, net (incl. in overhead)	17.3%
Amortization expense	$24
Accounts payable/Revenues	6.7%
Accrued liabilities/Revenues	9.1%
Income taxes payable/Revenues	0.5%
Deferred income taxes and other liabilities/Revenues	4.2%
Capital expenditures/Revenues	2.0%
Dividends/Net income	26.0%
Current portion of L/T debt due in 2013	$48

Balance Sheet
($ millions)	2011	2012
Assets
Cash and equivalents	$ 1,955	$Answer 0.00 points out of 1.00
Short-term investments	2,583	Answer 0.00 points out of 1.00
Accounts receivable, net	3,138	Answer 0.00 points out of 1.00
Inventories	2,715	Answer 0.00 points out of 1.00
Deferred income taxes	312	Answer 0.00 points out of 1.00
Prepaid expenses and other current assets	594	Answer 0.00 points out of 1.00
Total current assets	11,297	Answer 0.00 points out of 1.00
Property, plant and equipment, net	2,115	Answer 0.00 points out of 1.00
Identifiable intangible assets, net	487	Answer 0.00 points out of 1.00
Goodwill	205	Answer 0.00 points out of 1.00
Deferred income taxes and other assets	894	Answer 0.00 points out of 1.00
Total assets	$14,998	$Answer 0.00 points out of 1.00
Liabilities and Shareholders' Equity
Current portion of long-term debt	$ 200	$ Answer 0.00 points out of 1.00
Notes payable	187	Answer 0.00 points out of 1.00
Accounts payable	1,469	Answer 0.00 points out of 1.00
Accrued liabilities	1,985	Answer 0.00 points out of 1.00
Income taxes payable	117	Answer 0.00 points out of 1.00
Total current liabilities	3,958	Answer 0.00 points out of 1.00
Long-term debt	276	Answer 0.00 points out of 1.00
Deferred income taxes and other liabilities	921	Answer 0.00 points out of 1.00
Total liabilities	5,155	Answer 0.00 points out of 1.00
Common stock at stated value	3	Answer 0.00 points out of 1.00
Capital in excess of stated value	3,944	Answer 0.00 points out of 1.00
Accumulated other comprehensive income	95	Answer 0.00 points out of 1.00
Retained earnings	5,801	Answer 0.00 points out of 1.00
Total shareholders' equity	9,843	Answer 0.00 points out of 1.00
Total liabilities and shareholders' equity	$14,998	$ Answer 0.00 points out of 1.00

Instructions: Forecast Nike's fiscal year 2012 stastement of cash flows.

Use negative signs with your answers below, when appropriate.

Nike's Forecasted Statement of Cash Flows
($ millions)	2012 Est.
Net income	$ Answer 0.00 points out of 1.00
Add: depreciation	Answer 0.00 points out of 1.00
Add: amortization	Answer 0.00 points out of 1.00
Change in Accounts receivable	Answer 0.00 points out of 1.00
Change in Inventories	Answer 0.00 points out of 1.00
Change in Deferred income taxes	Answer 0.00 points out of 1.00
Change in Prepaid expenses & other current assets	Answer 0.00 points out of 1.00
Change in LT Deferred income taxes & other assets	Answer 0.00 points out of 1.00
Change in Accounts payable	Answer 0.00 points out of 1.00
Change in Accrued liabilities	Answer 0.00 points out of 1.00
Change in Income taxes payable	Answer 0.00 points out of 1.00
Change in LT Deferred income taxes and other liabilities	Answer 0.00 points out of 1.00
Net cash from operating activities	Answer 0.00 points out of 1.00
Capital expenditures	Answer 0.00 points out of 1.00
Net cash from investing activities	Answer 0.00 points out of 1.00
Dividends	Answer 0.00 points out of 1.00
Payments of LT debt	Answer 0.00 points out of 1.00
Net cash from financing activities	Answer 0.00 points out of 1.00
Net change in cash	Answer 0.00 points out of 1.00
Beginning cash	Answer 0.00 points out of 1.00
Ending cash Refine Assumptions for PPE Forecast Provided below is FY2016 information for Medtronic PLC. Medtronic plc Consolidated Statement of Income ($ millions) Apr. 29, 2016 Net sales $29,499 Costs and expenses Cost of products sold 9,142 Research and development expenses 2,224 Selling, general, and administrative expense 9,469 Special charges (gains), net 70 Restructuring charge, net 290 Certain litigation charges, net 26 Acquisition-related items 283 Amortization of intangiable assets 1,931 Other expense, net 107 Operating profit 5,957 Interest expense, net 955 Income from operations before income taxes 5,002 Provision for income taxes 950 Net income $4,052 Medtronic plc Consolidated Balance Sheets ($ millions) Apr. 29, 2016 Apr. 24, 2015 Current assets Cash and cash equivalents $3,042 $5,009 Investments 9,758 14,637 Accounts receivable 5,562 5,112 Inventories 3,473 3,463 Tax assets 697 1,335 Prepaid expenses and other current assets 1,234 1,454 Total current assets 23,766 31,010 Property, plant, and equipment, net 5,007 4,865 Goodwill 41,500 40,530 Other intangible assets, net 26,899 28,101 Long-term tax assets 1,383 774 Other assets 1,559 1,737 Total assets $100,114 $107,017 Current liabilities Short-term borrowings $1,159 $2,600 Accounts payable 1,709 1,610 Accrued compensation 1,712 1,611 Accrued income taxes 566 935 Deferred tax liabilities - 119 Other accrued expenses 2,185 2,464 Total current liabilities 7,331 9,339 Long-term debt 30,247 33,752 Long-term accrued compensation 1,759 1,535 Long-term accrued income taxes 2,903 2,476 Long-term deferred tax liabilities 3,729 4,700 Other long-term liabilities 1,916 1,819 Total liabilities 47,885 53,621 Shareholders' equity Ordinary shares - - Retained earnings 54,097 54,580 Accumulated other comprehensive (loss) (1,868) (1,184) Total shareholders' equity 52,229 53,396 Total liabilities and shareholders' equity $100,114 $107,017 a. Use the financial statements along with the additional information below to forecast property, plant and equipment, net for FY2017. CAPEX in FY2016 $1,101 million Depreciation expense in FY2016 945 million Forecasted FY2017 net sales 35,842 million Round to the nearest million. Forecasted PPE, net for FY2017 $Answer million b. Suppose the company discloses in a press release that accompanies its year-end SEC filing that anticipated CAPEX for FY2017 is $1.5 billion. Use the guidance to refine your forecast of property, plant and equipment, net for FY2017. $Answer million	$ Answer

Answer 1

Information regarding change in Cash and short-term investment is required to match the balance sheet and to prepare the cash flow statement.