You are on page 1of 7

Complete the following information:

Please use N/A if you could not locate an item or feel it does not apply.

1. Basic Company Facts

a. Name of Firm: Nike Incorporated

b. Stock Ticker Symbol: NKE
c. Stock exchange where traded: New York Stock Exchange
d. Primary and Secondary NAICS NAICS N/A
(or SIC) codes: SIC= 3021
e. State of Incorporation Oregon State (1968)
f. Independent Auditor PricewaterhouseCoopers
g. Company’s Fiscal Year End 31st May
h. Web site

2. List up to five products or services your company sells or provides and customers to whom
those products are sold.

Products Customers
Trainers(shoes) Involved in sports/gym/casual exercises.
Men’s Sports Running Shirt For sportsmen/women.
iPods For music lovers.
Sports Equipment For people playing professionally/casually
Training Kits/DVDS To customers who are learning a new

Page 1 of 7
3. Size of Company. (as of FYE 2008)

a. Dollar amount of Assets: 12,442,700,000

b. Dollar amount of Sales/Revenues: 18,627,000,000
c. Net Income: $ 3,800,000
d. Earnings per Share: $ 3.74
e. Number of Common Shares outstanding: 504,100,000

4. Use the financial highlights section of your company’s annual report to note the following
information. (Note: FYE may need to be adjusted).

Item FYE 2006 FYE 2005 FYE 2004 FYE 2003

Net Income $ 2,640,000 $ 2,240,000 $ 1,750,000 $ 890,000

Total Assets $ 9869,6 mil $ 8,793.6 mil $ 7,908.7 mil $ 6,821.1 mil

Total Liabilities $ 3584.1 mil $ 3149.1 mil $ 3126.7 mil $ 3013.2 mil

Long-term Debt $ 410.7 mil $ 687.3 mil $ 682.4 mil $ 551.6 mil

Dividend per share $ 0.59 $ 0.475 $ 0.37 $ 0.27

Earnings per share

(basic EPS) $ 2.69 $ 2.31 $ 1.80 $ 1.40

5. From Management’s Discussion and Analysis (MD&A), answer the following:

a. Does your company’s MD&A section have the following major sections?
(Note: All companies may not have these sections or use the exact terminology.)

Yes No


Results of operations

Financial condition and liquidity

Market risk management

Critical accounting policies

Page 2 of 7
Yes No

Caution concerning forward-looking information


b. What is the general tone of management’s comments in this section? Was the most recent
year a positive or negative experience for the company? Is management optimistic or
pessimistic about the future? Discuss.

The management seems optimistic about the future in MD&A report and discusses various

beneficial effects of the changes that have been made in the previous year i.e. change in

tax policies. It also discusses some of its policies such has hedging, future contracts and

how they have helped by comparing historical data.

6. Locate the Statement Management Responsibility and the Report of the Independent
Accountants (or Auditor’s Report) and read them carefully to answer the following questions.

a. Who is responsible for the preparation and content of the financial statements?
The Management of Nike (the internal auditors of Nike).

b. Does the company have an Audit Committee? Yes No

c. What is (are) the responsibility(s) of the audit committee?

The responsibilities of the audit committee include, to appoint an independent registered

public firm (auditing firm) and along with that firm and other internal committees and

Internal audit staff reviews matters regarding financial affairs of the company. This
includes checking the effectiveness of the accounting control system of the company and
overlooking the review of current year’s financial statements.

Page 3 of 7
d. Which financial statements are covered by the audit report?
The audit report covers, consolidated income statement, consolidated balance sheet,

consolidated cash flow statement, consolidated statement of Shareholder’s equity

and further to that notes and details regarding the components included in the above

statements are also given.

e. Who is responsible for assessing that the financial statements are fairly stated?
The independent public accounting firm, in this case, PricewaterhouseCoopers.

f. To whom is the audit report addressed?

To the Board of Directors and to the Shareholders.

g. Did your company receive an unqualified opinion? Yes No

h. If your firm did not receive an unqualified opinion, what reason(s) was (were) given?

7. Review the Basic Company Facts and other parts of the Annual Report to find the following

a. Name of CEO Mark G. Parker

b. Name of Chairman of the Board Philip H. Knight

c. When will the annual stockholder’s meeting be held? Month of July 2008

d. Where will the annual stockholder’s meeting be held?

e. Does you company have a:

Direct stock purchase plan? Yes No

Dividend reinvestment plan? N/A Yes No

Page 4 of 7
f. What company serves as the Transfer Agent? Computershare Trust Company, N.A

g. List other interesting information/facts, if any, disclosed in this section?

Overall Nike has over 130 wholly owned subsidiaries. 20 of these subsidiaries operate

within the United States while 110 in the rest of the World. Almost all of the

subsidiaries carry on the same line of business except for three. One of these three

is an insurance company.

8. Does your firm prepare consolidated financial statements? (check one)

Often, the financial statement will have the word “consolidated” in its title to indicate that the
corporation owns one or more subsidiaries and that the financial results of the subsidiaries
have been combined with those of the parent company to produce a single set of financial
Yes No

When the company and the subsidiaries are combined, all transactions between the company
and its subsidiaries must first be eliminated. Why do you think this is necessary?

This is necessary to eliminate these transactions being accounted twice. For example if one of

subsidiaries sells products or services to the other, it would show a revenue while the recipient

subsidiary would show an expense while overall Nike has neither earned any revenue or

incurred any expenditure, therefore to offset this these transactions are eliminated. Even if

were included, they would eventually cancel off the affects, so why do the unnecessary

9. What format was used to prepare your firm’s income statement? (check one)
Hint: If gross margin (also called gross profit) is reported on the income statement, it’s the
multiple step format.


Multiple step

Page 5 of 7
10. What is your company’s total sales revenue?

Most Recent Year Next Most Recent Year Percent Change

$ 18627.0 million $ 16,325.9 million 14.1%

11. For each of the selected items on the income statement, determine its percentage relative to
sales revenue for the most recent year and the next most recent year. If an item is not reported
draw a line through it.

Percen Percen
Most Recent t of Next Most t of
Income Statement Line Year (FY 08) Sales Recent Year Sales

Sales or Revenue 18627.0 mil 100 % 16325.9 mil 100 %

Cost of Sales 10239.6 mil 55.0 9165.4 mil 56.1

Gross Profit/Margin 8387.4 mil 45.0 7160.5 mil 43.9

Operating Expenses 5953.7 mil 32.0 5028.7 mil 30.8

Income before Tax 2502.9 mil 13.4 2199.9 mil 13.5

Provision for tax 619.5 mil 3.33 708.4 mil 4.33

Net Income 1883.4 mil 10.1 1491.5 mil 9.14

Other Major Items

Interest Income 77.1 mil 0.41 67.2 mil 0.41

12. Based on the common-size analysis above, which item(s) appear to be the most significant in
explaining the change in net income (profitability) from the next most recent year to the most
recent year (i.e., which items changed most relative to sales revenue)? Discuss below.

There are two significant changes. Nike’s Operating Expenses have increased but however

The share of net income has increased by approx. 1% (compared to total sales). This is due

To the fact that Nike has decreased the COGS by over 1 % compared to total Sales and

Secondly the tax liability for Nike has been reduced from 4% of total sales in FYE 2007 to
3% in FYE 2008. Due to these two effects there is increase in the % of net income.

Page 6 of 7
13. Which of the following terms describes the balance sheet as reported by your firm? (check
those that apply.)

Classified balance sheet (Assets are segregated into categories)

Comparative balance sheet (More than one year of data is presented)

14. Identify the amounts that your firm reported for each of the following categories and the
percentage of total assets that each represents. (FYE 2008)

Amount Percent
(in millions)

Current Assets $ 8944.6 71.0

Property, Plant & Equipment $ 1874.8 14.9

Goodwill and other intangible assets $ 425.1 3.4

Other long term assets $ 1350.3 10.7

Total $ 12594.8 100%

Current Liabilities $ 3311.6 26.3

Long-term liabilities $ 441.1 3.5

Contributed capital $ 3768.8 29.9

Retained Earnings $ 5073.3 40.3

Total $ 12594.8 100%

15. If you were a creditor of a firm you would be interested in whether the firm had enough
resources to pay you when you bill came due, which can be determined by two indicators:

A. The amount of working capital, the cushion by which total current assets exceed total
current liabilities
WC = current assets – current liabilities
Working Capital for FYE 08= 8944.6 mil – 3311.6 mil = $ 5633 mil

B. The current ratio, which reveals how many dollars of current assets are available to pay
off each dollar of current liabilities.
CR = Current Assets
Current Liabilities
CR= 8944.6/3311.6 = 2.70

Page 7 of 7