Analysis Nike's Common Size Income Statement (Essay Sample)
1）Analysis Nike's Common Size Income Statement ( I will upload Excel)
2) based on the consolidated statement of retained earnings(from 10K, 2018-2016) explained the key reasons for changes in Nike:
-common stock, preferred stock, accumulated other comprehensive income, retained earnings accounts ( Write one paragraph each one )
3) define Nike of analysis as a: a) creditor: the ability of debtors to fulfill their debt obligation.
b) investor: the ability to generate future earnings stream.
c) Manager: going concern of the company that affects its stakeholders. (Write one paragraph each one )
4) strength of Nike
5) weaknesses of Nike
1）Analysis Nike's Common Size Income Statement
Revenues increased by 6% from $ 34,350 to $36,397 million in the 2017 to 2018 fiscal year compared to a 7% increase in the cost of sales and 4% increase in the gross profits. The revenues mostly increased in first and fourth fiscal quarters from 2017 to 2018. In 2018, 42% of the total revenues was from the US compared to 46% in 2017 and 47% in 2016, partly because there was higher growth revenues in the international market, and lower sales revenue in the US (Nike, 2018). The cost of sales was $ 19,038 million in 2017 representing 55.42% of the revenues compared to 20,441 million in 2018, which was 56.16% of the revenues. The gross profit margin rate was 44.58% in 2017 and declined to 43.84% in 2018, mainly because the cost of sales increased at a faster rate than the revenues (Nike, 2018). In the cost of sales determination the inventory balances was $5,261 million in 2018 financial year up from $5,055million, and this increased the cost of sales.
The share of demand creation expense to revenue was 9.73% in 2017 and increased slightly to 9.83% the following year compared to the operating overhead expenses that was 21.02% and increased to 21.80%. The total selling and administrative expense was $10,563 million in 2017 representing 30.75% of the revenue and $11,511 million in 2018, which represents 31.63% of the revenues. The changes in the ratio of interest expense (income), net to sales were also marginal at 0.17% in 2017 and 0.15% in 2018 (Nike, 2018). However for the other expense (income), net this was -0.57% in 2017 and 0.18% in 2018. The net income was lower in FY2018 compared to 2017 and there was higher operating expense costs growth rate from 2017 to 2018 at 8.7%, while it was 0.90% in 2016 to 2017 (Nike, 2018). There was a provisional expense of $2,010 million third quarter of fiscal 2018 because of the one-time transition tax on the deemed repatriation of undistributed foreign earnings, partly explains the fall in net income to $1,933 million in 2018 compared to $4,240 million in 2017 as the income tax expense increased by 1,746 million in 2018 (Nike, 2018).
2) Consolidated statement of retained earnings and changes
Nike has shares of Class A Common Stock, and Class B Common Stock whereby Each share of Class A Common Stock is convertible into a share of Class B Common Stock, but the voting rights of the later are limited in some cases conversion to class B common stock, repurchase of Class B common stock and dividends mainly influenced changes in the common stock.
The owner of Nike’s preferred stock is Sojitz America, a company based in Japan where the company has undertaken significant import-export financing services for Nike in the fiscal 2018, Sojitz also focused on financing and purchasing services for the NIKE Brand products sold in some markets (Nike, 2018). Nike has redeemable preferred stock 1 par value, the redeemable option for Sojitz America and the net income is adjusted for preferred stock dividends. There is no issuance of additional preferred stock based on the certificate of corporation stipulations.
Changes in the accumulated other comprehensive income net of t
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