Financial Statement Analysis The financial statements for Nike, Inc., are presen
ID: 2344562 • Letter: F
Question
Financial Statement Analysis
The financial statements for Nike, Inc., are presented in Appendix E in the drop-down menu above. The following additional information (in millions) is available:
Accounts receivable at May 31, 2005
$ 2,249.9
Inventories at May 31, 2005
1,811.1
Total assets at May 31, 2005
8,793.6
Stockholders' equity at May 31, 2005
5,644.2
1. Determine the following measures for the fiscal years ended May 31, 2007 and May 31, 2006, rounding as instructed below.
Fiscal Year
2007
Fiscal Year
2006
a.
Working capital (in millions)
$
$
b.
Current ratio (Round to 1 decimal place.
c.
Quick ratio (Round to 1 decimal place.)
d.
Accounts receivable turnover
(Round to 1 decimal place.)
e.
Number of days' sales in receivables
(Round to 1 decimal place.)
f.
Inventory turnover (Round to 1 decimal place.)
g.
Number of days' sales in inventory
(Round to 1 decimal place.)
h.
Ratio of liabilities to stockholders' equity
(Round to 1 decimal place.)
i.
Ratio of net sales to average total assets
(Round to 1 decimal place.)
j.
Rate earned on average total assets, assuming interest expense is $20.495 million for the year ending May 31, 2007, and $20.956 million for the year ending May 31, 2006.
(Round to 1 decimal place.)
%
%
k.
Rate earned on average common stockholders' equity
(Round to 1 decimal place.)
%
%
l.
Price-earnings ratio, assuming that the market price was $56.75 per share on May 31, 2007, and $40.16 per share on May 31, 2006.
(Round to 1 decimal place.)
%
%
m.
Percentage relationship of net income to net sales
(Round to 1 decimal place.)
%
%
2. What conclusions can be drawn from these analyses?
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Explanation / Answer
Accounts Receivable at May 31, 2005 = $2,249.90
Inventories at May 31, 2005 = $1,811.10
Total Assets at May 31, 2005 = $8,793.60
Stockholder’s Equity at May 31, 2005 = $5,644.20
Current Assets (2006) = $7,346
Current Assets (2007) = $8,076.50
Current Liabilities (2006) = $2,612.40
Current Liabilities (2007) = $2,584.00
(a) Net Working Capital = [Current Assets – Current Liabilities]
Net Working Capital (2006) = [$7,346 - $2,612.40]
Net Working Capital (2006) = $4,733.60
Net Working Capital (2007) = [$8,076.50 - $2,584.00]
Net Working Capital (2007) = $5,492.50
(b) Current Ratio = [Current Assets / Current Liabilities]
Current Ratio (2006) = [$7,346 / $2,612.40]
Current Ratio (2006) = 2.81 times
Current Ratio (2007) = [$8,076.50 / $2,584.00]
Current Ratio (2007) = 3.13 times
(c) Quick Ratio = [(Current Assets – Inventories Prepaid expenses) / Current Liabilities]
Quick Assets (2006) = [($7,346 - $2,076.70 - $380.10)]
Quick Assets (2006) = $4,889.20
Quick Ratio = [$4,889.20 / $2,612.40]
Quick Ratio = 1.87 times
Quick Assets (2007) = [$8,076.50 - $2,121.90 - $393.20]
Quick Assets (2007) = $5,561.40
Quick Ratio (2007) = [$5,561.40 / $2,584.00]
Quick Ratio (2007) = 2.15 times
(d) Accounts Receivables Turnover = [Sales / Accounts Receivables]
Sales (2006) = $14,954.900
Sales (2007) = $16,325.90
Accounts Receivables (2006) = $2,382.90
Accounts Receivables (2007) = $2,494.70
Accounts Receivables Turnover (2006) = [$14,954.90 / $2,382.90]
Accounts Receivables Turnover (2006) = 6.275 times
Accounts Receivables Turnover (2007) = [$16,325.90 / $2,494.70]
Accounts Receivables Turnover (2007) = 6.544 times
(e) Number of days sales in receivables = [360 days / Receivables turnover]
Number of days sales in receivables (2006) = [360 / 6.275]
Number of days sales in receivables (2006) = 57.37 days
Number of days sales in receivables (2007) = [360 / 6.544]
Number of days sales in receivables (2007) = 55.01 days
(f) Inventory Turnover Ratio = [Sales / Average Inventory]
Sales (2006) = $14,954.900
Sales (2007) = $16,325.90
Inventory (2006) = [($1,811.10 + $2,076.70) / 2]
Average Inventory (2006) = $1,943.90
Average Inventory (2007) = [($2,076.70 + $2,121.90) / 2]
Average Inventory (2007) = $2,099.30
Inventory Turnover Ratio (2006) = [$14,954.90 / $1,943.90]
Inventory Turnover Ratio (2006) = 7.69 times
Inventory Turnover Ratio (2007) = [$16,325.90 / $2,099.30]
Inventory Turnover Ratio (2007) = 7.77 times
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