Nike: Somewhere between a Swoosh and a Slam Dunk
Nike, Inc.’s principal business activity involves the design, development, and worldwide marketing of high-quality footwear, apparel, equipment, and accessory products for serious and recreational athletes. Almost 25,000 employees work for the firm as of 2009. Nike boasts the largest worldwide market share in the athletic footwear industry and a leading market share in sports and athletic apparel.
This case uses Nike’s financial statements and excerpts from its notes to review important concepts underlying the three principal financial statements (balance sheet, income statement, and statement of cash flows) and relations among them. The case also introduces tools for analyzing financial statements.
Industry Economics
Product Lines
Industry analysts debate whether the athletic footwear and apparel industry is a performancedriven industry or a fashion-driven industry. Proponents of the performance view point to Nike’s dominant market position, which results in part from continual innovation in product development. Proponents of the fashion view point to the difficulty of protecting technological improvements from competitor imitation, the large portion of total expenses comprising advertising, the role of sports and other personalities in promoting athletic shoes, and the fact that a high percentage of athletic footwear and apparel consumers use the products for casual wear rather than the intended athletic purposes (such as playing basketball or running).
Growth
There are only modest growth opportunities for footwear and apparel in the United States. Concern exists with respect to volume increases (how many pairs of athletic shoes will consumers tolerate in their closets) and price increases (will consumers continue to pay prices for innovative athletic footwear that is often twice as costly as other footwear).
Athletic footwear companies have diversified their revenue sources in two directions in recent years. One direction involves increased emphasis on international sales. With dress codes becoming more casual in Europe and East Asia and interest in American sports such as basketball becoming more widespread, industry analysts view international markets as the major growth markets during the next several years. Increased emphasis on soccer (European football) in the United States aids companies such as Adidas that have reputations for quality soccer footwear.
The second direction for diversification is sports and athletic apparel. The three leading athletic footwear companies capitalize on their brand name recognition and distribution channels to create a line of sportswear that coordinates with their footwear. Team uniforms and matching apparel for coaching staffs and fans have become a major growth avenue. For example, to complement Nike’s footwear sales, Nike acquired Umbro, a major brand-name line of jerseys, shorts, jackets, and other apparel in the soccer market.
Production
Essentially all athletic footwear and most apparel are produced in factories in Asia, primarily China (40%), Indonesia (31%), Vietnam, South Korea, Taiwan, and Thailand. The footwear companies do not own any of these manufacturing facilities. They typically hire manufacturing representatives to source and oversee the manufacturing process, helping to ensure quality control and serving as a link between the design and the manufacture of products. The manufacturing process is labor-intensive, with sewing machines used as the primary equipment. Footwear companies typically price their purchases from these factories in U.S. dollars.
Marketing
Athletic footwear and sportswear companies sell their products to consumers through various independent department, specialty, and discount stores. Their sales forces educate retailers on new product innovations, store display design, and similar activities. The market shares of Nike and the other major brand-name producers dominate retailers’ shelf space, and slower growth in sales makes it increasingly difficult for the remaining athletic footwear companies to gain market share. The slower growth also has led the major companies to increase significantly their advertising and payments for celebrity endorsements. Many footwear companies, including Nike, have opened their own retail stores, as well as factory outlet stores for discounted sales of excess inventory.
Athletic footwear and sportswear companies have typically used independent distributors to market their products in other countries. With increasing brand recognition and anticipated growth in international sales, these companies have recently acquired an increasing number of their distributors to capture more of the profits generated in other countries and maintain better control of international marketing.
Financing
Compared to other apparel firms, the athletic footwear firms generate higher profit margins and
Nike Strategy
Nike targets the serious athlete with performance-driven footwear and athletic wear, as well as the recreational athlete. The firm has steadily expanded the scope of its product portfolio from its primary products of high-quality athletic footwear for running, training, basketball, soccer, and casual wear to encompass related product lines such as sports apparel, bags, equipment, balls, eyewear, timepieces, and other athletic accessories. In addition, Nike has expanded its scope of sports, now offering products for swimming, baseball, cheerleading, football, golf, lacrosse, tennis, volleyball, skateboarding, and other leisure activities. In recent years, the firm has emphasized growth outside the United States. Nike also has grown by acquiring other apparel companies, including Cole Haan (dress and casual footwear), Converse (athletic and casual footwear and apparel), Hurley (apparel for action sports such as surfing, skateboarding, and snowboarding), and Umbro (footwear, apparel, and equipment for soccer). The firm sums up the company’s philosophy and driving force behind its success as follows:
Nike designs, develops, and markets high quality footwear, apparel, equipment and accessory products worldwide. We are the largest seller of athletic footwear and apparel in the world. Our strategy is to achieve long-term revenue growth by creating innovative, “must-have” products; building deep, personal consumer connections with our brands; and delivering compelling retail presentation and experiences.
To maintain its technological edge, Nike engages in extensive research at its research facilities in Beaverton, Oregon. It continually alters its product line to introduce new footwear, apparel, equipment, and evolutionary improvements in existing products.
Nike maintains a reputation for timely delivery of footwear products to its customers, primarily as a result of its “Futures” ordering program. Under this program, retailers book orders five to six months in advance. Nike guarantees delivery of the order within a set time period at the agreed price at the time of ordering. Approximately 89% of the U.S. footwear orders received by Nike during 2009 came through its Futures program. This program allows the company to improve production scheduling, thereby reducing inventory risk. However, the program locks in selling prices and increases Nike’s risk of increased raw materials and labor costs. Independent contractors manufacture virtually all of Nike’s products. Nike sources all of its footwear and approximately 95% of its apparel from other countries.
The following exhibits present information for Nike:
Exhibit 1.31: Consolidated balance sheets for 2007, 2008, and 2009
Exhibit 1.32: Consolidated income statements for 2007,2008, and 2009
Exhibit 1.33: Consolidated statements of cash flows 2007, 2008, and 2009
Exhibit 1.34: Excerpts from the notes to Nike’s financial statements
Exhibit 1.35: Common-size and percentage change income statements
Exhibit 1.36: Common-size and percentage change balance sheets
Identify the time at which Nike recognizes revenues. Does this timing of revenue recognition seem appropriate? Explain.
REQUIRED
Study the financial statements and notes for Nike and respond to the following questions.
Identify the reasons for the change in
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Financial Reporting, Financial Statement Analysis and Valuation
- Nike: Somewhere between a Swoosh and a Slam Dunk Nike, Inc.s principal business activity involves the design, development, and worldwide marketing of high-quality footwear, apparel, equipment, and accessory products for serious and recreational athletes. Almost 25,000 employees work for the firm as of 2009. Nike boasts the largest worldwide market share in the athletic footwear industry and a leading market share in sports and athletic apparel. This case uses Nikes financial statements and excerpts from its notes to review important concepts underlying the three principal financial statements (balance sheet, income statement, and statement of cash flows) and relations among them. The case also introduces tools for analyzing financial statements. Industry Economics Product Lines Industry analysts debate whether the athletic footwear and apparel industry is a performancedriven industry or a fashion-driven industry. Proponents of the performance view point to Nikes dominant market position, which results in part from continual innovation in product development. Proponents of the fashion view point to the difficulty of protecting technological improvements from competitor imitation, the large portion of total expenses comprising advertising, the role of sports and other personalities in promoting athletic shoes, and the fact that a high percentage of athletic footwear and apparel consumers use the products for casual wear rather than the intended athletic purposes (such as playing basketball or running). Growth There are only modest growth opportunities for footwear and apparel in the United States. Concern exists with respect to volume increases (how many pairs of athletic shoes will consumers tolerate in their closets) and price increases (will consumers continue to pay prices for innovative athletic footwear that is often twice as costly as other footwear). Athletic footwear companies have diversified their revenue sources in two directions in recent years. One direction involves increased emphasis on international sales. With dress codes becoming more casual in Europe and East Asia and interest in American sports such as basketball becoming more widespread, industry analysts view international markets as the major growth markets during the next several years. Increased emphasis on soccer (European football) in the United States aids companies such as Adidas that have reputations for quality soccer footwear. The second direction for diversification is sports and athletic apparel. The three leading athletic footwear companies capitalize on their brand name recognition and distribution channels to create a line of sportswear that coordinates with their footwear. Team uniforms and matching apparel for coaching staffs and fans have become a major growth avenue. For example, to complement Nikes footwear sales, Nike acquired Umbro, a major brand-name line of jerseys, shorts, jackets, and other apparel in the soccer market. Production Essentially all athletic footwear and most apparel are produced in factories in Asia, primarily China (40%), Indonesia (31%), Vietnam, South Korea, Taiwan, and Thailand. The footwear companies do not own any of these manufacturing facilities. They typically hire manufacturing representatives to source and oversee the manufacturing process, helping to ensure quality control and serving as a link between the design and the manufacture of products. The manufacturing process is labor-intensive, with sewing machines used as the primary equipment. Footwear companies typically price their purchases from these factories in U.S. dollars. Marketing Athletic footwear and sportswear companies sell their products to consumers through various independent department, specialty, and discount stores. Their sales forces educate retailers on new product innovations, store display design, and similar activities. The market shares of Nike and the other major brand-name producers dominate retailers shelf space, and slower growth in sales makes it increasingly difficult for the remaining athletic footwear companies to gain market share. The slower growth also has led the major companies to increase significantly their advertising and payments for celebrity endorsements. Many footwear companies, including Nike, have opened their own retail stores, as well as factory outlet stores for discounted sales of excess inventory. Athletic footwear and sportswear companies have typically used independent distributors to market their products in other countries. With increasing brand recognition and anticipated growth in international sales, these companies have recently acquired an increasing number of their distributors to capture more of the profits generated in other countries and maintain better control of international marketing. Financing Compared to other apparel firms, the athletic footwear firms generate higher profit margins and rates of return. These firms use cash flow generated from this superior profitability to finance needed working capital investments (receivables and inventories). Long-term debt tends to be relatively low, reflecting the absence of significant investments in manufacturing facilities. Nike Strategy Nike targets the serious athlete with performance-driven footwear and athletic wear, as well as the recreational athlete. The firm has steadily expanded the scope of its product portfolio from its primary products of high-quality athletic footwear for running, training, basketball, soccer, and casual wear to encompass related product lines such as sports apparel, bags, equipment, balls, eyewear, timepieces, and other athletic accessories. In addition, Nike has expanded its scope of sports, now offering products for swimming, baseball, cheerleading, football, golf, lacrosse, tennis, volleyball, skateboarding, and other leisure activities. In recent years, the firm has emphasized growth outside the United States. Nike also has grown by acquiring other apparel companies, including Cole Haan (dress and casual footwear), Converse (athletic and casual footwear and apparel), Hurley (apparel for action sports such as surfing, skateboarding, and snowboarding), and Umbro (footwear, apparel, and equipment for soccer). The firm sums up the companys philosophy and driving force behind its success as follows: Nike designs, develops, and markets high quality footwear, apparel, equipment and accessory products worldwide. We are the largest seller of athletic footwear and apparel in the world. Our strategy is to achieve long-term revenue growth by creating innovative, must-have products; building deep, personal consumer connections with our brands; and delivering compelling retail presentation and experiences. To maintain its technological edge, Nike engages in extensive research at its research facilities in Beaverton, Oregon. It continually alters its product line to introduce new footwear, apparel, equipment, and evolutionary improvements in existing products. Nike maintains a reputation for timely delivery of footwear products to its customers, primarily as a result of its Futures ordering program. Under this program, retailers book orders five to six months in advance. Nike guarantees delivery of the order within a set time period at the agreed price at the time of ordering. Approximately 89% of the U.S. footwear orders received by Nike during 2009 came through its Futures program. This program allows the company to improve production scheduling, thereby reducing inventory risk. However, the program locks in selling prices and increases Nikes risk of increased raw materials and labor costs. Independent contractors manufacture virtually all of Nikes products. Nike sources all of its footwear and approximately 95% of its apparel from other countries. The following exhibits present information for Nike: Exhibit 1.31: Consolidated balance sheets for 2007, 2008, and 2009 Exhibit 1.32: Consolidated income statements for 2007,2008, and 2009 Exhibit 1.33: Consolidated statements of cash flows 2007, 2008, and 2009 Exhibit 1.34: Excerpts from the notes to Nikes financial statements Exhibit 1.35: Common-size and percentage change income statements Exhibit 1.36: Common-size and percentage change balance sheets REQUIRED Study the financial statements and notes for Nike and respond to the following questions. Why do accounts receivable appear net of allowance for doubtful accounts? Identify the events or transactions that cause the allowance account to increase or decrease.arrow_forwardNike: Somewhere between a Swoosh and a Slam Dunk Nike, Inc.s principal business activity involves the design, development, and worldwide marketing of high-quality footwear, apparel, equipment, and accessory products for serious and recreational athletes. Almost 25,000 employees work for the firm as of 2009. Nike boasts the largest worldwide market share in the athletic footwear industry and a leading market share in sports and athletic apparel. This case uses Nikes financial statements and excerpts from its notes to review important concepts underlying the three principal financial statements (balance sheet, income statement, and statement of cash flows) and relations among them. The case also introduces tools for analyzing financial statements. Industry Economics Product Lines Industry analysts debate whether the athletic footwear and apparel industry is a performancedriven industry or a fashion-driven industry. Proponents of the performance view point to Nikes dominant market position, which results in part from continual innovation in product development. Proponents of the fashion view point to the difficulty of protecting technological improvements from competitor imitation, the large portion of total expenses comprising advertising, the role of sports and other personalities in promoting athletic shoes, and the fact that a high percentage of athletic footwear and apparel consumers use the products for casual wear rather than the intended athletic purposes (such as playing basketball or running). Growth There are only modest growth opportunities for footwear and apparel in the United States. Concern exists with respect to volume increases (how many pairs of athletic shoes will consumers tolerate in their closets) and price increases (will consumers continue to pay prices for innovative athletic footwear that is often twice as costly as other footwear). Athletic footwear companies have diversified their revenue sources in two directions in recent years. One direction involves increased emphasis on international sales. With dress codes becoming more casual in Europe and East Asia and interest in American sports such as basketball becoming more widespread, industry analysts view international markets as the major growth markets during the next several years. Increased emphasis on soccer (European football) in the United States aids companies such as Adidas that have reputations for quality soccer footwear. The second direction for diversification is sports and athletic apparel. The three leading athletic footwear companies capitalize on their brand name recognition and distribution channels to create a line of sportswear that coordinates with their footwear. Team uniforms and matching apparel for coaching staffs and fans have become a major growth avenue. For example, to complement Nikes footwear sales, Nike acquired Umbro, a major brand-name line of jerseys, shorts, jackets, and other apparel in the soccer market. Production Essentially all athletic footwear and most apparel are produced in factories in Asia, primarily China (40%), Indonesia (31%), Vietnam, South Korea, Taiwan, and Thailand. The footwear companies do not own any of these manufacturing facilities. They typically hire manufacturing representatives to source and oversee the manufacturing process, helping to ensure quality control and serving as a link between the design and the manufacture of products. The manufacturing process is labor-intensive, with sewing machines used as the primary equipment. Footwear companies typically price their purchases from these factories in U.S. dollars. Marketing Athletic footwear and sportswear companies sell their products to consumers through various independent department, specialty, and discount stores. Their sales forces educate retailers on new product innovations, store display design, and similar activities. The market shares of Nike and the other major brand-name producers dominate retailers shelf space, and slower growth in sales makes it increasingly difficult for the remaining athletic footwear companies to gain market share. The slower growth also has led the major companies to increase significantly their advertising and payments for celebrity endorsements. Many footwear companies, including Nike, have opened their own retail stores, as well as factory outlet stores for discounted sales of excess inventory. Athletic footwear and sportswear companies have typically used independent distributors to market their products in other countries. With increasing brand recognition and anticipated growth in international sales, these companies have recently acquired an increasing number of their distributors to capture more of the profits generated in other countries and maintain better control of international marketing. Financing Compared to other apparel firms, the athletic footwear firms generate higher profit margins and rates of return. These firms use cash flow generated from this superior profitability to finance needed working capital investments (receivables and inventories). Long-term debt tends to be relatively low, reflecting the absence of significant investments in manufacturing facilities. Nike Strategy Nike targets the serious athlete with performance-driven footwear and athletic wear, as well as the recreational athlete. The firm has steadily expanded the scope of its product portfolio from its primary products of high-quality athletic footwear for running, training, basketball, soccer, and casual wear to encompass related product lines such as sports apparel, bags, equipment, balls, eyewear, timepieces, and other athletic accessories. In addition, Nike has expanded its scope of sports, now offering products for swimming, baseball, cheerleading, football, golf, lacrosse, tennis, volleyball, skateboarding, and other leisure activities. In recent years, the firm has emphasized growth outside the United States. Nike also has grown by acquiring other apparel companies, including Cole Haan (dress and casual footwear), Converse (athletic and casual footwear and apparel), Hurley (apparel for action sports such as surfing, skateboarding, and snowboarding), and Umbro (footwear, apparel, and equipment for soccer). The firm sums up the companys philosophy and driving force behind its success as follows: Nike designs, develops, and markets high quality footwear, apparel, equipment and accessory products worldwide. We are the largest seller of athletic footwear and apparel in the world. Our strategy is to achieve long-term revenue growth by creating innovative, must-have products; building deep, personal consumer connections with our brands; and delivering compelling retail presentation and experiences. To maintain its technological edge, Nike engages in extensive research at its research facilities in Beaverton, Oregon. It continually alters its product line to introduce new footwear, apparel, equipment, and evolutionary improvements in existing products. Nike maintains a reputation for timely delivery of footwear products to its customers, primarily as a result of its Futures ordering program. Under this program, retailers book orders five to six months in advance. Nike guarantees delivery of the order within a set time period at the agreed price at the time of ordering. Approximately 89% of the U.S. footwear orders received by Nike during 2009 came through its Futures program. This program allows the company to improve production scheduling, thereby reducing inventory risk. However, the program locks in selling prices and increases Nikes risk of increased raw materials and labor costs. Independent contractors manufacture virtually all of Nikes products. Nike sources all of its footwear and approximately 95% of its apparel from other countries. The following exhibits present information for Nike: Exhibit 1.31: Consolidated balance sheets for 2007, 2008, and 2009 Exhibit 1.32: Consolidated income statements for 2007,2008, and 2009 Exhibit 1.33: Consolidated statements of cash flows 2007, 2008, and 2009 Exhibit 1.34: Excerpts from the notes to Nikes financial statements Exhibit 1.35: Common-size and percentage change income statements Exhibit 1.36: Common-size and percentage change balance sheets Identify the time at which Nike recognizes revenues. Does this timing of revenue recognition seem appropriate? Explain. REQUIRED Study the financial statements and notes for Nike and respond to the following questions. What are the likely reasons for the increase in the selling and administrative expenses to sales percentages between 2007 and 2009? What is the likely explanation for the relatively small percentages for notes payable and long-term debt?arrow_forwardNike: Somewhere between a Swoosh and a Slam Dunk Nike, Inc.s principal business activity involves the design, development, and worldwide marketing of high-quality footwear, apparel, equipment, and accessory products for serious and recreational athletes. Almost 25,000 employees work for the firm as of 2009. Nike boasts the largest worldwide market share in the athletic footwear industry and a leading market share in sports and athletic apparel. This case uses Nikes financial statements and excerpts from its notes to review important concepts underlying the three principal financial statements (balance sheet, income statement, and statement of cash flows) and relations among them. The case also introduces tools for analyzing financial statements. Industry Economics Product Lines Industry analysts debate whether the athletic footwear and apparel industry is a performancedriven industry or a fashion-driven industry. Proponents of the performance view point to Nikes dominant market position, which results in part from continual innovation in product development. Proponents of the fashion view point to the difficulty of protecting technological improvements from competitor imitation, the large portion of total expenses comprising advertising, the role of sports and other personalities in promoting athletic shoes, and the fact that a high percentage of athletic footwear and apparel consumers use the products for casual wear rather than the intended athletic purposes (such as playing basketball or running). Growth There are only modest growth opportunities for footwear and apparel in the United States. Concern exists with respect to volume increases (how many pairs of athletic shoes will consumers tolerate in their closets) and price increases (will consumers continue to pay prices for innovative athletic footwear that is often twice as costly as other footwear). Athletic footwear companies have diversified their revenue sources in two directions in recent years. One direction involves increased emphasis on international sales. With dress codes becoming more casual in Europe and East Asia and interest in American sports such as basketball becoming more widespread, industry analysts view international markets as the major growth markets during the next several years. Increased emphasis on soccer (European football) in the United States aids companies such as Adidas that have reputations for quality soccer footwear. The second direction for diversification is sports and athletic apparel. The three leading athletic footwear companies capitalize on their brand name recognition and distribution channels to create a line of sportswear that coordinates with their footwear. Team uniforms and matching apparel for coaching staffs and fans have become a major growth avenue. For example, to complement Nikes footwear sales, Nike acquired Umbro, a major brand-name line of jerseys, shorts, jackets, and other apparel in the soccer market. Production Essentially all athletic footwear and most apparel are produced in factories in Asia, primarily China (40%), Indonesia (31%), Vietnam, South Korea, Taiwan, and Thailand. The footwear companies do not own any of these manufacturing facilities. They typically hire manufacturing representatives to source and oversee the manufacturing process, helping to ensure quality control and serving as a link between the design and the manufacture of products. The manufacturing process is labor-intensive, with sewing machines used as the primary equipment. Footwear companies typically price their purchases from these factories in U.S. dollars. Marketing Athletic footwear and sportswear companies sell their products to consumers through various independent department, specialty, and discount stores. Their sales forces educate retailers on new product innovations, store display design, and similar activities. The market shares of Nike and the other major brand-name producers dominate retailers shelf space, and slower growth in sales makes it increasingly difficult for the remaining athletic footwear companies to gain market share. The slower growth also has led the major companies to increase significantly their advertising and payments for celebrity endorsements. Many footwear companies, including Nike, have opened their own retail stores, as well as factory outlet stores for discounted sales of excess inventory. Athletic footwear and sportswear companies have typically used independent distributors to market their products in other countries. With increasing brand recognition and anticipated growth in international sales, these companies have recently acquired an increasing number of their distributors to capture more of the profits generated in other countries and maintain better control of international marketing. Financing Compared to other apparel firms, the athletic footwear firms generate higher profit margins and rates of return. These firms use cash flow generated from this superior profitability to finance needed working capital investments (receivables and inventories). Long-term debt tends to be relatively low, reflecting the absence of significant investments in manufacturing facilities. Nike Strategy Nike targets the serious athlete with performance-driven footwear and athletic wear, as well as the recreational athlete. The firm has steadily expanded the scope of its product portfolio from its primary products of high-quality athletic footwear for running, training, basketball, soccer, and casual wear to encompass related product lines such as sports apparel, bags, equipment, balls, eyewear, timepieces, and other athletic accessories. In addition, Nike has expanded its scope of sports, now offering products for swimming, baseball, cheerleading, football, golf, lacrosse, tennis, volleyball, skateboarding, and other leisure activities. In recent years, the firm has emphasized growth outside the United States. Nike also has grown by acquiring other apparel companies, including Cole Haan (dress and casual footwear), Converse (athletic and casual footwear and apparel), Hurley (apparel for action sports such as surfing, skateboarding, and snowboarding), and Umbro (footwear, apparel, and equipment for soccer). The firm sums up the companys philosophy and driving force behind its success as follows: Nike designs, develops, and markets high quality footwear, apparel, equipment and accessory products worldwide. We are the largest seller of athletic footwear and apparel in the world. Our strategy is to achieve long-term revenue growth by creating innovative, must-have products; building deep, personal consumer connections with our brands; and delivering compelling retail presentation and experiences. To maintain its technological edge, Nike engages in extensive research at its research facilities in Beaverton, Oregon. It continually alters its product line to introduce new footwear, apparel, equipment, and evolutionary improvements in existing products. Nike maintains a reputation for timely delivery of footwear products to its customers, primarily as a result of its Futures ordering program. Under this program, retailers book orders five to six months in advance. Nike guarantees delivery of the order within a set time period at the agreed price at the time of ordering. Approximately 89% of the U.S. footwear orders received by Nike during 2009 came through its Futures program. This program allows the company to improve production scheduling, thereby reducing inventory risk. However, the program locks in selling prices and increases Nikes risk of increased raw materials and labor costs. Independent contractors manufacture virtually all of Nikes products. Nike sources all of its footwear and approximately 95% of its apparel from other countries. The following exhibits present information for Nike: Exhibit 1.31: Consolidated balance sheets for 2007, 2008, and 2009 Exhibit 1.32: Consolidated income statements for 2007,2008, and 2009 Exhibit 1.33: Consolidated statements of cash flows 2007, 2008, and 2009 Exhibit 1.34: Excerpts from the notes to Nikes financial statements Exhibit 1.35: Common-size and percentage change income statements Exhibit 1.36: Common-size and percentage change balance sheets REQUIRED Study the financial statements and notes for Nike and respond to the following questions. Why does Nike subtract deferred income taxes from net income when calculating cash flow from operations for 2009?arrow_forward
- Nike: Somewhere between a Swoosh and a Slam Dunk Nike, Inc.s principal business activity involves the design, development, and worldwide marketing of high-quality footwear, apparel, equipment, and accessory products for serious and recreational athletes. Almost 25,000 employees work for the firm as of 2009. Nike boasts the largest worldwide market share in the athletic footwear industry and a leading market share in sports and athletic apparel. This case uses Nikes financial statements and excerpts from its notes to review important concepts underlying the three principal financial statements (balance sheet, income statement, and statement of cash flows) and relations among them. The case also introduces tools for analyzing financial statements. Industry Economics Product Lines Industry analysts debate whether the athletic footwear and apparel industry is a performancedriven industry or a fashion-driven industry. Proponents of the performance view point to Nikes dominant market position, which results in part from continual innovation in product development. Proponents of the fashion view point to the difficulty of protecting technological improvements from competitor imitation, the large portion of total expenses comprising advertising, the role of sports and other personalities in promoting athletic shoes, and the fact that a high percentage of athletic footwear and apparel consumers use the products for casual wear rather than the intended athletic purposes (such as playing basketball or running). Growth There are only modest growth opportunities for footwear and apparel in the United States. Concern exists with respect to volume increases (how many pairs of athletic shoes will consumers tolerate in their closets) and price increases (will consumers continue to pay prices for innovative athletic footwear that is often twice as costly as other footwear). Athletic footwear companies have diversified their revenue sources in two directions in recent years. One direction involves increased emphasis on international sales. With dress codes becoming more casual in Europe and East Asia and interest in American sports such as basketball becoming more widespread, industry analysts view international markets as the major growth markets during the next several years. Increased emphasis on soccer (European football) in the United States aids companies such as Adidas that have reputations for quality soccer footwear. The second direction for diversification is sports and athletic apparel. The three leading athletic footwear companies capitalize on their brand name recognition and distribution channels to create a line of sportswear that coordinates with their footwear. Team uniforms and matching apparel for coaching staffs and fans have become a major growth avenue. For example, to complement Nikes footwear sales, Nike acquired Umbro, a major brand-name line of jerseys, shorts, jackets, and other apparel in the soccer market. Production Essentially all athletic footwear and most apparel are produced in factories in Asia, primarily China (40%), Indonesia (31%), Vietnam, South Korea, Taiwan, and Thailand. The footwear companies do not own any of these manufacturing facilities. They typically hire manufacturing representatives to source and oversee the manufacturing process, helping to ensure quality control and serving as a link between the design and the manufacture of products. The manufacturing process is labor-intensive, with sewing machines used as the primary equipment. Footwear companies typically price their purchases from these factories in U.S. dollars. Marketing Athletic footwear and sportswear companies sell their products to consumers through various independent department, specialty, and discount stores. Their sales forces educate retailers on new product innovations, store display design, and similar activities. The market shares of Nike and the other major brand-name producers dominate retailers shelf space, and slower growth in sales makes it increasingly difficult for the remaining athletic footwear companies to gain market share. The slower growth also has led the major companies to increase significantly their advertising and payments for celebrity endorsements. Many footwear companies, including Nike, have opened their own retail stores, as well as factory outlet stores for discounted sales of excess inventory. Athletic footwear and sportswear companies have typically used independent distributors to market their products in other countries. With increasing brand recognition and anticipated growth in international sales, these companies have recently acquired an increasing number of their distributors to capture more of the profits generated in other countries and maintain better control of international marketing. Financing Compared to other apparel firms, the athletic footwear firms generate higher profit margins and rates of return. These firms use cash flow generated from this superior profitability to finance needed working capital investments (receivables and inventories). Long-term debt tends to be relatively low, reflecting the absence of significant investments in manufacturing facilities. Nike Strategy Nike targets the serious athlete with performance-driven footwear and athletic wear, as well as the recreational athlete. The firm has steadily expanded the scope of its product portfolio from its primary products of high-quality athletic footwear for running, training, basketball, soccer, and casual wear to encompass related product lines such as sports apparel, bags, equipment, balls, eyewear, timepieces, and other athletic accessories. In addition, Nike has expanded its scope of sports, now offering products for swimming, baseball, cheerleading, football, golf, lacrosse, tennis, volleyball, skateboarding, and other leisure activities. In recent years, the firm has emphasized growth outside the United States. Nike also has grown by acquiring other apparel companies, including Cole Haan (dress and casual footwear), Converse (athletic and casual footwear and apparel), Hurley (apparel for action sports such as surfing, skateboarding, and snowboarding), and Umbro (footwear, apparel, and equipment for soccer). The firm sums up the companys philosophy and driving force behind its success as follows: Nike designs, develops, and markets high quality footwear, apparel, equipment and accessory products worldwide. We are the largest seller of athletic footwear and apparel in the world. Our strategy is to achieve long-term revenue growth by creating innovative, must-have products; building deep, personal consumer connections with our brands; and delivering compelling retail presentation and experiences. To maintain its technological edge, Nike engages in extensive research at its research facilities in Beaverton, Oregon. It continually alters its product line to introduce new footwear, apparel, equipment, and evolutionary improvements in existing products. Nike maintains a reputation for timely delivery of footwear products to its customers, primarily as a result of its Futures ordering program. Under this program, retailers book orders five to six months in advance. Nike guarantees delivery of the order within a set time period at the agreed price at the time of ordering. Approximately 89% of the U.S. footwear orders received by Nike during 2009 came through its Futures program. This program allows the company to improve production scheduling, thereby reducing inventory risk. However, the program locks in selling prices and increases Nikes risk of increased raw materials and labor costs. Independent contractors manufacture virtually all of Nikes products. Nike sources all of its footwear and approximately 95% of its apparel from other countries. The following exhibits present information for Nike: Exhibit 1.31: Consolidated balance sheets for 2007, 2008, and 2009 Exhibit 1.32: Consolidated income statements for 2007,2008, and 2009 Exhibit 1.33: Consolidated statements of cash flows 2007, 2008, and 2009 Exhibit 1.34: Excerpts from the notes to Nikes financial statements Exhibit 1.35: Common-size and percentage change income statements Exhibit 1.36: Common-size and percentage change balance sheets Identify the time at which Nike recognizes revenues. Does this timing of revenue recognition seem appropriate? Explain. REQUIRED Study the financial statements and notes for Nike and respond to the following questions. The dividends paid by Nike increased each year (343.7 million in 2007, 412.9 million in 2008, and 466.7 million in 2009). Given that Nike repurchased its stock each year, what is the likely explanation for the increasing amount of dividends?arrow_forwardNike: Somewhere between a Swoosh and a Slam Dunk Nike, Inc.s principal business activity involves the design, development, and worldwide marketing of high-quality footwear, apparel, equipment, and accessory products for serious and recreational athletes. Almost 25,000 employees work for the firm as of 2009. Nike boasts the largest worldwide market share in the athletic footwear industry and a leading market share in sports and athletic apparel. This case uses Nikes financial statements and excerpts from its notes to review important concepts underlying the three principal financial statements (balance sheet, income statement, and statement of cash flows) and relations among them. The case also introduces tools for analyzing financial statements. Industry Economics Product Lines Industry analysts debate whether the athletic footwear and apparel industry is a performancedriven industry or a fashion-driven industry. Proponents of the performance view point to Nikes dominant market position, which results in part from continual innovation in product development. Proponents of the fashion view point to the difficulty of protecting technological improvements from competitor imitation, the large portion of total expenses comprising advertising, the role of sports and other personalities in promoting athletic shoes, and the fact that a high percentage of athletic footwear and apparel consumers use the products for casual wear rather than the intended athletic purposes (such as playing basketball or running). Growth There are only modest growth opportunities for footwear and apparel in the United States. Concern exists with respect to volume increases (how many pairs of athletic shoes will consumers tolerate in their closets) and price increases (will consumers continue to pay prices for innovative athletic footwear that is often twice as costly as other footwear). Athletic footwear companies have diversified their revenue sources in two directions in recent years. One direction involves increased emphasis on international sales. With dress codes becoming more casual in Europe and East Asia and interest in American sports such as basketball becoming more widespread, industry analysts view international markets as the major growth markets during the next several years. Increased emphasis on soccer (European football) in the United States aids companies such as Adidas that have reputations for quality soccer footwear. The second direction for diversification is sports and athletic apparel. The three leading athletic footwear companies capitalize on their brand name recognition and distribution channels to create a line of sportswear that coordinates with their footwear. Team uniforms and matching apparel for coaching staffs and fans have become a major growth avenue. For example, to complement Nikes footwear sales, Nike acquired Umbro, a major brand-name line of jerseys, shorts, jackets, and other apparel in the soccer market. Production Essentially all athletic footwear and most apparel are produced in factories in Asia, primarily China (40%), Indonesia (31%), Vietnam, South Korea, Taiwan, and Thailand. The footwear companies do not own any of these manufacturing facilities. They typically hire manufacturing representatives to source and oversee the manufacturing process, helping to ensure quality control and serving as a link between the design and the manufacture of products. The manufacturing process is labor-intensive, with sewing machines used as the primary equipment. Footwear companies typically price their purchases from these factories in U.S. dollars. Marketing Athletic footwear and sportswear companies sell their products to consumers through various independent department, specialty, and discount stores. Their sales forces educate retailers on new product innovations, store display design, and similar activities. The market shares of Nike and the other major brand-name producers dominate retailers shelf space, and slower growth in sales makes it increasingly difficult for the remaining athletic footwear companies to gain market share. The slower growth also has led the major companies to increase significantly their advertising and payments for celebrity endorsements. Many footwear companies, including Nike, have opened their own retail stores, as well as factory outlet stores for discounted sales of excess inventory. Athletic footwear and sportswear companies have typically used independent distributors to market their products in other countries. With increasing brand recognition and anticipated growth in international sales, these companies have recently acquired an increasing number of their distributors to capture more of the profits generated in other countries and maintain better control of international marketing. Financing Compared to other apparel firms, the athletic footwear firms generate higher profit margins and rates of return. These firms use cash flow generated from this superior profitability to finance needed working capital investments (receivables and inventories). Long-term debt tends to be relatively low, reflecting the absence of significant investments in manufacturing facilities. Nike Strategy Nike targets the serious athlete with performance-driven footwear and athletic wear, as well as the recreational athlete. The firm has steadily expanded the scope of its product portfolio from its primary products of high-quality athletic footwear for running, training, basketball, soccer, and casual wear to encompass related product lines such as sports apparel, bags, equipment, balls, eyewear, timepieces, and other athletic accessories. In addition, Nike has expanded its scope of sports, now offering products for swimming, baseball, cheerleading, football, golf, lacrosse, tennis, volleyball, skateboarding, and other leisure activities. In recent years, the firm has emphasized growth outside the United States. Nike also has grown by acquiring other apparel companies, including Cole Haan (dress and casual footwear), Converse (athletic and casual footwear and apparel), Hurley (apparel for action sports such as surfing, skateboarding, and snowboarding), and Umbro (footwear, apparel, and equipment for soccer). The firm sums up the companys philosophy and driving force behind its success as follows: Nike designs, develops, and markets high quality footwear, apparel, equipment and accessory products worldwide. We are the largest seller of athletic footwear and apparel in the world. Our strategy is to achieve long-term revenue growth by creating innovative, must-have products; building deep, personal consumer connections with our brands; and delivering compelling retail presentation and experiences. To maintain its technological edge, Nike engages in extensive research at its research facilities in Beaverton, Oregon. It continually alters its product line to introduce new footwear, apparel, equipment, and evolutionary improvements in existing products. Nike maintains a reputation for timely delivery of footwear products to its customers, primarily as a result of its Futures ordering program. Under this program, retailers book orders five to six months in advance. Nike guarantees delivery of the order within a set time period at the agreed price at the time of ordering. Approximately 89% of the U.S. footwear orders received by Nike during 2009 came through its Futures program. This program allows the company to improve production scheduling, thereby reducing inventory risk. However, the program locks in selling prices and increases Nikes risk of increased raw materials and labor costs. Independent contractors manufacture virtually all of Nikes products. Nike sources all of its footwear and approximately 95% of its apparel from other countries. The following exhibits present information for Nike: Exhibit 1.31: Consolidated balance sheets for 2007, 2008, and 2009 Exhibit 1.32: Consolidated income statements for 2007,2008, and 2009 Exhibit 1.33: Consolidated statements of cash flows 2007, 2008, and 2009 Exhibit 1.34: Excerpts from the notes to Nikes financial statements Exhibit 1.35: Common-size and percentage change income statements Exhibit 1.36: Common-size and percentage change balance sheets Identify the time at which Nike recognizes revenues. Does this timing of revenue recognition seem appropriate? Explain. REQUIRED Study the financial statements and notes for Nike and respond to the following questions. How has Nike primarily financed its acquisitions of property, plant, and equipment during the three years?arrow_forwardNike: Somewhere between a Swoosh and a Slam Dunk Nike, Inc.s principal business activity involves the design, development, and worldwide marketing of high-quality footwear, apparel, equipment, and accessory products for serious and recreational athletes. Almost 25,000 employees work for the firm as of 2009. Nike boasts the largest worldwide market share in the athletic footwear industry and a leading market share in sports and athletic apparel. This case uses Nikes financial statements and excerpts from its notes to review important concepts underlying the three principal financial statements (balance sheet, income statement, and statement of cash flows) and relations among them. The case also introduces tools for analyzing financial statements. Industry Economics Product Lines Industry analysts debate whether the athletic footwear and apparel industry is a performancedriven industry or a fashion-driven industry. Proponents of the performance view point to Nikes dominant market position, which results in part from continual innovation in product development. Proponents of the fashion view point to the difficulty of protecting technological improvements from competitor imitation, the large portion of total expenses comprising advertising, the role of sports and other personalities in promoting athletic shoes, and the fact that a high percentage of athletic footwear and apparel consumers use the products for casual wear rather than the intended athletic purposes (such as playing basketball or running). Growth There are only modest growth opportunities for footwear and apparel in the United States. Concern exists with respect to volume increases (how many pairs of athletic shoes will consumers tolerate in their closets) and price increases (will consumers continue to pay prices for innovative athletic footwear that is often twice as costly as other footwear). Athletic footwear companies have diversified their revenue sources in two directions in recent years. One direction involves increased emphasis on international sales. With dress codes becoming more casual in Europe and East Asia and interest in American sports such as basketball becoming more widespread, industry analysts view international markets as the major growth markets during the next several years. Increased emphasis on soccer (European football) in the United States aids companies such as Adidas that have reputations for quality soccer footwear. The second direction for diversification is sports and athletic apparel. The three leading athletic footwear companies capitalize on their brand name recognition and distribution channels to create a line of sportswear that coordinates with their footwear. Team uniforms and matching apparel for coaching staffs and fans have become a major growth avenue. For example, to complement Nikes footwear sales, Nike acquired Umbro, a major brand-name line of jerseys, shorts, jackets, and other apparel in the soccer market. Production Essentially all athletic footwear and most apparel are produced in factories in Asia, primarily China (40%), Indonesia (31%), Vietnam, South Korea, Taiwan, and Thailand. The footwear companies do not own any of these manufacturing facilities. They typically hire manufacturing representatives to source and oversee the manufacturing process, helping to ensure quality control and serving as a link between the design and the manufacture of products. The manufacturing process is labor-intensive, with sewing machines used as the primary equipment. Footwear companies typically price their purchases from these factories in U.S. dollars. Marketing Athletic footwear and sportswear companies sell their products to consumers through various independent department, specialty, and discount stores. Their sales forces educate retailers on new product innovations, store display design, and similar activities. The market shares of Nike and the other major brand-name producers dominate retailers shelf space, and slower growth in sales makes it increasingly difficult for the remaining athletic footwear companies to gain market share. The slower growth also has led the major companies to increase significantly their advertising and payments for celebrity endorsements. Many footwear companies, including Nike, have opened their own retail stores, as well as factory outlet stores for discounted sales of excess inventory. Athletic footwear and sportswear companies have typically used independent distributors to market their products in other countries. With increasing brand recognition and anticipated growth in international sales, these companies have recently acquired an increasing number of their distributors to capture more of the profits generated in other countries and maintain better control of international marketing. Financing Compared to other apparel firms, the athletic footwear firms generate higher profit margins and rates of return. These firms use cash flow generated from this superior profitability to finance needed working capital investments (receivables and inventories). Long-term debt tends to be relatively low, reflecting the absence of significant investments in manufacturing facilities. Nike Strategy Nike targets the serious athlete with performance-driven footwear and athletic wear, as well as the recreational athlete. The firm has steadily expanded the scope of its product portfolio from its primary products of high-quality athletic footwear for running, training, basketball, soccer, and casual wear to encompass related product lines such as sports apparel, bags, equipment, balls, eyewear, timepieces, and other athletic accessories. In addition, Nike has expanded its scope of sports, now offering products for swimming, baseball, cheerleading, football, golf, lacrosse, tennis, volleyball, skateboarding, and other leisure activities. In recent years, the firm has emphasized growth outside the United States. Nike also has grown by acquiring other apparel companies, including Cole Haan (dress and casual footwear), Converse (athletic and casual footwear and apparel), Hurley (apparel for action sports such as surfing, skateboarding, and snowboarding), and Umbro (footwear, apparel, and equipment for soccer). The firm sums up the companys philosophy and driving force behind its success as follows: Nike designs, develops, and markets high quality footwear, apparel, equipment and accessory products worldwide. We are the largest seller of athletic footwear and apparel in the world. Our strategy is to achieve long-term revenue growth by creating innovative, must-have products; building deep, personal consumer connections with our brands; and delivering compelling retail presentation and experiences. To maintain its technological edge, Nike engages in extensive research at its research facilities in Beaverton, Oregon. It continually alters its product line to introduce new footwear, apparel, equipment, and evolutionary improvements in existing products. Nike maintains a reputation for timely delivery of footwear products to its customers, primarily as a result of its Futures ordering program. Under this program, retailers book orders five to six months in advance. Nike guarantees delivery of the order within a set time period at the agreed price at the time of ordering. Approximately 89% of the U.S. footwear orders received by Nike during 2009 came through its Futures program. This program allows the company to improve production scheduling, thereby reducing inventory risk. However, the program locks in selling prices and increases Nikes risk of increased raw materials and labor costs. Independent contractors manufacture virtually all of Nikes products. Nike sources all of its footwear and approximately 95% of its apparel from other countries. The following exhibits present information for Nike: Exhibit 1.31: Consolidated balance sheets for 2007, 2008, and 2009 Exhibit 1.32: Consolidated income statements for 2007,2008, and 2009 Exhibit 1.33: Consolidated statements of cash flows 2007, 2008, and 2009 Exhibit 1.34: Excerpts from the notes to Nikes financial statements Exhibit 1.35: Common-size and percentage change income statements Exhibit 1.36: Common-size and percentage change balance sheets REQUIRED Study the financial statements and notes for Nike and respond to the following questions. Why does Nike subtract increases in accounts receivable to net income when calculating cash flow from operations for 2009?arrow_forward
- Nike: Somewhere between a Swoosh and a Slam Dunk Nike, Inc.s principal business activity involves the design, development, and worldwide marketing of high-quality footwear, apparel, equipment, and accessory products for serious and recreational athletes. Almost 25,000 employees work for the firm as of 2009. Nike boasts the largest worldwide market share in the athletic footwear industry and a leading market share in sports and athletic apparel. This case uses Nikes financial statements and excerpts from its notes to review important concepts underlying the three principal financial statements (balance sheet, income statement, and statement of cash flows) and relations among them. The case also introduces tools for analyzing financial statements. Industry Economics Product Lines Industry analysts debate whether the athletic footwear and apparel industry is a performancedriven industry or a fashion-driven industry. Proponents of the performance view point to Nikes dominant market position, which results in part from continual innovation in product development. Proponents of the fashion view point to the difficulty of protecting technological improvements from competitor imitation, the large portion of total expenses comprising advertising, the role of sports and other personalities in promoting athletic shoes, and the fact that a high percentage of athletic footwear and apparel consumers use the products for casual wear rather than the intended athletic purposes (such as playing basketball or running). Growth There are only modest growth opportunities for footwear and apparel in the United States. Concern exists with respect to volume increases (how many pairs of athletic shoes will consumers tolerate in their closets) and price increases (will consumers continue to pay prices for innovative athletic footwear that is often twice as costly as other footwear). Athletic footwear companies have diversified their revenue sources in two directions in recent years. One direction involves increased emphasis on international sales. With dress codes becoming more casual in Europe and East Asia and interest in American sports such as basketball becoming more widespread, industry analysts view international markets as the major growth markets during the next several years. Increased emphasis on soccer (European football) in the United States aids companies such as Adidas that have reputations for quality soccer footwear. The second direction for diversification is sports and athletic apparel. The three leading athletic footwear companies capitalize on their brand name recognition and distribution channels to create a line of sportswear that coordinates with their footwear. Team uniforms and matching apparel for coaching staffs and fans have become a major growth avenue. For example, to complement Nikes footwear sales, Nike acquired Umbro, a major brand-name line of jerseys, shorts, jackets, and other apparel in the soccer market. Production Essentially all athletic footwear and most apparel are produced in factories in Asia, primarily China (40%), Indonesia (31%), Vietnam, South Korea, Taiwan, and Thailand. The footwear companies do not own any of these manufacturing facilities. They typically hire manufacturing representatives to source and oversee the manufacturing process, helping to ensure quality control and serving as a link between the design and the manufacture of products. The manufacturing process is labor-intensive, with sewing machines used as the primary equipment. Footwear companies typically price their purchases from these factories in U.S. dollars. Marketing Athletic footwear and sportswear companies sell their products to consumers through various independent department, specialty, and discount stores. Their sales forces educate retailers on new product innovations, store display design, and similar activities. The market shares of Nike and the other major brand-name producers dominate retailers shelf space, and slower growth in sales makes it increasingly difficult for the remaining athletic footwear companies to gain market share. The slower growth also has led the major companies to increase significantly their advertising and payments for celebrity endorsements. Many footwear companies, including Nike, have opened their own retail stores, as well as factory outlet stores for discounted sales of excess inventory. Athletic footwear and sportswear companies have typically used independent distributors to market their products in other countries. With increasing brand recognition and anticipated growth in international sales, these companies have recently acquired an increasing number of their distributors to capture more of the profits generated in other countries and maintain better control of international marketing. Financing Compared to other apparel firms, the athletic footwear firms generate higher profit margins and rates of return. These firms use cash flow generated from this superior profitability to finance needed working capital investments (receivables and inventories). Long-term debt tends to be relatively low, reflecting the absence of significant investments in manufacturing facilities. Nike Strategy Nike targets the serious athlete with performance-driven footwear and athletic wear, as well as the recreational athlete. The firm has steadily expanded the scope of its product portfolio from its primary products of high-quality athletic footwear for running, training, basketball, soccer, and casual wear to encompass related product lines such as sports apparel, bags, equipment, balls, eyewear, timepieces, and other athletic accessories. In addition, Nike has expanded its scope of sports, now offering products for swimming, baseball, cheerleading, football, golf, lacrosse, tennis, volleyball, skateboarding, and other leisure activities. In recent years, the firm has emphasized growth outside the United States. Nike also has grown by acquiring other apparel companies, including Cole Haan (dress and casual footwear), Converse (athletic and casual footwear and apparel), Hurley (apparel for action sports such as surfing, skateboarding, and snowboarding), and Umbro (footwear, apparel, and equipment for soccer). The firm sums up the companys philosophy and driving force behind its success as follows: Nike designs, develops, and markets high quality footwear, apparel, equipment and accessory products worldwide. We are the largest seller of athletic footwear and apparel in the world. Our strategy is to achieve long-term revenue growth by creating innovative, must-have products; building deep, personal consumer connections with our brands; and delivering compelling retail presentation and experiences. To maintain its technological edge, Nike engages in extensive research at its research facilities in Beaverton, Oregon. It continually alters its product line to introduce new footwear, apparel, equipment, and evolutionary improvements in existing products. Nike maintains a reputation for timely delivery of footwear products to its customers, primarily as a result of its Futures ordering program. Under this program, retailers book orders five to six months in advance. Nike guarantees delivery of the order within a set time period at the agreed price at the time of ordering. Approximately 89% of the U.S. footwear orders received by Nike during 2009 came through its Futures program. This program allows the company to improve production scheduling, thereby reducing inventory risk. However, the program locks in selling prices and increases Nikes risk of increased raw materials and labor costs. Independent contractors manufacture virtually all of Nikes products. Nike sources all of its footwear and approximately 95% of its apparel from other countries. The following exhibits present information for Nike: Exhibit 1.31: Consolidated balance sheets for 2007, 2008, and 2009 Exhibit 1.32: Consolidated income statements for 2007,2008, and 2009 Exhibit 1.33: Consolidated statements of cash flows 2007, 2008, and 2009 Exhibit 1.34: Excerpts from the notes to Nikes financial statements Exhibit 1.35: Common-size and percentage change income statements Exhibit 1.36: Common-size and percentage change balance sheets Identify the time at which Nike recognizes revenues. Does this timing of revenue recognition seem appropriate? Explain. REQUIRED Study the financial statements and notes for Nike and respond to the following questions. What are the likely reasons for the repurchases of common stock during the three years?arrow_forwardRalph Lauren Corporation designs, markets, and distributes a variety of apparel, home decor, accessory, and fragrance products. The company's products include such brands as Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren, Polo Jeans Co., and Chaps. Polo Ralph Lauren reported the following (in thousands) for two recent years:arrow_forwardPlease answer in detail CarniTrin is a manufacturer of Carnival costumes in a highly competitive market. The company's management team is seeking guidance on the use of financial performance measures to identify the key drivers of the company's financial performance and develop a strategy to improve it. The following data relate to the company for the year 2022: In its clothing division, the company has $6,000,000 invested in assets. After-tax operating income from sales of clothing in 2022 is $900,000. Income for the clothing division has grown steadily over the last few years. The cosmetics division has $14,000,000 invested in assets and an after-tax operating income in 2022 of $1,900,000. The weighted-average cost of capital for CarniTrin is 10% and the 2021’s after-tax return on investment for each division was 15%. The general manager of CarniTrin has asserted that in the future, managers should have their compensation structure aligned with their performance measures…arrow_forward
- Tesla, the world’s largest carmaker (as determined by market capitalization), understands that their primary target market responds well to brands that focus on social responsibility. Tesla’s senior management has been meeting to devise a global marketing campaign centered on social responsibility. To this end, Tesla decided to hire a consultancy to develop a 9-month plan ending December 31, 2022. Management has asked for a presentation for an initial list of items that would be considered valid elements of a social responsibility marketing plan that would accommodate each of the markets that Tesla competes in. Questions: What type of research would the consultancy conduct to understand each of the wide variety of cultures that the brand competes in? Armed with this researched information, how might the consultancy modify its social responsibility campaigns to accommodate some of the major markets?arrow_forwardQuestion: The articles below is my classmate discussion post can you please give explanation why you agree with the articles below? According to the SEC 10-K, Procter & Gamble organizes its business into five strategic business units (SBUs) and five reportable segments as per U.S. GAAP. These segments cover Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care. The SBUS oversee global brand strategies, product innovations, and supply chain management, with direct profit responsibility for key markets termed "Focus Markets." They also drive growth in other markets, referred to as "Enterprise Markets." The MD&A discusses business performance by region, including North America, Europe, Greater China, Latin America, Asia Pacific, and India, Middle East, and Africa (IMEA), offering insights into geographical revenue contributions and market dynamics. Their largest customer is Walmart Inc. and its affiliates, which accounted for consolidated net sales of…arrow_forwardUsing the preceding information, calculate EVA, and discuss which division manager will get the bonus. 3. What nonfinancial measures could CarniTrin use to evaluate divisional performances?arrow_forward
- Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage Learning