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• THE ANNUAL REPORT PROJECT IS WORTH 18 POINTS. 

Kwan LunKwan LunACG2021 Section 080ACG2021 Section 080

NIKE, IncNIKE, Inc..

Executive Summary

http://www.nike.com/nikebiz/nikebiz.jhtml?page=18

After completing this analysis, I can a sure that Nike has a bright future ahead. With the expanding range of products and research and development into their equipments, it can only benefit their quality of goods. Their financial statements will attract many investors to join their company. With the stock prices going up and the dividends pay out increasing, there is no stopping to what Nike can do. But I believe since Nike have touched every part of sports in different ways, they still need to have a Nike food and beverage department. Protein bars and energy drinks, it’s only time till they actually come up with these products.

Part A. Introduction

• The name of nike’s chief executive officer is Philip H. Knight.

• The location of home office is Beaverton, Oregon.

• The ending date of latest fiscal year was August 31, 2004

• Description of the principal products or services that the company provides:

Nikes’s products started as sport footwear. As it grew larger it took on making other products like clothing, sports equipment, accessory, and electronics. It also became one of the world’s largest

seller of athletic products.

• Main geographic area of activity:

Nike is an international corporation. Their products are marketed in nearly 200 countries

Outside of the U.S.. The company operates through 24 distribution centers in Europe,

Asia, Australia, Latin America, Africa, and Canada. Nike has 175 retail outlets outside

the U.S. and it is estimated that more than 30,000 of it’s retail accounts are foreign.

Part A. Audit Report• The name of the company’s independent auditors is Pricewaterhouse C oo LLP.

• In your own words, what did the auditors say about the company

According to what the auditor said, 2004 was the best year they have had. They crossed $12 billion in revenue, a 15 percent increase over last year, with 27 percent growth in earnings per share. In fiscal '04, Their international pre-tax profits grew by nearly a third. With Cole Haan, Bauer Nike Hockey, Converse and ,Hurley, all these are companies they own, are now making over a billiob dollars in revenue. He also concluded that there is lots of room to grow.

Part A. Stock Market Information

• The most recent price of the company’s stock was $81.11

• Last Twelve month trading range of Nike.

$60.69- $81.80

• Dividends per share: $ .80

• Date of above information: October 29, 2004

• My opinion about Nike’s stock is definitely to keep it. There are slight dips in stock but the overall outcome is that it gains money.

Part B. Industry Situation and Company Plans

Nike is definitely expanding. From buying out long time company Converse to owning Hurley. There must be an expansion and investment from Nike as years to

come. With the stock price rising it only shows there will be a bright future for Nike.

Part C. Income Statement

• The format is most like a Multistep.

• Gross Profit increases due to an increase in sale

• Net Inc. operation increases.

• Net income increased from 2003 to 2004.

Oct 31, 2004 Oct 31, 2003

Gross Profit 3561.8 3024.9

Net Inc. Operations 1585.8 1301.5

Net Income 326.8 261.2

* (Charts in millions)

Part C. Balance Sheet

Comments

• Assets increased by 1047.2

• Liabilities decreased by 73.8

• Owner’s Equity increased by 1121

Assets = Liabilities + OE

2004 8052.9 1907.9 6145

2003 7005.7 1981.7 5024

* (Charts in millions)

Part C. Statement of Cash Flow

• Cash flow from operations is more than net income for the past two years.

• Nike is definitely increasing their investments from 42.3 million in 2003 to 72.4 million in 2004.

• Nike’s primary source of financing is stock sales.

• Overall, cash increased over the past two years.

Part D. Accounting Policies

Significant Accounting Policies:

Basis of Consolidation

Shipping & Handling Cost

Inventory Valuation

Stock Based Compensation

Recognition of Revenues

Cash & Equivalents

Prop., Plant, & Equipment & Dep.

Earning Per Share

Topics of Note to Financial Statement:Summary of Significant Acc. Policies

InventoriesProperty, Plant, & Equipment

Identifiable Assets & LiabilitiesAccrued Liabilities

Short Term Borrowing and Credit LinesLong Term Debt

Income TaxRedeemable Preferred Stock

Common StockEarning per Share

Benefit PlansInterest Income

Comprehensive IncomeCommitments & Contingencies

Risk Management & DerivativesOperating Segments & Related Info

Subsequent Event

Part E. Financial Analysis Liquidity Ratios

2004 2003

Working Capital CA- CL 5621.1-1907.0=

3713.2

4679.9-2015.2=

2664.7

Current Ratio CA/CL 5621.1/1907.0=

2.9 times

4679.9/2015.2=

2.3 times

Receivable Turnover Net sale/ Avg

Acc. Recieivable

10697.0/1952.5=

5.4 times

2893.0/1952.2=

5.0 times

Avg Days Sales

uncollected

365/

Avg Inv.

365/5.4=

67.6 days

365/5.0=

73 days

Inventory

Turnover

COGS/

Avg Inv.

6313.6/14442= 6004.7/1396.4=

4.3 times

Avg Days

Inventory in Hand

365/

Inv. Turnover

365/4.3=

84.9 times

365/4.3=

84.8 times

* ( Charts in millions)

Part E. Financial Analysis Profitability Ratios

2004 2003

Profit Margin Net Income/

Net Sale

474.0/ 10,697=

4.4%

663.3/ 9893.0=

6.7%

Asset Turnover Net Sale/ Avg.

Total Assets

10,697.0/ 4,149.7= 2.5 times

9893.0/ 6,085.3=

1.6 times

Return on Assets Net Income/

Avg Total Assets

474.0/ 4.149.7=

11.3%

663.3/ 6,085.3=

10.95%

Return on Equity Ne Income/

Avg SHE

474.0/ 2,507.9=

18.9%

663.3/ 3644.5=

18.2%

Part E. Financial Analysis Solvency Ratio

For the past two years, calculate and comment on:

• Debt to Equity

• There is little difference in Debt to Equity in 2004 and 2003

2004 2003

Debt to Equity Total Liabilities/

Total SHE

1907.9/ 6145=

0.31 times

1981.7/ 5024

0.39 times

Part E. Financial Analysis Market Strength Ratios

For he past two years calculate and comment on:

• Price/ earning per share

• Dividend yield

2004 2003

Price Earning per Share Mkt Price of share stock/ EPS

81.11/ 3.741=

21.68

57.85/ 2.86=

20.2

Dividends Yield Dividend per share/ Mkt. Price per share

0.80/81.11=

0.98%

0.54/38.53=

1.4%