Coporate Finance Nike

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Corporate Finance Assignment #2July 10th 2012
CIBU – Lorin LEONE Thomas HERMANN

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An Investment Analysis Case Study: NIKE

* Which points are most useful?
* Which information is important to success and development of Nike? * What are your thoughts on a projection for Nike to branch out into this market? -------------------------------------------------

1. Financial Data summing up

Despite growing competition from successful upstart companies like Under Armour, and an increasingly aggressive war on market shares with other giants like Puma and Adidas – Reebok, Nike’s financial statements show an exemplary year 2011 for the firm. Indeed, after 3 years of relatively steady revenues and slightly increasing operating expenses, Nike’s revenues went up by 1.8 billion USD. The operating income in 2011 is higher and doesn’t absorb the predictable increase in cost of revenues and operating expenses, however the firm’s net income is still significantly higher than the previous 3 years. Nike’s last two years balance sheet shows us that the company has less accessible Cash than in 2010 (Close to 2 billion USD vs 3 billion USD in 2010). On the other hand Nike benefits from larger inventories as well as more assets in Accounts & Notes Receivable than the previous year. Overall Nike still has a substantial margin to invest, and solid current assets. We can add that we observe an increase in account payable as well as a decrease in accrued expenses. Nike’s net cash flow from operating activities is substantially positive, their long-term debt are decreasing by more than 150 millions over the last year and their share capital is still very strong and increasing.

2 Most useful points & thoughts on Nike’s branching out

* Point 3 & 4 relay to the potential of the market, that Nike is thinking of entering. The first and foremost information Nike needs is forecasting on the market...
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