The following content provided will include information regarding Nikes Inc. cash management strategies, which will include more in depth information from the previous group paper. In addition, working capital recommendations will be provided to senior management base on next year’s in the pro-forma financial statements.
Working Capital Strategies Paper
Financial statements are a vital factor of any business organization; they show where a company’s money came from, where it went, and where it is now, according to Securities and Exchange Commission website (2008). In addition, four main financial statements consist of the balance sheet, income statement, cash flow statement, and statement of shareholders’ equity. These four financial statements will be evaluated from Nike Inc. and more in depth information will be included from information on the previous paper which will be link to the working capital strategies. Furthermore, a detail working capital recommendation to senior management will be included and the impact of Nike Inc. revenue increase of their working capital. Debt Structure
In fiscal 2008, Nike met or exceeded there financial goals. Revenues grew 14% to $18.6 billion, net income grew 26% to $1.9 billion, and delivered diluted earnings per share of $3.74, a 28% increase versus fiscal 2007. These reported results included combined gains from the sale of Starter Brand and NIKE Bauer Hockey businesses of $35.4 million, net of tax, in fiscal 2008 and the gain recognized on the sale-leaseback of the Oregon Footwear Distribution Center of $10.0 million, net of tax, in fiscal 2007, one-time tax benefits of $105.4 million and $25.5 million recognized in fiscal 2008 and 2007, respectively, operational losses of $13.3 million, net of tax, from Umbro, which was acquired in the fourth quarter of fiscal 2008, and a $9.6 million gain, net of tax, from the Converse arbitration ruling settlement in fiscal 2007. Nike estimates that the combination of favorable translation of foreign currency-denominated profits from international businesses and the foreign currency losses included in other (expense) income, net resulted in a year-over-year increase in consolidated income before income taxes of approximately 6%. (SEC, 2008) Equity Structure
Nike is focused on building its international portfolio and pursues growth opportunities. Nike will focus on athletic equipment and aiming for the non-athletic customer. In 2007, Nike purchased Converse, which has allowed the company to appeal to emerging markets in Brazil, China, and Russia. Nike increased Converse sales from $1.5 to $2 billion (29% increase) and most of the growth drives sales in the emerging markets. Since US revenue for Nike remains flat, the company is looking to reach more of the international market. Nike plans to invest 11% of revenue in marketing and this expense will help in promoting strong brands and maintain product recognition. In 2006, Nike spent $1.74 billion in advertising, 11.6% of revenue. This advertising led to Nike's operating margin of 8.80%. Nike is not the most profitable company in the footwear industry that title belongs to Puma. Puma has a margin of 9.55% on $4.1 in revenue. Puma had to put 15.23% of revenue towards advertising. With Nike being not as profitable as Puma, this disadvantage points out the importance of other profitability-enhancing ventures, such as moves towards increase retail distribution. Nike is planning to generate revenue by appealing more for the low-performance footwear market in the United States and Europe. This means that Nike will emphasize on Converse and Hurley, which have sneakers not intended for athletic use. By utilizing the many opportunities for growth this can improve the stockholders equity for the coming years (WikInvest, 2008). Stocks
Although slowly on the rise, NIKE’s stock took a harsh blow in 2008 with the biggest drop they had seen...
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