Capital Structure

Topics: Stock, Stock market, Finance Pages: 4 (1206 words) Published: October 4, 2014
Company Information

My company choice is Nike Inc. (Nike), a multinational sports footwear, equipment and apparel manufacturing company based in Oregon, United States. This puts Nike in the apparel industry. In 2010, Forbes rated Nike as the top sports business with a total value of $10.7 billion.

The most effective marketing strategy Nike employ is the sponsorship agreements they have with numerous top athletes in a variety of sports.

Operating Risks of Nike

When Nike was initially started out, the aim was to improve the social, labor and environmental impacts the business has, motivated by the need to manage risks. However they have also incorporated innovation to help make Nike a more sustainable business that involves the people, planet and profit in order to ensure long lasting success.

One of the major operating risks is the need to continuously keep in touch with the ever-evolving sports world, as well as the demand of consumers who are constantly demanding new products and services.

Financial Risks of Nike

The strong indication of a company’s financial risks is the debt to total capitalization ratio. This ratio measures the portion of a company’s total capital structure that is financed by debts.

The ratio is calculated as:

According to the balance sheet dated May 31, 2014, Nike had a total debt of $1.373 billion, and total shareholders’ equity of $10.824 billion. Computing these numbers gives a debt to total capital ratio of 11.26%.

The balance sheet of Nike shows that there is no preferred stock offered by the company but their common stock number stands at 3 million. Also, because there are no preferred stocks, it is impossible to calculate the cost of this type of stocks.

Capital Structure of Nike

This section gives a brief analysis of Nike’s capital structure. As stated earlier, Nike has a debt to capitalization ratio of 11.26%; meaning only 11.26% of Nike was been financed externally as of May 31,...

Bibliography: 1. Schwartz, Peter (February 3, 2010). “The World’s Top Sports brand” http://www.forbes.com/2010/02/03/most-powerful-sports-names-tiger-woods-nike-cmo-network-sports-brands.html Retrieved September 19, 2014.
2. Nelson Farris. “Strategy: Innovation in the Offense” http://www.nikebiz.com/crreport/content/strategy/2-1-1-corporate-responsibility-strategy-overview.php?cat=cr-strategy Retrieved September 19, 2014.
3. Yahoo Finance. Nike, Inc. http://finance.yahoo.com/q/bs?s=NKE+Balance+Sheet&annual Retrieved September 19, 2014
4. NASDAQ. Nike, Inc. http://www.nasdaq.com/symbol/nke Retrieved September 19, 2014
5. Morningstar. Nike Inc. Class B http://performance.morningstar.com/stock/performance-return.action?p=dividend_split_page&t=NKE Retrieved September 20, 2014
6. Nike Inc. http://investors.nikeinc.com/Investors/Stock-Information/Historical-Price-Lookup/default.aspx Retrieved September 20, 2104
7. NASDAQ. Nike Inc. Dividend Date & History. http://www.nasdaq.com/symbol/nke/dividend-history Retrieved September 20, 2014
8. YCharts. Nike Inc. http://ycharts.com/companies/NKE/dividend_yield Retrieved September 20, 2014
9. Yahoo Finance, Nike Inc. http://finance.yahoo.com/echarts?s=NKE+Interactive Retrieved September 20, 2014
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