ADJUSTMENTS ON WORK
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Milestone3.docxRunning Head: MILESTONE 3
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The financial statement of Nike from 2017 to 2019 is summarized in the table below.
In the last quarter of 2019 the sales of Nike grew by 4% as compare to the last quarter of 2018. Form this increase in sale the revenues of Nike boost by $10 billion. Besides of the currency rate fluctuations the sale in North American grew by 4% and sale in China grew by 22% that is 1.70 billion. Footwear sale in North America grew by 9%, while the equipment sales grew by 7% and business grew by 6%. Due to online sales that revenues increase by 11.8 billion that is 35% in online sale and store sale increase by 6%. While the sale of whole sale customer grew by 10%. Moreover, in the last 12 months the stock is increase by 17% (Thomson, 2019 ).
Below mentioned is the Nike income statement of current and last three years.
|
Revenue |
5/31/2019 |
5/31/2018 |
5/31/2017 |
5/31/2016 |
|
Total Revenue |
39,117,000 |
36,397,000 |
34,350,000 |
32,376,000 |
|
Cost of Revenue |
21,643,000 |
20,441,000 |
19,038,000 |
17,405,000 |
|
Gross Profit |
17,474,000 |
15,956,000 |
15,312,000 |
14,971,000 |
|
Operating Expenses |
||||
|
Research Development |
- |
- |
- |
- |
|
Selling General and Administrative |
12,702,000 |
11,511,000 |
10,563,000 |
10,469,000 |
|
Total Operating Expenses |
34,345,000 |
31,952,000 |
29,601,000 |
27,874,000 |
|
Operating Income or Loss |
4,772,000 |
4,445,000 |
4,749,000 |
4,502,000 |
|
Income from Continuing Operations |
||||
|
Total Other Income/Expenses Net |
29,000 |
-120,000 |
137,000 |
121,000 |
|
Earnings Before Interest and Taxes |
4,772,000 |
4,445,000 |
4,749,000 |
4,502,000 |
|
Interest Expense |
-131,000 |
-124,000 |
-86,000 |
-31,000 |
|
Income Before Tax |
4,801,000 |
4,325,000 |
4,886,000 |
4,623,000 |
|
Income Tax Expense |
772,000 |
2,392,000 |
646,000 |
863,000 |
|
Net Income From Continuing Ops |
4,029,000 |
1,933,000 |
4,240,000 |
3,760,000 |
|
Non-recurring Events |
||||
|
Net Income |
||||
|
Net Income |
4,029,000 |
1,933,000 |
4,240,000 |
3,760,000 |
|
Preferred Stock And Other Adjustments |
- |
- |
- |
- |
|
Net Income Applicable To Common Shares |
4,029,000 |
1,933,000 |
4,240,000 |
3,760,000 |
On the basis of the current income statements and percentage of increase in sale in China and North American shows that Nike is preforming well and there is huge increase in revenues based on sales. Furthermore, the sale of Nike in China is also contributing a lot in overall sales performance of Nike because the market is huge and there is large customer base. Despite the trade conflict of USA and China still the sale is going high. Therefore, under the best case assumption in which the Nike performed well are:
· The earning are forecasting to grow 13.6% per year and over the past year the earning is grew by 107.4%.
· In the last three months the company did not face any price violation.
· The market performance of Nike shows that 7 day return of Nike is 1.9% that is large than competitors that is 0.7% of US luxury and 0.5 of US market.
· It is assumed that in the next three years the future growth will be 13.2%. The current profit margin of Nik is 10.8% that is higher than last year that is 5.6% (simplywall.st, 2019).
Hence, in the best case it is assumed that Nike’s income statement will project a growth of 14%.
|
Revenue |
5/31/2016 |
5/31/2017 |
5/31/2018 |
5/31/2019 |
5/31/2020 |
5/31/2021 |
5/31/2022 |
|
Total Revenue |
32,376,000 |
34,350,000 |
36,397,000 |
39,117,000 |
44,593,380 |
50,836,453 |
57,953,557 |
|
Cost of Revenue |
17,405,000 |
19,038,000 |
20,441,000 |
21,643,000 |
24,673,020 |
28,127,243 |
32,065,057 |
|
Gross Profit |
14,971,000 |
15,312,000 |
15,956,000 |
17,474,000 |
19,920,360 |
22,709,210 |
25,888,500 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
Selling General and Administrative |
10,469,000 |
10,563,000 |
11,511,000 |
12,702,000 |
14,480,280 |
16,507,519 |
18,818,572 |
|
Total Operating Expenses |
27,874,000 |
29,601,000 |
31,952,000 |
34,345,000 |
39,153,300 |
44,634,762 |
50,883,629 |
|
Operating Income or Loss |
4,502,000 |
4,749,000 |
4,445,000 |
4,772,000 |
5,440,080 |
6,201,691 |
7,069,928 |
|
Income from Continuing Operations |
|
|
|
|
|
|
|
|
Total Other Income/Expenses Net |
121,000 |
137,000 |
-120,000 |
29,000 |
33,060 |
37,688 |
42,965 |
|
Earnings Before Interest and Taxes |
4,502,000 |
4,749,000 |
4,445,000 |
4,772,000 |
5,440,080 |
6,201,691 |
7,069,928 |
|
Interest Expense |
-31,000 |
-86,000 |
-124,000 |
-131,000 |
-149,340 |
-170,248 |
-194,082 |
|
Income Before Tax |
4,623,000 |
4,886,000 |
4,325,000 |
4,801,000 |
5,473,140 |
6,239,380 |
7,112,893 |
|
Income Tax Expense |
863,000 |
646,000 |
2,392,000 |
772,000 |
880,080 |
1,003,291 |
1,143,752 |
|
Net Income From Continuing Ops |
3,760,000 |
4,240,000 |
1,933,000 |
4,029,000 |
4,593,060 |
5,236,088 |
5,969,141 |
|
Net Income |
|
|
|
|
|
|
|
|
Net Income |
3,760,000 |
4,240,000 |
1,933,000 |
4,029,000 |
4,593,060 |
5,236,088 |
5,969,141 |
|
Net Income Applicable To Common Shares |
3,760,000 |
4,240,000 |
1,933,000 |
4,029,000 |
4,593,060 |
5,236,088 |
5,969,141 |
Under the worst case scenario, it is assumed that Nike will show a performance of 5% increase in sale. As it shows in the past years. Due to high debts that company might be not able to generate good income. Hence, these debts makes the company risky. Therefore, the following income statement is made on 5% increase in revenues. That is the worst scenario that the company ever think of.
|
Revenue |
5/31/2016 |
5/31/2017 |
5/31/2018 |
5/31/2019 |
5/31/2020 |
5/31/2021 |
5/31/2022 |
|
Total Revenue |
32,376,000 |
34,350,000 |
36,397,000 |
39,117,000 |
41,072,850 |
47,233,778 |
54,318,844 |
|
Cost of Revenue |
17,405,000 |
19,038,000 |
20,441,000 |
21,643,000 |
22,725,150 |
26,133,923 |
30,054,011 |
|
Gross Profit |
14,971,000 |
15,312,000 |
15,956,000 |
17,474,000 |
18,347,700 |
21,099,855 |
24,264,833 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
Selling General and Administrative |
10,469,000 |
10,563,000 |
11,511,000 |
12,702,000 |
13,337,100 |
15,337,665 |
17,638,315 |
|
Total Operating Expenses |
27,874,000 |
29,601,000 |
31,952,000 |
34,345,000 |
36,062,250 |
41,471,588 |
47,692,326 |
|
Operating Income or Loss |
4,502,000 |
4,749,000 |
4,445,000 |
4,772,000 |
5,010,600 |
5,762,190 |
6,626,519 |
|
Income from Continuing Operations |
|
|
|
|
|
|
|
|
Total Other Income/Expenses Net |
121,000 |
137,000 |
-120,000 |
29,000 |
30,450 |
35,018 |
40,270 |
|
Earnings Before Interest and Taxes |
4,502,000 |
4,749,000 |
4,445,000 |
4,772,000 |
5,010,600 |
5,762,190 |
6,626,519 |
|
Interest Expense |
-31,000 |
-86,000 |
-124,000 |
-131,000 |
-137,550 |
-158,183 |
-181,910 |
|
Income Before Tax |
4,623,000 |
4,886,000 |
4,325,000 |
4,801,000 |
5,041,050 |
5,797,208 |
6,666,789 |
|
Income Tax Expense |
863,000 |
646,000 |
2,392,000 |
772,000 |
810,600 |
932,190 |
1,072,019 |
|
Net Income From Continuing Ops |
3,760,000 |
4,240,000 |
1,933,000 |
4,029,000 |
4,230,450 |
4,865,018 |
5,594,770 |
|
Net Income |
3,760,000 |
4,240,000 |
1,933,000 |
4,029,000 |
4,230,450 |
4,865,018 |
5,594,770 |
|
Net Income Applicable To Common Shares |
3,760,000 |
4,240,000 |
1,933,000 |
4,029,000 |
4,230,450 |
4,865,018 |
5,594,770 |
References sec.gov. (2019, 1 1). NIke . Retrieved from sec.gov: https://www.sec.gov/Archives/edgar/data/320187/000032018718000142/nke-5312018x10k.htm simplywall.st. (2019, 1 1). NIke . Retrieved from simplywall.st: https://simplywall.st/stocks/us/consumer-durables/nyse-nke/nike stock-analysis-on.net. (2019, 1 1). NIke Inc. . Retrieved from stock-analysis-on.net: https://www.stock-analysis-on.net/NYSE/Company/Nike-Inc/Financial-Statement/Income-Statement Thomson, L. (2019 , June 27 ). Nike misses on earnings, but beats on revenues as customers buy more sneakers and sports gear. Retrieved from cnbc.com: https://www.cnbc.com/2019/06/27/nike-reports-fiscal-4q-2019-earnings.html
