Impact of BREXIT and COVID-19 on performance of Nike

This report analyzes the impact of BREXIT and COVID-19 on the performance of Nike, including the key elements of Nike's international finance and risk management strategy. It also examines the financial performance of Nike through various ratios.

International Finance
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Contents
International Finance.......................................................................................................................1
Contents...........................................................................................................................................2
INTRODUCTION...........................................................................................................................3
TASK1.............................................................................................................................................3
1) Impact of BREXIT and COVID-19 on performance of Nike.................................................3
2) Explanation of key elements of Nikes international finance and risk management strategy..3
3) Analysis financial performance of Nike..................................................................................3
CONCLUSION................................................................................................................................3
REFRENCES...................................................................................................................................3
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INTRODUCTION
International finance is field of financial economic which concern with management of
monetary resources deals within global market environment. In other words, it is a branch of
economics which provides direction related to monetary transactions between two or more
than two countries. It includes, are of foreign direct investment, balance of payment,
exchange rate system etc. It play essential part in overall economy as with the use of In
order to understand the importance of concept of international financial Nike has been
chosen. In this report elements of international fiancé and impact of BREXIT agreement and
global epidemic diseases of COVID 19 on profitability rate of Nike and identifying
performance status of the company through analysis of financial statements.
TASK1
1) Impact of BREXIT and COVID-19 on performance of Nike
International Finance: international finance is a mechanism through which countries
decided their exchange rate, value of shares which help in transaction and identify growth
performance of organization within world economy. It is essential part of fiancé as it is the
link between two or more than two global organizations (Ferrero, Gross and Neri, S.2019).
To maintain the mechanism of international fiancé concepts world trade organization,
world bank, international monetary fund, has been established all these are regulate and
supervise all transactions of organizations related to exchange of currencies, trade of goods
and services in global market economy. Ma y factors are effected elements of international
fiancé, at present time world economy goes down and international fiancé system suffers
from many problems due to BRITIX agreement and COVID 19 dieses. Effect of these two
on Nike has been described below:
Impact of BREXIT agreement on recent performance and development of Nike
In December 2016 Britain decide to leave their membership with European
countries due to their decision it will adversely impact on the economy of Britain and value
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of pound decline with this revenue percentage of Nike in their target market of Britain has
been decline. Britain is the largest market of purchasing branded shoo and clothes products
of Nike. Even in European Union countries company’s product sells at wider level bur due
to this agreement conflicts arises and pound value decrease which directly impact on the
international financial trade system due to this profitability rate has been decline in 2018
and 19 . Brexit agreement will negatively effect on profitability rate of Nike but the
company may increase their revenue as Britain decided to charge 0 % terrific rate and give
advance benefits and deduction for Shoo Products Company (Boudrias and Kotkin, 2016).
Impact of COVID-1 on recent performance and development of Nike
The whole world is now fighting with Corona virus diseases 19, main reason of this
disease severe acute respiratory syndrome corona virus 2. World Health Organization
declare it as global epidemic, first case of this dieses comes in December 2019 at
Wuhan ,China after that, this virus is spread global in few months at present time, after
China Italy , America, Spain and Iran is effected from this dieses. At present time more
then 8lakh population of world suffers from this dieses and approximately 40000 died due
to COVID 19, there will be no waxen has been developed to procure from this virus, it will
adversely affect on world economy as due to this dieses entire economy is going into
lockdown period which negatively impact n industrial cycle of each economy, it has been
analysis that due to this virus each country take 2 to 3 years to come back in their same
position. Nike is one of the most famous multinational corporations of America, their
target market is spread all over the world. Due to this pandemic their sales volume rate
goes down company earn more than 15 % income from China but due to lockdown over
more than 7000 shoe stores are closed in China and now Europe and in America also they
earn 70 % revenue from selling their products in Europe and America all their production
center has been shutdown there will be no manufacturing, even e commercial market of
Nike is also lay down. It will adversely impacted on value of American doller thus growth
rate also deceases but management department of Nike uses effective marketing strategy
tool they develop e- fitness app and online training club workouts through which they
generated profit at lockdown period. Digital sales rate goes up 30 % with their strategy
overall they may earn profit but it is not sufficient to maintain their position in market
place.
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2) Explanation of key elements of Nikes international finance and risk management strategy
International fiancé helps in determining exchange rates of currency, balance of payment,
interest rate, custom rates, tax policies, if business deals in international market. Nike is
global company which sells their product all over the world special in middle east and
European countries, in order to maintain sustainability and mange financial resource of
organization management department use elements of international finance and implement
effective financial strategy to run their business successfully in market and easily solve any
conflicts and critical situation of business. Elements of international market are mention
below:
 Sources of finance: Nike has been successfully maintain their strong position in market,
their management department formulate strong capital structure, the company generates
their funds from investing in share, airing assets, invest in various securities and by taken
funds and loan from various financial institution of America (Kearney and Liu, 2014).
 Dividend policy: Nike is biggest industry of accessories and footwear, the company has
maintain strong policy regarding divide to maintain their blue chip company status, Nike
provides dived to their shareholder on annually basis it also provided cash dividend to
their relevant shareholder, their shareholders has wider area thus they provides dividend
according to law and rules implemented under accounting standard , they value of
divided is .88 with 1 % of yield provides to their shareholders.
3) Analysis financial performance of Nike
Financial performance of business organization can be identified through reorganization
of their annual financial statements which includes, balance sheet, income statement, cash flow
and ratio of an running business entity. It is necessary for an entity which trade their business in
international economy to identify analysis their financial statement it will help in recognize profit
volume, performance evolution, and comparison with other rivalry companies. Manager of Nike
prepared their financial statement to take decision related to collection of funds and their
investment decision. It will help in formulating polices and it also represent in front of public so
that they can understand how company run their business activites and policies and procedure
they uses to provides service to their potential customers.
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 Profitability ratio: Theses ratio help in identify efficiency level of an entity to generate
profit from their business operations. It will also use to determine the level of controlling
expense through assets of company. Higher profitability ratio represent strong position of
company. And negative rate of this ratio shows that company is unable to gearing profit
from their business operations and thus they needed to change either polices. It can be
divided into two parts, margin ratio and return ratio. Margin ratio uses to identify ability
of an entity to generate profit from sales it consider, gross profit, net profit, operating
profit cash flow margin ratio etc. Return ratio is used to determine the rate of gearing
profit by using assts of company. This ration includes, return on assets, return of equity
and return on capital investment ratio (Daly, 2016).
 Gross Profit: This ratio can be calculated by dividing gross profit to Sale of
particular period f time. Nike gearing gross profit in 2018 43.84 % and it will
increase in2019 at 44.67 % this shows that even though terrific war or Beatrix
agreement sale of this company goes high.
 Return on assets: This ratio calculated by dividing net profit with total assets of
the company. It will help in measuring profit through assets. Company earn return
from assets in 2018was 8.58 % rate of return hike and company gear 16.99 %
profit from their assets in 2019 this show that management department use
effective policies.
 Liquidity ratio: It consider as those financial ratios through which mangers identify that
whatever their entity is able to pay short term debt liabilities of their business
organization to run their day to day business successfully. Higher rate of liquidity ratio
shows that company is in strong financial position to pay their current liability. It
includes acid test ratio, working capital ratio, quick ratio, and cash ratio through which
mangers determine their liquidity position in market place.
 Working capital ratio: It is used to measure current assets value in pay their shirt
term liability. It calculated by dividing value of current asset and current
liabilities. In 2018 value of current ratio is 2.10 and in 2018 it was 2,51 this show
that company is more reliable in paying their debt in 2019 compare to 2018.
 Quick ratio: It is part of current ratio, but it does not consider the value of stock,
main purpose of using this ratio is considered the liquid position of an entity to
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pay their liabilities. In 2018 quick ratio value is measured 0.87 and it decrease in
2019 .59 this means that as compare to 2018 company has lack of cash and cash
equivalents to pay their debt liabilities.
 Efficiency ratio: This ratio used to identify the level of how efficiently business
organization use their assets to generate profit. High ratio show healthy position of
organization. This ratio includes, debtor turnover ratio, inventory turnover ratio, fixed
assets turnover ratio, total assets turnover ratio etc. It is essential ratio for any business
organization as with the se of this ratio manager identify their non performing assets.
 Stock Turnover ratio: This ratio is used to measure the time period company needs to
cover up money from selling their stock. A compare to 2018 4.06 times company needs
to cover up their inventory. This ration can be calculated by dividing average stock value
with cost of goods sold
 Fixed Assets ratio: This ratio can be calculated by cost of selling goods divided by value
of assets return on assets is 1,68 compare to 2018 1.53 this means company needs more
time as compare to last year to utilize their assets (Hameiri, and Jones, 2018).
 Investment ratio: It is used to measure performance of an entity’s shares It includes
price earnings ratio, earning per share, market price, yield ratio etc. Managers of an entity
used this ratio to understand the return rate company earn or they give their investors
through their portfolio investment. High rate show high returning rate of investment.
 Price earnings ratio: It is used to identify value of financial gain company earn
from their share in 2019 value of price earnings ratio was 31 and in 2018 it was
61. 4 this shows a Hugh rate of decline due to various reasons in changing in
economy cycle. It can be calculated by
 Earnings per share: Value of dividend payout ratio of Nike in 2018 is 2,97 and
in 2019 it is its 2.70 that means rate if providing dividend is decreases.
From the above measurement of ratios of Nike it has been analysis that even
though Brexit agreement it will may negatively impact on sales volume of Nike in
market are of Europe but the company can earn from other market area. They can
generate their revenue from mid east countries and Indian market as their
branding value is high. On the other hand the company’s profitability ratio
increase compare to 2018 this shows that company has been in strong position to
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recover all the losses arising due to COVID 19 event it will impacted on their
efficiency as well as investment ratio, their rate of investment is decrease this
means that does not use effective investment policies to invest in portfolio ,
efficiency ratio also decreases it will be a negative impact on companies earning
but due to strong goodwill and effective marketing and pro optional strategies
company can maintain their position in the market area again (Beckworth, 2017).
CONCLUSION
From the above analysis it has been concluded that in order to maintain sustainable position
in global market business organizations need to follow rules and mechanism implemented
according to international finance system, at present time the world is facing COVID
pandemic, which totally ruin sustainability of all industries. To overcome effect of this
pandemic mangers need to formulate effective financial management policies for this
purpose they need to analysis their financial statement it will help them to take decision and
built effective policies.
REFRENCES
From books and journals
Ferrero, G., Gross, M. and Neri, S., 2019. On secular stagnation and low interest rates:
demography matters. International Finance, 22(3), pp.262-278.
Boudrias, J. P. and Kotkin, R., 2016. Project Bonds in Project Finance. In The Principles of
Project Finance (pp. 133-144). Routledge.
Kearney, C. and Liu, S., 2014. Textual sentiment in finance: A survey of methods and models.
International Review of Financial Analysis, 33, pp.171-185.
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Daly, K., 2016. A secular increase in the equity risk premium. International Finance, 19(2),
pp.179-200.
Hameiri, S. and Jones, L., 2018. China challenges global governance? Chinese international
development finance and the AIIB. International Affairs, 94(3), pp.573-593.
Moccero, D. N., Pariès, M. D. and Maurin, L., 2014. Financial conditions index and
identification of credit supply shocks for the euro area. International finance, 17(3),
pp.297-321.
Beckworth, D., 2017. The monetary policy origins of the eurozone crisis. International Finance,
20(2), pp.114-134.
Collier, P., 2014. Attracting international private finance for African infrastructure. Journal of
African Trade, 1(1), pp.37-44.
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