Comprehensive Financial Statement Analysis of Nike Inc. (2020)

This report presents a comprehensive financial statement analysis of Nike Inc., examining its financial performance from 2016 to 2020. It begins with an analyst's tearsheet and provides a company profile, followed by an in-depth industry analysis, competitor analysis using Porter's Five Forces model, and an overview of Nike's business model and corporate strategy. The report delves into Nike's financial statements, including revenue, expenses, and assets, and performs ratio analysis to assess liquidity, profitability, and efficiency. Trend analysis is also included. Furthermore, it explores company valuations and applies a free cash flow model to estimate Nike's intrinsic value. The analysis covers key financial metrics, including current ratio, debt-to-equity, gross margin, and return on equity, providing a holistic view of Nike's financial health and performance within the global footwear and apparel market. The report also includes interpretations of the ratios and trend analysis.

FINANCIAL
STATEMENT
ANALYSIS
(WORD COUNT:-2995)

Contents
ANALYST TEARSHEET...............................................................................................................3
COMPANY PROFILE....................................................................................................................3
Industry Analysis.............................................................................................................................4
Competitor Analysis........................................................................................................................6
Business model and corporate strategy............................................................................................7
Company’ financial statements........................................................................................................9
Ratio Analysis................................................................................................................................10
Company Valuations.....................................................................................................................13
Free cash flow model.....................................................................................................................14
References......................................................................................................................................17
Appendix........................................................................................................................................19

ANALYST TEARSHEET
The purpose of financial statement research is to determine patterns and connections
between accounting policies. Integrated reporting and outside consumers of financial reports
(including such experts, bankers, and buyers) must assess a return on equity, stability, and
stability. Trend analysis, horizontal analysis declarations, and financial ratios are the most
popular approaches for working capital management. This report based on the Nike inc. Nike,
Inc. is an American multinational business that designs, develops, manufactures, and markets
sneakers, clothing, technology, collectibles, and services to a wide range. The firm is based in the
Washington metropolitan region, near Beaverton, Oregon. In this report consist of PEST
analysis, SWOT analysis, Porters five force model and business model. Along with discuss about
the company’s financial statement, dividends model and free cash flow model.
COMPANY PROFILE
NIKE, named after the Greek goddess, is a group of shoes and clothes. Designs, creates
and offers a selection of items that help play b-ball and soccer (football), just like running,
people training and other activity sports. Under the named image, NIKE also advertises
children's sportswear and various ugly and funny exercises; also sells functional clothing under
the Converse. The group, which generates approximately 60% of its contracts outside of the
United States, sells through more than 1,090 stores worldwide and web-based corporate websites
and a large number of sales accounts, self-buyers, licensees and resellers. A customer in North
America accounts for approximately 40% of total revenue (Frisch, 2008).
Operations
NIKE branded items, which account for 95% of total revenue, are based on six main classes:
Running, NIKE Basketball, Jordan Brand, Football, Coaching, and Sportswear (active lifestyle
items). NIKE shoes are the driving force behind the organizational offer, obtaining over 60% of
contracts and led by the famous Jordan Brand and various departments. NIKE Clothing
represents approximately 30% of contracts and NIKE Equipment (uniforms, socks, sports balls,
eyes, watches, IT equipment, clubs, protections and other hardware intended for sports exercises)
approximately 5% (Kreng and Wang, 2013).

Geographic accessibility
NIKE is headquartered near Beaverton, Oregon; there is a 400-land site with over 40 structures.
It also has significant territorial control in Hilversum, the Netherlands (for the EMEA region)
and Shanghai, China (for the Greater China region) and branch and customer locations in over 50
different countries.
The organization creates almost 40% of deals in North America (for the most part the US) with
another quarter in Europe, the Middle East, and Africa. More noteworthy China represents about
20% of income and some 15% for the remainder of the Asia-Pacific district and Latin America
(Masaviru, 2016).
Industry Analysis
Nike, fully known as "Nike, Inc.", is an international company based in the United States that
provides functional and popular apparel around the world. Founded in 1964, Nike serves to
"inspire and promote every competitor on the planet". Despite being one of the largest gaming
and decoration apparel groups in the world, Nike must maintain a high level in its impressive
market.
Political
The political parts are especially crucial to the demise of a group - the part we don't see
regularly. Most of the current policy changes are only about how an organization can deliver its
products or the profit it is making, for example. For Nike, some of these are:
The United States, Nike's "home country," so to speak, has significant development deals that are
particularly important to this group. These include low loan costs and high costs around the
world.
Economic
Nike sells mid-range items, so they're not as powerful against cash parties as others, but
everything considered here is part of the economic factors:

A market crash could mean terrible news for Nike, along with many other big brands. Shoppers
can decide to upgrade to cheaper end items if that has happened somehow, or even the same as a
fair amount of value becomes easier. Nike's revenue is partly due to lower labor costs in the Far
East. However, this is emerging as the possibility that higher Nike costs globally go hand in hand
with progress in economically underdeveloped countries (Mahdi et al 2015).
Social
Advertising has never been more relevant than it is today. Good social conditions mean a lot to
businesses today, so it's worth thinking about these elements:
The growing popularity of "well-being" means that more and more people are moving towards
better lifestyles. No doubt these people will buy a lot of sportswear, something that would make
Nike very happy. In addition, Nike receives a lot of analysis for its questionable creativity.
Technological
Innovation allows organizations to move forward from a diverse perspective. From
communicating with customers to designing things, innovation offers some benefits to
associations that are very similar to Nike. Here are some of the technological elements that
influence it:
Web-based media allows things to explode or shake faster than at any other time. Nike does a
great job of using web-based media to capture its image, but that can be very two-dimensional if
used loosely. Nike also has the ability to use meaningful data-driven measurements due to
innovative advances, considering them to improve focus and creativity and increase revenue.
Competitor Analysis
Porter’s five forces model
Nike Inc. continues its development as a major player in the global footwear, apparel and play
equipment market. Nike Inc. has a Five Force review establishing the key powers that shape the
organization's operations. Michael Porter developed the Five Forces Study module to understand

the impact of external elements on organizations. In Nike's case, these five powers highlight
conflict as perhaps the main external factor (Mahdi et al 2015).
Competitive Rivalry or Competition with Nike Inc. (Strong Force)
Competition determines how Nike Inc keeps pace with much of the soccer games market. This
part of the Five Forces study shows what competition means for the business climate and
presentation of individual companies. The external components accompany him, making the
Nike situation a strong source of controversy:
 Low market development rate (hard power)
 High company strength (strong power)
 Average number of companies (average power)
Bargaining Power of Nike’s Customers/Buyers (Moderate Force)
Nike's customers have a direct impact on business performance. This part of the Five Forces
Audit shows how customers determine the intensity of a business and the business situation. In
Nike's case, the external parties add to the customer's central trading force:
 Low exchange costs (hard power)
 Mid range (average power)
 Small size of individual customers (power supply without power supply)
Bargaining Power of Nike’s Suppliers (Weak Force)
Suppliers are influencing the Nike industry through access to raw materials. This part of the five-
force audit governs the impact of suppliers on business and the industry climate. For Nike's
position, the external elements involved make up the fragile bargaining chip of suppliers:
 Totally brittle potency
 Large supplier population (fragile power)
 Medium size of individual providers (medium capacity)
Threat of Substitutes or Substitution (Moderate Force)

The agents are a major threat to Nike’s display as a major player in the global sneaker market.
This part of the study of the five forces differentiates renewable power across industrial and
corporate climates. Next, the external factors keep up with the center risk against Nike Inc:
 Medium reach of agents (medium power)
 Medium execution for surrogate cost (medium capacity)
 Low exchange costs (hard power)
Threat of New Entrants or New Entry (Weak Force)
New competitors or new companies can upset Nike’s business situation. This part of the five-
force study differentiates the extent to which new entrants are influencing companies in the
footwear, apparel and equipment market. External elements increase the vulnerability of new
entrants to Nike Inc:
 Significant costs for brand development (power without power)
 Large economies of scale (fragile energy)
 Average expenditure on working together (medium power)
Business model and corporate strategy

Business Model

Corporate Strategy
At Nike Inc., most of the pay comes from the company's shoe and apparel contracts. The
organization uses similar innovations, relevant channels, and different funding for other
elements. Despite the fact that Nike has filled the business, company-wide approaches should be
expected to ensure the organization's development. There are three main company-wide methods
Nike has used to promise improvements. Just off the bat, Nike stepped in to promote new items
by showcasing new items. Using cutting-edge technology, Nike has chosen to keep an eye on
them. As a result of item promotions, Nike items remain attractive to customers despite the trend
change. Furthermore, promotion and market access have been essential for company-wide
approaches. Everything else in this way, due to its image-intensive design, Nike finds it simple to
integrate and explore new business segments equally focused on new market chips. Market
development and infiltration into regions such as Africa and the Middle East have contributed to
an expansion of Nike's lead (Masaviru, 2016).
Ultimately, Nike has a basic strategy that should be used to ensure the continuous
improvement of the organization. A variety of suppliers is an important part of business success.
Nike customers are on a large scale and are attracted to Nike products. As a result, Nike has
improved the scale of its market and secured a consistent track record for supported creation.
With Nike's market ready and capable, there is a need for a mix of suppliers. As the share of the
total industry expands, so does the need for additional resources and raw materials. Therefore,
additional vendors need to ensure that the organization does not run out of resources (Masaviru,
2016).
Company’ financial statements
Nike Inc. revenues increased from 2018 to 2019 but then, at that rate, they decreased
slightly from 2019 to 2020 without reaching the level of 2018. Nike Inc. the pay paid increased
from 2018 to 2019, but then, at that pace, decreased significantly from 2019 to 2020. Nike Inc.
pays before annual expenses increased from 2018 to 2019, but then, at that rate, it decreased
completely from 2019 to 2020. Nike Inc. total compensation has increased since 2018 to 2019
but then, at that point, it decreased slightly from 2019 to 2020 without reaching the level of 2018.

Nike Inc. current assets have increased from 2018 to 2019 and from 2019 to 2020. Nike Inc.’s
property, plant and equipment, net increased from 2018 to 2019 and from 2019 to 2020. Nike
Inc.’s non-current assets have decreased since 2018 to 2019 but then, at that point, they expanded
from 2019 to 2020 exceeding the level of 2018. Nike Inc. total facilities extended from 2018 to
2019 and from 2019 to 2020 (Subramanyam, 2014).
Ratio Analysis
Financial ratio analysis
2020
Nike Plc Industry
Current Ratio 2.48 2
Long-term Debt/Capital 0.54 0.66
Debt/Equity 1.2 0.94
Gross Margin 43.42 54
Operating Margin 8.33 12
Net Profit Margin 6.79 5
Asset Turnover 1.19 1.02
Inventory Turnover ratio 2.87 1.12
Receivable Turnover 13.6 25
ROE 31.52 33
ROA 8.1 11
ROI 14.54 13
Trend Analysis
Item/Year 2019 2018 2017 2016
Current Assets 16,525,00
0 15,134,000 16,061,000 15,025,000
Current Liabilities 7,866,000 6,040,000 5,474,000 5,358,000
Inventories 5,622,000 5,261,000 5,055,000 4,838,000
Cash 4,663,000 5,245,000 6,179,000 5,457,000
Receivables 4,272,000 3,498,000 3,677,000 3,241,000
Total Assets 23,717,00
0 22,536,000 23,259,000 21,396,000
Total Liabilities 14,677,00
0 12,724,000 10,852,000 9,138,000
Total Equity 9,040,000 9,812,000 12,407,000 12,258,000

Sales 39,117,00
0 36,397,000 34,350,000 32,376,000
Cost of Goods Sold 21,643,00
0 20,441,000 19,038,000 17,405,000
EBIT 4,772,000 4,445,000 4,749,000 4,502,000
Interest -49,000 -54,000 -59,000 -19,000
Net Income 4,029,000 1,933,000 4,240,000 3,760,000
Interpretation
1. Liquidity ratio
A liquidity ratio can help companies get the information they need if they can handle
their current liabilities with their current assets. Nike Inc.'s current rate declines from 2018 to
2019, but improved from 2019 to 2020 and did not reach 2018. Nike Inc. The current rate
decreased from 2018 to 2019, but improved from 2019 to 2020 and did not reach 2018. Nike Inc
cash rate decreased from 2018 to 2019, but improved from 2019 to 2020, surpassing the 2018
level (Gibson and Boyer, 2013).
1.1 Current Ratio
The current ratio of Nike is 2.48 in the year 2020. Compared to industry, current ratio of Nike is
higher. This indicates that company is secure from the perspective of shareholder. But the current
ratio is more than idol baseline of 2:1. This results into inappropriate utilization of short-term
funds by the company.
2. Activity ratios
Activity ratio helps organizations understand how efficiently their balance sheet assets can be
used to manage and receive cash and revenue. Nike Inc. declined from 2018 to 2019 and from
2019 to 2020. Nike Inc.'s sales declined. It was receivable from 2018 to 2019, but improved from
2019 to 2020 and surpassed 2018. Nike Inc takes payables. It decreased from 2018 to 2019, but
increased from 2019 to 2020, exceeding 2018. Nike Inc. The division of labor improved between
2018 and 2019 but declined significantly between 2019 and 2020 (Fridson and Alvarez, 2011).
2.1 Receivable turnover ratio

The receivables turnover of the company in the year 2020 is 13.6 or 14 days. On the other hand,
industry takes 25 days to receive the amount from debtors. This indicates that Nike is more
efficient compare to industry in receiving fund.
2.2 Inventory turnover ratio
The inventory turnover of Nike is 2.87 times which is higher than industry’s ratio of 1 time. This
shows that Nike is efficiently converting its inventory into cash throughout the year.
2.3 Asset turnover
The asset turnover of Nike is 1.19 times which higher than industry’s asset turnover of 1.02
times. This indicates that Nike is better utilizing its assets compare to industry.
3. Debt Ratio
The debt-to-equity ratio is so important to the analysis that a company can know its
financial risk to the company. A debt-to-equity ratio greater than 1 indicates that the company is
at higher risk, and a debt-to-equity ratio below one indicates that the company is less risky
(Stickney, C.P., Brown and Press, 1995). Nike Inc.: The 2018-2019 debt/equity ratio improved,
but declined significantly between 2019 and 2020. Nike Inc.: The debt/equity ratio (including
operating leases) improved from 2018 to 2019, but declined significantly between 2019 and
2019. 2020. Nike Inc. on equity. It improved from 2018 to 2019, but decreased significantly
between 2019 and 2020. It improved from 2018 to 2019, but decreased significantly between
2019 and 2020.
3.1 Debt/Equity ratio
The debt-equity ratio of Nike is 1.2 times, which is higher than industry of 0.94. This indicates
that Nike has more risk to become insolvent due to higher proportion of debt compare to equity.
4. Profitability Ratios
Probability is used in analytics and can help investors to check their performance and helps
analyze how a company is generating returns in terms of returns. It also helps companies