Researching Industry Financial Statistics

Company Profile:  NIKE INC 

Ticker symbol: NKE

Year Established: 1967

Employee: 62,600

CEO: Mark Parker 

NAICS code: 424340 

Total Revenue of NIKE INC Compared to its direct Competitors: Nike INC is ranks 2 nd it has a Total Revenue of 32,376,000,000 

Return on Assets Compared to its Competitors: Nike ranks 7 th with a 17.49 

Net Income Compared to its Competitors: Nike ranks 2 nd with a Net Income of 3,760,000,000 

Revenue: 2015 2014 

30,601,000,000 27,799,000,000 

Gross Margin: 45.97 44.77 

Earnings Per Share: 1.90 1.53 

When investors want to invest in a company or an enterprise they consider the solvency and equity ratio. Nevertheless, neither one of the ratios can be measured in seclusion since the tenure of loan that the company has is considered. The liquid ratio determines the ability of a company to meet its long-term obligation as they become current, also, short term obligation as they become due. Liquidity ratio indicate the sufficiency of cash level and the ability of an enterprise to change its assets into cash to resolve its liabilities. From a creditor’s point of view, this is good thing since it depicts liquidity. However, from the investor’s point of view, it ascertains that the company is not generating enough income from its operations to fund its activities that could be caused by reduced receivable (Adelson, 1998). The solvency ratio is considered usually accounting for business over a year, it shows the company's ability to sustain its operations and still stay afloat by comparing its debt to equity or assets.

Analysis 

Analyzing several business ratios, for both long and short-term obligations is evident in Nike Inc. is innocuous regarding borrowing from the creditor's point of view. Liquidity ratio includes the current ratio of 252% this implies that the company has 2.52 times more current assets compared to liabilities to meet its mandate. The average current ratio of the industry is 2.81; this implies that the firm shall need limited time to raise funds to cover the current liability of the company as they become due (NIKE, Inc, 2017). The quick ratio measures assets that are more liquid, Nike’s Liquid ratio is 1.6 to 1 which is slightly higher than the average ratio of the industry which is 1.4 to 1. The ratio indicates that Nike has enough assets to settle its current liabilities as well as other companies within the industry.

Inventory turnover ratio of Nike Inc was 3.99 and 91.2 days. The Inventory turnover ratio industry average was 3.06 and 122 days; this implies that Nike Inc. sells their inventory an average of 30 days lesser than their entrant implying that the company receives more revenue at a faster rate. Receivables turnover ratio of Nike Inc is 9.01 for 39.5 days. The average Receivables turnover ratio of the industry average is 10.79 for 33.2 days. It implies that Nike is behind its rivals by six days. The difference can be attributed to the sales and the volume of the inventory that a particular company deals with annually. The period which Nike takes to retrieve revenue from credit accounts takes too long and cannot be counted and may not be received at all. Nike’s Total assets turnover ratio is 1.52 per dollar of what the company had in assets they generate 1.52 dollars, this show how the company is effective in utilization. The industry average of Total assets turnover ratio is 1.16 making the company more competitive compared to its rival.

Profitability Ratios 

The profitability of Nike Inc was 0.11 whereas the industrial avails were 0.92, this portrays that the company converted 11 percent of what they sold to profit ahead of their entrants ( Sorto, Aasheim, & Wimmer, 2017) . Return on asset ratio of Nile Inc was 16.29; this depicts for each dollar that the company invested 16.29 dollars was made. The average Return on assets ratio was 2940.55 which ranks Nike the best amongst it, competitors. Return on assets measures how efficiently Nike Inc utilize assets to generate earnings. Gross margin ratio was 45.97 compared to the industry average of 52 (Plunkett, Jack, Plunkett, Steinberg, Faulk & Snider, 2017). The ratio indicates how profitable business is in selling their inventory for profit with the markup from the actual cost of production.

Solvency Ratios 

The industry’s debt to equity ratio was 0.38 while that for Nike was 0.08. The ratio shows that compared to equity, debt is cheaper as a type of finance for taxation purposes, dividends paid to shareholders are not a tax deduction ( Stice, Stice, & Stice, 2017) . 0.45 was the debt ratio of the industry while that of Nike was 4.1 implying that the competitors of Nike and Nike will not experience any trouble at the time of repaying or while securing a loan. The industry ratio was 0.53, and the equity was 0.58. A higher measurement number bring about security in the case that the business has to liquidate its assets to stay solvent (Plunkett et al 2017). However, it is good for the stockholder if the measurement number is lower.

Trends Over the Last 5 Years 

Over the decade, the sales of Nike have been stable, besides the last five years. The revenue of Nike has accelerated by $8,248,000,000 with the constant increases in all the right areas. The overall revenue was $24,128,000,000 in 2012, which totaled up in 2016 to $$32,376,000,000 (Plunkett et al 2017). There was a total increase in the operating income by $1,462,000,000. This is because in 2012, the operating income was $3,040,000,000 which in 2016 increased to $4,502,000,000 (Statista: The Statistic Portal, 2017). Over the last five years, also the primary areas like Return on Assets, Earnings Per Share as well as Net Income have likewise increased tremendously.

Though, there were some increases in other sections of expenditure also. A rise of $3,038,000,000 was registered in the Selling, General, and Administrative, General together with Selling expenses. The 2016 Olympic sports can probably explain this major rise. Much production, product preparation along with advertising also spiked the impressive increment in the revenue. One more major increase was Operating Cash Flow which increased by increased by $1,197,000,000 (Plunkett et al 2017). In general, Nike’s road to success has continued for several years. In the US and the rest of the world, Nike has remained the highest paid sporting goods brand and athletic apparel thanks to great management, foresight as well as financial planning.

Conclusion 

In Athletic equipment, apparel and shoes, Nike are leading all over the world. The main reason why they have maintained their top position is that of brand recognition, customer service, technology as well as marketing. In 2014, Details.com named the organization as one of the top ten healthiest organizations to work for. Innovation is also another reason for them staying at the top since the business is never scared to reinvent services and products within their unlimited financial range. Nike achieves this with the element of user feedback and functionality that has resulted in the business being ranked number seven as the world's most innovative companies by Fast Company in 2014.

Nike remains to be profitable together with enhancing their financial holding on apparel market and the sports equipment as indicated by the financial ratios and statements. Advertisement turns out to be the largest competitive advantage of the company where star athletes increase their revenues and endorse their products. Nike has an unlimited amount of capital to pay these stars, their endorsement increases the bottom-line and attracts buyers. The company is financially sound, and predictions indicate a continued rise in profits and revenue.

References

Adelson, A. (1998). Companies are increasingly seeking to identify their products with music, both old and new. The New York Times . 

  NIKE, Inc. (2017). Company Profile. Retrieved from http://about.nike.com/pages/company-profile 

Plunkett, Jack W., Plunkett, M. B., Steinberg, J. S., Faulk, J., & Snider, I. J. (2017). Nike Inc. Search All. Retrieved March 30, 2017, from http://www.plunkettresearchonline.com. 

Statista: The Statistic Portal. (2017). Statistics and Facts on NIKE, Inc.. Retrieved from https://www.statista.com/topics/1243/nike/ 

Sorto, M., Aasheim, C., & Wimmer, H. (2017). Feeling The Stock Market: A Study in the Prediction of Financial Markets Based on News Sentiment. 

Stice, D., Stice, E. K., & Stice, J. D. (2017). Cash Flow Problems Can Kill Profitable Companies.