Answer To: This assignment to analyze the financial statements from Nike. You must submit your spreadsheet...
Harshit answered on May 03 2021
Instructions
This assignment is due by 11:59 pm on Mon. May 3.
It must be submitted online through the Canvas assignment.
This project is worth 40 points
Instructions:
In class, we have been discussing the recent annual financial statements and disclosure notes for corporations. In this project, you’ll analyze recent financial statements for Nike, Inc.
In addition to discussions in class, a summary of the commonly-used ratios is included at the end of this document. The concepts are summarized in chapter 13 of the online textbook (chapter 13 is not included in the paper version of the textbook). The videos explaining these analysis concepts are also published on Connect.
This spreadsheet contains eight tabbed worksheets (including this one). You are to complete the yellow-shaded areas on 5 of the worksheets, as decribed below:
Worksheet Name
Questions Answer yellow-shaded questions by referring to the financial statement sheets.
10-K Sec 7 Excerpts from section 7 (Management Discussion and Analysis) of Nike's 2020 10-K document are provided for your reference.
Inc St-Vert Perform a Common-Size (Vertical) Analysis of the Income Statement in the yellow-shaded cells. Sample formulas are provided to get you started.
Inc St-Horiz Perform a Trend (Horizontal) Analysis of the Income Statement in the yellow-shaded cells. Sample formulas are provided to get you started.
Bal Sht-Vert Perform a Common-Size (Vertical) Analysis of the Balance Sheet in the yellow-shaded cells. Sample formulas are provided to get you started.
Bal Sht-Horiz Perform a Trend (Horizontal) Analysis of the Balance Sheet in the yellow-shaded cells. Sample formulas are provided to get you started.
Cash Flows A copy of the Statement of Cash Flows is provided for your reference.
Shrhldr Eqty A copy of the Statement of Equity is provided for your reference.
Questions
Nike's Report of Independent Registered Public Accounting Firm 0 40.00 <== Totals
For the questions in this section, refer to the "Report of Independent Registered Public Accounting Firm" that begins on page 6 of the "Nike 2020 10-K Excerpts.pdf" document that was attached to the Canvas assignment.
1. What is the name of Nike's independent audit firm?
Price Waterhouse Coopers LLP 0.50 Accuracy
2. What type of opinion did the independent auditors issue on Nike's financial statements (unqualified, qualified, adverse or disclaimer)?
Unqualified 1.00 Accuracy
3. What does this audit opinion mean?
It means that the financial statements of the company are free from material statements in all material aspects 0.50 Quality
Nike's 10-K section 7 (Management Discussion & Analysis) excerpt
For the questions in this section, refer to the excerpts from Nike's 10-K Section 7 (Management Discussion and Analysis) on the [10-K Sec 7] worksheet or to the "Nike 2020 10-K Excerpts.pdf" document that was attached to the Canvas assignment.
In chapter 7, we talked about accounts receivable. The amount reported on the Balance Sheet is the "net realizable value" (eBook pg. 364). Refer to the paragraph titled "Allowance for Uncollectible Accounts Receivable" on the [10-K Sec 7] worksheet to get the amount Nike accrued for uncollectible A/R. Then combine this with the Accounts Receivable, Net amount reported on the Balance Sheet to calculate the percent of A/R Nike expects to be uncollectible.
Nike Corporation Fiscal 2020
(ended May 31, 2020) Fiscal 2019
(ended May 31, 2019)
4. Allowance for Uncollectible Accounts $214 $30 0.30 Accuracy
5. Accounts Receivable, net $2,963 $4,302 0.30 Accuracy
6. Percentage expected to be uncollectible [= Allowance / (A/R net + Allowance)] 7.2% 0.7% 0.40 Accuracy
7. According to the "Allowance …" paragraph, what recent event caused this change in expected uncollectible accounts?
The collectibility of accounts receivables was affected by the impact of Covid-19. 0.50 Quality
In chapter 8, we talked about long-term assets. Refer to the paragraph titled "Property, Plant and Equipment and Depreciation" on the [10-K Sec 7] worksheet. Remember that the value reported on the Balance Sheet is the "Property, Plant and Equipment, net" (net of accumulated depreciation)--the remaining unused value of these assets.
Nike Corporation Fiscal 2020
(ended May 31, 2020) Fiscal 2019
(ended May 31, 2019)
8. Percentage of Property, Plant and Equipment assets "used up" (already depreciated) 49.63% 49.9% 0.50 Accuracy
9. In chapter 9, we talked about accrued liabilities. Refer to Note 5 - Accrued Liabilities" on the [10-K Sec 7] worksheet. Note that these amounts (over $5 Billion) were accrued in the credit part of a journal entry. What category of account (asset, liability, revenue, expense, etc.) would have appeared in the debit part of these accrual journal entries?
Expenses Account 0.50 Accuracy
Income Statement
10. In the [Inc-Vert] sheet, complete preparing a “common-size” income statement (vertical analysis) for all three fiscal years. In common-size income statements, net sales revenue is 100 percent and every other number is a percentage of sales. 3.00 Quality
Calculate the following values:
Note: Nike presents “Gross Margin” with the label "Gross Profit."
Nike Corporation Fiscal 2020
(ended May 31, 2020) Fiscal 2019
(ended May 31, 2019)
11. Gross margin percentage 43.4% 44.7% 0.50 Accuracy
12. Net margin percentage 6.8% 10.3% 0.50 Accuracy
13. During which of these two years did Nike have better profitability performance?
2019 0.50 Correct
Income Statement – Horizontal Analysis
14. In the [Inc-Horiz] sheet, complete computing annual changes for each line item on the income statement. 3.00 Quality
15. Enter an "X" in the box next to the option below that best describes the trend in Nike's revenues during the reported periods. Select only one of the choices. 0.50 Correct
Steady or accelerating increase
Steady or accelerating decrease
X Fluctuating, with an initial increase followed by a decrease
Fluctuating, with an initial decrease followed by an increase
Unchanged
16. Enter an "X" in the box next to the option below that best describes the trend in Nike's selling, general & administrative expenses (operating expenses) during the reported periods. Select only one of the choices. 0.50 Correct
X Steady or accelerating increase
Steady or accelerating decrease
Fluctuating, with an initial increase followed by a decrease
Fluctuating, with an initial decrease followed by an increase
Unchanged
17. Enter an "X" in the box next to the option below that best describes the trend in Nike's net income during the reported periods. Select only one of the choices. 0.50 Correct
Steady or accelerating increase
Steady or accelerating decrease
X Fluctuating, with an initial increase followed by a decrease
Fluctuating, with an initial decrease followed by an increase
Unchanged
18. Examine the percentage changes in income statement line items from 2019 to 2020 for Nike. Also, refer to the excerpts from Nike's 10-K Section 7 (Management Discussion and Analysis) on the [10-K Sec 7] worksheet. Summarize what is causing the changes in net income from fiscal year 2019 to 2020.
The overall revenue of the company has decreased in the year 2020. The percentage of cost of sales and the operating overhead expense of the company has increased which led to the fall of the net income in the year 2020 0.50 Quality
19. Do you expect the trend to continue? Why or why not?
The major for this fall was because of Covid-19 which may continue for a year or so. Therefore the trend may continue for a year or two but will increase in the long run. 0.50 Completeness
Balance Sheet – Vertical (Common Size) Analysis
20. In the [Bal Sht-Vert] sheet, complete preparing common-size balance sheets for the years ended May 31, 2020 and May 31, 2019. In a common-size balance sheet, total assets is 100 percent and every other number is a percentage of total assets. 3.00 Quality
Answer the following questions:
Nike Corporation Fiscal 2020
(ended May 31, 2020) Fiscal 2019
(ended May 31, 2019)
21. What percent of total assets are current assets? 65.6% 69.7% 1.00 Accuracy
22. Which current asset (ignore totals) has the largest balance? Cash and equivalents Inventories 0.50 Accuracy
23. What percent of total assets are long-term assets? 34.4% 34.4% 1.00 Accuracy
24. Which long-term asset (ignore totals) has the largest balance? Property, plant and equipment, net Property, plant and equipment, net 0.50 Accuracy
25. What percent of total assets are current liabilities? 26.4% 33.2% 1.00 Accuracy
26. Which current liability (ignore totals) has the largest balance? Accrued liabilities Accrued liabilities 0.50 Accuracy
27. What percent of total assets are long-term liabilities? 47.9% 28.7% 1.00 Accuracy
28. Which long-term liability (ignore totals) has the largest balance? Long-term debt Long-term debt 0.50 Accuracy
29. What percent of Total Assets is Total Stockholders’ Equity? 25.7% 38.1% 1.00 Accuracy
30. Does Nike finance its assets mostly with debt or equity?
Debt 1.00 Correct
Balance Sheet – Horizontal Analysis
31. In the [Bal Sht-Horiz] sheet, complete computing annual changes for each line item on the balance sheet. Answer all dollar amounts in $millions like Nike does in its financial statements. 3.00 Quality
Calculate the following values:
Nike Corporation From Fiscal 2019
to Fiscal 2020
32. What was the dollar-amount of increase in Inventory? $1,745 answer in $millions 0.50 Accuracy (ignore sign)
33. What was the percentage increase in Inventory? 31.0% 0.50 Accuracy (ignore sign)
34. What was the direction of the change (increase or decrease)? Increase 0.50 Accuracy
35. Which asset line item (ignore totals) had the largest dollar increase? Cash and equivalents 0.50 Accuracy
36. Which asset line item (ignore totals) had the largest percentage change? Short-term investments 0.50 Accuracy
37. Which liability line item (ignore totals) had largest dollar increase? Long-term debt 0.50 Accuracy
38. Which liability line...