Nike: Brief Summary

Nike Inc., designs, creates and sells sportswear such as sneakers, clothing, sporting equipment, and other athletic-type products. Nike's headquarters in the US is at One Bowerman Dr. in Beaverton, OR. 97005.  The company competes in the customer cyclical business sector.  As for the industry, the organization competes in the footwear and accessories industry.  At present, Nike employs about 73,000 individuals.

Nike Financial Report Sources

“Nike 2021 Financial Report: Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA., and owner of Quality Business Plan.  In this report, I used Nike's 2018 10k, Nike's 2017 10k annual report, 2021 10k annual report, 2020 10k annual report, and Nike's 2019 10k annual report as the basis for information gathering. 

Section 1: Nike Income Statement Analyzed

In this section, I walk through a broad definition of what an income statement is and why it is important.  From this, I then discuss and define income statement line items, such as revenues, gross profits, etc. in detail.  After each line item is defined and discussed, I finally offer a summary analysis of Nike's important income statement line item trends.

Nike Revenue Growth.

Nike’s revenues ended 2017 at $34.3 billion.  In three of the next four years, the organization’s revenues would climb continuously.  On average, the firm’s revenue growth rate was about 7%.  Impressively, their highest growth rate, 19.1%, happened recently in 2021.  Most impressive.

Analyst Grade: A

Nike COGS

Nike’s SG&A, as compared to revenues in 2017, was 30.8%.  In the next three years, the organization’s SG&A as compared to revenues would increase moderately, ending 2020 at 35.1%.  This increase indicates that the company was using increased overhead costs to generate fewer sales.  Not a great trend.  Fortunately, in 2021, the organization would mitigate this problem and reduce their SG&A as compared to revenues to 29.2%.

Analyst Grade: B

Section 2: Nike Balance Sheet Analyzed

For Nike's balance sheet, I again go through each important line item from the balance sheet.  In reviewing each line item, I will define Nike's balance sheet line items, such as cash, property, plant and equipment, and liabilities.  Next, I then offer a summary analysis of Nike's important balance sheet line items.

Nike's Short-term Investments.

Nike’s short-term investments ended 2017 at $2.3 billion.  In the next three years, the organization’s short-term investments would fall to $197 million in 2019.  Fortunately, the organization would rebound its short-term investment position ending 2021 at $3.5 billion.  Again, some huge fluctuations in their short-term investments.  Inherently, fluctuations in balance sheet line items indicate risk within the organization.  Not a good trend.

Analyst Grade: B

Inventory.

Nike’s inventory level ended 2017 at $5 billion.  In the next three years, the organization’s inventory would climb substantially, ending 2020 at $7.36 billion.  Fortunately, the organization would be able to reduce its inventory level ending 2021 at $6.8 billion.  As compared to sales, the organization’s inventory level has maintained a relatively tight range, except for 2020.  The tight range in inventory as compared to sales would be a good trend, in my opinion.

Grade: A

Section 3: Nike Financial Ratios Analyzed

For this section, I have chosen several different financial ratios to review for Nike.  In reviewing each of Nike's financial ratios, I first start with defining the financial ratio.  Next, I supply the financial formula for calculating the specific ratio.  Finally, I offer a brief analysis of Nike's Important Financial ratios. 

Nike Current Ratio:

Nike’s current ratio ranged from 2.1 to 2.93 over the last five years.  Typically, most multinational organizations keep a current ratio of about .8 to 1.3.  In comparison, the organization seems to have a substantial amount of current assets as compared to current liabilities.  This would be considered a bad trend.  A better strategy would be to maintain a current ratio of about 1.0 or even slightly less.

Analyst Grade: B

Nike Total Asset Turnover:

Nike’s total asset turnover ended 2017 at 1.48.  In the next two years, the organization would improve its total asset turnover ending 2019 at 1.65.  This means that the firm generated more revenues with less total assets.  Unfortunately, in the next two years, the company ended 2021 at 1.18.  This means that the organization systematically reduced its total asset utilization.  This would be a bad trend, in my opinion.

Analyst Grade: B-