Nike Financial Report

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 2022 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 in 2018 were $36.3 billion.  In 2022, their revenues were $46.7 billion.  This is an average growth rate annually of about 6.8% for the last five years.  This trend indicates the organization has entered the mature phase of its business cycle.  Further, the company is doing an excellent job of continually and systematically growing revenues, except for a dip in 2020.

Analyst Grade: A

Nike Summary Income Statement 2021
	2021	2020	2019	2018	2017
Revenues	44,538	37,403	39,117	36,397	34,350
COGS	24,576	21,162	21,643	20,441	19,038
Gross Profit	19,962	16,241	17,474	15,956	15,312
SG&A	13,025	13,126	12,702	11,511	10,563
Depreciation	744	721	705	747	706
R & D		-	-	-	-
Other		-	-	-	-
Total Operating Expenses	13,769	13,847	13,407	12,258	11,269
EBIT	6,923	2,976	4,850	4,379	4,945
Other Income			-	-	-
Interest Expense	262	89	49	54	59
EBT	6,661	2,887	4,801	4,325	4,886
Taxes	934	348	772	2,392	646
Net Income	5,727	2,539	4,029	1,933	4,240

 

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 Cash.

Nike's cash holding in 2018 was $4.2 billion, or 11.7% of sales.  In 2022, their cash position was $8.5 billion, or 18.4% of sales.  This trend indicates that the organization has felt the need to increase its cash position as compared to sales year-over-year.  This increase lowers the organization's ability to fully utilize its cash for growth or other revenue-generating opportunities.  From an investor's perspective, this is not a good trend.

Analyst Grade: B

Nike 2021 Summary Balance Sheet
	2021	2020	2019	2018	2017
Cash	9,889	8,348	4,466	4,249	3,808
Short Term Investment	3,587	439	197	996	2,371
Account Receivable	4,463	2,749	4,272	3,498	3,677
Inventory	6,854	7,367	5,622	5,261	5,055
Other		-	-	-	-
Current Assets	26,291	20,556	16,525	15,134	16,061
Net PPE	4,904	4,866	4,744	4,454	3,989
Goodwill	242	223	154	154	139
Other		-	-	-	-
Total Assets	37,740	31,342	23,717	22,536	23,259
Accounts Payable	2,836	2,248	2,612	2,279	2,048
Accrued Expense	6,063	5,184	5,010	3,269	3,011
Accrued Taxes	306	156	229	150	84
Notes Payable	2	248	9	336	325
LT Debt - Current	-	3	6	6	6
Other		-	-	-	-
Total Current Liabilities	9,674	8,284	7,866	6,040	5,474
LT Debt	9,413	9,406	3,464	3,468	3,471
Other		-	-	-	-
Total Liabilities	24,973	23,287	14,677	12,724	10,852
Common Stock	9,968	8,302	7,163	6,384	8,638
Treasury	-	-	-	-	-
Retained Earnings	3,179	(191)	1,643	3,517	3,979
Other		-	-	-	-
Total Equity	12,767	8,055	9,040	9,812	12,407
Total Equity & Liability	37,740	31,342	23,717	22,536	23,259

 

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 was 2.7 in 2021.  As of 2022, their current ratio was 2.63.  This trend indicates the organization has lowered its current asset holdings as compared to current liabilities.  From an investor perspective, this trend should be considered good.  However, the organization is still holding an excessive amount of current assets as compared to current liabilities.  A better strategy would be for the organization to reduce its current ratio to closer the 1.0.

Analyst Grade: C

Nike Total Asset Turnover:

Nike's total asset turnover in 2019 was 1.65.  In 2022, their total asset turnover was 1.16.  This trend indicates the organization is continually underutilizing total assets under management.  This trend should be concerning from an investor's perspective.  To mitigate this issue, the organization should optimize operations to better align assets with revenue generation.

Analyst Grade: B

Nike 2021 Liquidity Ratios
Ratios	2021	2020	2019	2018	2017
Current Ratio	2.72	2.48
Cash Ratio	1.39	1.06
Quick Ratio	2.01	1.59
Net Working Capital	16,617	12,272
Nike 2021 Asset Utilization
Ratios	2021	2020	2019	2018	2017
Total Asset Turnover	1.18	1.19
Fixed Asset Turnover	9.08	7.69
Days Sales Outstanding	29.55	34.26
Inventory Turnover (Using Sales)	6.26	5.76
Inventory Turnover (Using COGS)	3.46	3.26
Accounts Receivable Turnover	12.35	10.65
Working Capital Turnover	2.68	3.05
AP Turnover	9.47	9.43
Average Days Inventory	105.60	112.02
Average Days Payable	38.56	38.72
Nike 2021 Profitability Ratios
Ratios	2021	2020	2019	2018	2017
Return on Assets	15.17%	8.10%
Return on Equity	44.86%	31.52%
Net Profit Margin	12.86%	6.79%
Gross Profit Margin	44.82%	43.42%
Operating Profit Margin	15.54%	7.96%
Basic Earning Power	18.34%	9.50%
ROCE	24.67%	12.91%
Capital Employed	28,066	23,058
ROIC	26.83%	14.78%
Nike 2021 Debt Ratios
Ratios	2021	2020	2019	2018	2017
Debt Ratio	24.95%	30.81%
Debt/Equity	73.74%	119.89%
Times Interest Earned	26.42	33.44