Capital budgeting is the process in which a business determines whether projects such as building a new plant or investing in a long-term venture are worth pursuing. Oftentimes, a prospective project's lifetime cash inflows and outflows are assessed in order to determine whether the returns generated meet a sufficient target benchmark. Whereas capital rationing is the act of placing restrictions on the amount of new investments or projects undertaken by a company. This is accomplished by imposing a higher cost of capital for investment consideration or by setting a ceiling on the specific sections of the budget. The company I have chosen to do my research financial analysis paper on is Nike Inc. NIKE, Inc., based near Beaverton, Oregon, is the world's leading designer, marketer and distributor of authentic athletic footwear, …show more content…
is a growth company. Over the last 10 years, we’ve more than doubled our revenue, and they have stated “we believe we’ll deliver $30 billion in revenue by FY15 and $36 billion by FY17.” Since we published our FY10/11 Sustainable Business Performance Summary, our overall employee base grew to approximately 48,000 at the end of FY13, an increase of 10,000 employees. We expect strong growth in Running, Basketball, Football, Men’s Training, Sportswear, Women’s Training and Direct to Consumer sales. As we look forward, we believe that sustainability is one of the key drivers that will catalyze innovation and lead us toward continued growth. NIKE, seeks to deliver shareholder value through sustainable growth. One of the ways we will achieve this goal is to find avenues to reach our long-term vision of decoupling profitable growth from constrained resources. The CEO shared that they are working to integrate sustainability into every aspect of our business. Our aim is to challenge, push and explore ways that change the game entirely for materials, design and manufacturing. We don’t grow just to get bigger. We grow to be better and do
Nike has a very sophisticated sustainability strategy. The strategy is based on company’s prospects for future, to ensure that the company remains profitable and reputable, taking into consideration the social responsibility of the company (NIKE 2013). For instance, the strategy is supposed to ensure that the company gains a stable supply for the raw materials for the product manufacturing that will ensure stable supply of the products in the market at favorable prices. The strategy also targets make the company responsive to environmental concerns, aiming at reducing environmental pollution through emissions to the atmosphere (Charter, 2001). The strategy outlines the company
For Nike's business model to continually flourish and stay profitable, the senior management team and strategic planners must continually monitor short, intermediate and long-term economic factors that will affect their operations. Nike's business model is heavily dependent on supply chains, as the majority of their products are manufactured in Asian nations, either in their own manufacturing centers or contract manufacturing partners. Sales forecasts for next-generation shoes, apparel and sporting equipment must be accurate to ensure the supply chain estimates and forecasts can meet product demand. The influence of economic factors on sales and marketing planning and strategy development is among the most immediate and significant for any enterprise operating in global markets (Cerullo, Avila, 1975). Strategic planners at Nike, working in conjunction with product development and product launch teams, must understand the price elasticity of demand for a given new product or an entirely new division before launching it. Economic data gives Nike senior management and strategic planners the insight necessary to determine which new products to launch or not, when, and in which specific regions of the world. Economic variables will in short tell Nike's senior management how to navigate risk and capitalize on opportunities as quickly as possible.
The report focuses on the Economic Value Added of Nike Inc. The analysis is conducted through a detailed assessment of the financial statements including income statement, balance sheet, and cash flow. Such financial statements are then applied to derive common-size statements for income statement and balance. The trends and predictions obtained from the common-size statements predict the future economic value. Similarly, the Pro-forma financial statements derived provide vital future economic performances of Nike Inc. According to the regression analysis and the assessment of the common-size and Pro-forma financial statements; Nike Inc. has a growth in revenue and earnings per share. The EVA computed using WACC, Net Operating Profit after Taxes (NOPAT), and Invested Capital is positive (+$391.24); this shows that Nike Inc. is financially stable and will grow in the next three years.
Innovation: In such a mature and competitive industry, continuous innovation is crucial to the success of the company as it gives a unique selling point that rivals do not have. Both product and process innovation are Nike’s
In this project, I have chosen to provide a microeconomic-based analysis on NIKE Inc. The study will include the analytic overview of the general market of Nike brand, as well as the information about the goods, service, and areas of operation. Throughout the research of this paper, I will discuss the cost of production, as well as the supply and demand in relation to microeconomics. Moreover, we will look at how supply and demand of this market regulates the equilibrium of quantity and price, as well as the economical efficiencies where the surplus for consumer and producer is maximized. Information will be explored to understand why businesses and people make decisions and how those actions we can be used for strategy. To conclude this research paper, I will take a deeper look and make recommendations for the future profitability, future growth and sustainability of NIKE Inc. (Hubbard & Obrien, 2015).
Expanding globally is a very serious decision for any corporation. Before making this decision, management should take into consideration the health of the corporation and identify the long term financial goals. In this assignment, I will discuss the importance for the financial managers of Nike Inc. to use economic variables in identifying long term financial goals and the major techniques/tools that the financial managers of Nike Inc. can use for forecasting future directions in the stock market and in the economy as a whole.
S &A / Sales, Current Assets / Sales, and Current Liability / Sales have been adopted from previous income statements and balance sheets from 1995 to 2001. Perhaps, we can take new assumptions. Generally, the case issue is to examine if the share price of Nike is undervalue or overvalue and the common stock of Nike Inc should be added to the North
It appears that Nike is taking a few steps in the right directions through innovation and restructuring of their workforce to better position themselves financially in the long term.
Investing in a company has certainly changed over the years. Financial information is literally at one's fingertips via the internet. In today's fast paced corporate environment companies are under tremendous scrutiny to maintain their edge. The company I am evaluating is NIKE. This Financial analysis will consist of the following: Ratios from the Income Statement, Statement of Owner's Equity, and Balance Sheet. This information is designed to assist a potential investor.
Nike is known as one of the most consistently innovative companies for its technologically advanced products. As Nike stated, Innovation is the company’s heart in its business growth strategy because it helps them to become more sustainable company and to keep up with the competition and customer demands (nikeandunderarmour.com, 2015). Therefore, Nike vision innovation is a key business success of the company. It invests
All managers need to understand where value comes from in their firm. The purpose of this analysis is to identify the financial strategy and performance of this particular publicly traded company. The process of understanding the risk and profitability of a company by analyzing reported financial info, especially annual and quarterly reports are vital to identifying the company’s overall financial performance. I wanted to analyze Coca Cola because the company has so much history and is one of the most recognizable brands in the world. I have always enjoyed researching food and beverage companies
a. Capital budgeting is the process of analyzing projects and determining which ones to accept and include in the capital budget.
Similarities & Differences: Within the financial statement of Nike, Inc. there are tremendous similarities due to the consistency as well efficiency of the conduction of business. However, with these similarities is a fair deal of differences due to economic stability as well as the adoption product ideas and innovative methods that aid Nike to continue for the better of the company: by reaching new levels of sustainability as they enhance product performance, by developing, more meaningful connections with consumers, and by presenting their products in compelling experiences at retail. The annual reports of 2010 to 2014 clearly distinguish the letter to shareholders in the same placement but the content with each year are not similar by any means; within 2010, they created six new strategic geographies to focus their effort where passion and culture of sport are strongest. Nike pushed forward an aggressive retail agenda in store and online. Revenue at $19 billion the previous year went down 1 percent under EPS and future orders. Their income from other operation contributed more than $2.5 billion in revenue and generated $2.8 billion in free cash flow from operations and had $5 billion in cash and short-term investments on their balance sheet. Revenue from direct to consumer increased 12% to near $2.5 billion. Gross margins came in at 46.3 percent for the year. That was the year of the World cup, whereby they showed tremendous acceleration they generated in the back of
In order to properly discuss Nike’s issues, it is important to first look at the apparel industry and the economy as a whole to determine how Nike compares to it. The apparel industry, more specifically the athletic apparel market, is a very dynamic industry to be in. Because of
A comprehensive analysis, using market data and market research, allows us to assess all areas affecting Nike’s strategic direction: