17-8i Nike, Inc., ProblemFinancial Statement AnalysisThe financial statements for Nike, Inc., are presented in Appendix C at the end of the text. Use the following additional information (in millions):Accounts receivable at May 31, 2016$ 3,241Inventories at May 31, 20164,838Total assets at May 31, 201621,379Stockholders’ equity at May 31, 201612,258InstructionsDetermine the following measures for the fiscal years ended May 31, 2018, and May 31, 2017. Round ratios and percentages to one decimal place.H. Ratio of liabilities to stockholders’ equity NIKE, Inc. Consolidated Statements of IncomeYear Ended May 31.(in millions, except per share data)201820172016Revenues36,397 S34,350 S32,376Cost of salesGross profit20,44119.03817.40515.95615,31214,971Demand creation expense3,5773.3413.278Operating overhead expense7.9347.2227.191Total seling and administrative expense11,51110.56310.409Interest expense (income), net545919Other expense (income), net66(196)(140)Income before income taxes4,3254.004,623Income tax expense2.392NET INCOME1,9334,240S3,760Eamings per common shareBasic1.192.50221Diuted1.17 S%24251 S2.16Dividends deciared per common share0.78 $0.700.62SThe accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.NIKE, Inc. Consolidated Statements of Comprehensive IncomeYear Ended May 31.(in millions)201820172016Net income1.933 S4.240 S3.760Other comprehensive income (loss), net of taxChange in net foreign currency translation adjustment(6)16(176)Change in net gains (losses) on cash flow hedges76(S15)(757)Change in net gains dosses) on other34(32)Total other comprehensive income (loss), net of tax104(531)(920)TOTAL COMPREHENSIVE INCcOME2.037S3,709 S2,832The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.NIKE, Inc. Consolidated Balance SheetsMay 31,n miions)20182017ASSETSCurent assets:Cash and equivalentsShort term investments4,249S3,8082.371Accounts receivable, net34983677Inventories5,2015.055Prepaid expenses and oher ourrent assets1,1301.150Total current assets15.13416.061Property. plant and equipment, net4,454dentitable intangite assets, net285283Goodwi154139Deferred inoome taxes and other assetsTOTAL ASSETS2.5092.78722.53623.259LIABILITIES AND SHAREHOLDERS EQUITYCurent abitiesCurrent portion of long-term dobtNotes payable336325Accounts payable2.2792.048Accrued abites3,2093,011Income taxes payable15084Total current liabilitienG.0405474Longterm debt3,4683471Deferred income taxes and cther labilities3.2161,907Commitments and contingencies (Note 15)Redeemable preferred stockShareholders equityCommon stock at stated value:Ciass A convertible-329 and 329 shares outstandingClass B-1,272 and 1314 shares outstandingaCapital in excess of stated value5710Accumulated other comprehensive loss(92)G13)Retained eanings3.5176.907Total shareholders equity981212.407TOTAL LIABILITIES AND SHAREHOLDERS EQUITY22.53623.259The accompanying Notes to the Consolidated Financial Statements are an integral part of this atatement NIKE, Inc. Consolidated Statements of Cash FlowsYear Ended May 31.(in milions)201820172016Cash provided by operationsNet income1.933S4,2403.700Adjustments to reconcile net income to net cash provided by operations:Depreciation747706649Deferred income taxesG47(273)(80)Stock-based compensation218215236Amortization and other271013Not foreign curency adjustments(99)(117)Changes in certain working capital components and other assets and labiities:Decrease (increase) in accounts receivable187(426)60(Increase) in inventories(255)(231)(590)Decrease (increase) in prepaid expenses and other current and non-current assets35(120)(161)Increase (decrease) in accounts payatle, acorued labilities and other current and non-curent labilites1.515(158)(506)Cash provided by operations4.9553.8463.399Cash provided (used) by investing activities:Purchases of short-term investments(4.783)(5,928)(5,367)Maturities of short-term investments3.6133,6232.924Sales of short-term investments2.4962.4232.386Investments in reverse repurchase agreements150Additions to property, plant and equipment(1.028)(1.105)(1,143)Disposals of property, plant and equipment31310Other investing activities(25)(34)Cash provided (used) by investing activities276(1,008)(1,034)Cash used by financing activities:Net proceeds from long-term debt issuance1,482981Long-term debt payments, including current portion(6)(44)(106)Increase (decrease) in notes payable13327(67)Payments on capital lease and other financing obligations(23)(17)Proceeds from exercise of stock options and other stock issuances733489607Repurchase of common stock(4.254)a.223)3.238)Dividends- common and preferred(1,243)(1,133)(1,022)Tax payments for net share settiement of equity awards(55)(20)(22)Cash used by financing activities(4,835)(2.148)2.074)Effect of exchange rate changes on cash and equivalents45(20)(105)Net increase (decrease) in cash and equlvalents441670(714)Cash and equivalents. beginning of yearCASH AND EQUIVALENTS, END OF YrEAR3.8083,13836524,249 S3,0083,138Supplemental disciosure of cash flow information:Cash paid during the year for:Interest, net of capitalized interest1259870Income taxes529703748Non-cash additions to property. plant and equipment294266252Dividends declared and not paid320300271The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.NIKE, Inc. Consolidated Statements of Shareholders' EquityCommen SteckCapitat nAccumutatedCless AGlassShares AmuntwhensiveRetainednge7.203 12,707m er sr taRharescomprenmFarninuAmuntTatalmalanee at May 31, 20sa1,24Snock ootiona exerciaedComversn Cha n Cem RRepurchase of Cass Common SockDividends an(10)d terd (Sahare)euance(1.0sa(1.05a)nptoyees net orsosmoca-Dsea comeosatonNet incomeO compret onatance atMay 31, 20103.7603.76031. 3 12.3501,329Snoc opiona exercised17sasComverson te Class Common o(24)24Repurchaseof Clas Common SockDividends on common atock o.ro perand preferred(1.1(1.15)y n orshares wthheldo a a compensation121(13)100215215Net income4.2404.240Cer comereteve eotmatane at May 31, 2017Sno opona exercdww(213)131424G00Conversion so Clann Common sinock(4.013)Repurchase of Cas Common SnockDividenda on common atockshare) and preterrednareUancesharesc254)(4.207)(1.205)yees.net ofe218218NetOer compretevece osKelassatisre a gscordance wh AU 201O-02Balance et My 31, 20181aa10417(17)3.517 S 0.12329 -1,2726.384e92)Te yng Can nt narr nte s are an dgral part tte

Ratio of liabilities to stockholders’ equity - It is also called Debt-to-equity (D/E) ratio. In…

Answered: The financial statements for Nike,…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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17-8i Nike, Inc., Problem

Financial Statement Analysis

The financial statements for Nike, Inc., are presented in Appendix C at the end of the text. Use the following additional information (in millions):

Accounts receivable at May 31, 2016	$ 3,241
Inventories at May 31, 2016	4,838
Total assets at May 31, 2016	21,379
Stockholders’ equity at May 31, 2016	12,258

Instructions

Determine the following measures for the fiscal years ended May 31, 2018, and May 31, 2017. Round ratios and percentages to one decimal place.
H. Ratio of liabilities to stockholders’ equity

NIKE, Inc. Consolidated Statements of Income
Year Ended May 31.
(in millions, except per share data)
2018
2017
2016
Revenues
36,397 S
34,350 S
32,376
Cost of sales
Gross profit
20,441
19.038
17.405
15.956
15,312
14,971
Demand creation expense
3,577
3.341
3.278
Operating overhead expense
7.934
7.222
7.191
Total seling and administrative expense
11,511
10.563
10.409
Interest expense (income), net
54
59
19
Other expense (income), net
66
(196)
(140)
Income before income taxes
4,325
4.00
4,623
Income tax expense
2.392
NET INCOME
1,933
4,240
S
3,760
Eamings per common share
Basic
1.19
2.50
221
Diuted
1.17 S
%24
251 S
2.16
Dividends deciared per common share
0.78 $
0.70
0.62
S
The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.
NIKE, Inc. Consolidated Statements of Comprehensive Income
Year Ended May 31.
(in millions)
2018
2017
2016
Net income
1.933 S
4.240 S
3.760
Other comprehensive income (loss), net of tax
Change in net foreign currency translation adjustment
(6)
16
(176)
Change in net gains (losses) on cash flow hedges
76
(S15)
(757)
Change in net gains dosses) on other
34
(32)
Total other comprehensive income (loss), net of tax
104
(531)
(920)
TOTAL COMPREHENSIVE INCcOME
2.037
S
3,709 S
2,832
The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.
NIKE, Inc. Consolidated Balance Sheets
May 31,
n miions)
2018
2017
ASSETS
Curent assets:
Cash and equivalents
Short term investments
4,249
S
3,808
2.371
Accounts receivable, net
3498
3677
Inventories
5,201
5.055
Prepaid expenses and oher ourrent assets
1,130
1.150
Total current assets
15.134
16.061
Property. plant and equipment, net
4,454
dentitable intangite assets, net
285
283
Goodwi
154
139
Deferred inoome taxes and other assets
TOTAL ASSETS
2.509
2.787
22.536
23.259
LIABILITIES AND SHAREHOLDERS EQUITY
Curent abities
Current portion of long-term dobt
Notes payable
336
325
Accounts payable
2.279
2.048
Accrued abites
3,209
3,011
Income taxes payable
150
84
Total current liabilitien
G.040
5474
Longterm debt
3,468
3471
Deferred income taxes and cther labilities
3.216
1,907
Commitments and contingencies (Note 15)
Redeemable preferred stock
Shareholders equity
Common stock at stated value:
Ciass A convertible-329 and 329 shares outstanding
Class B-1,272 and 1314 shares outstanding
a
Capital in excess of stated value
5710
Accumulated other comprehensive loss
(92)
G13)
Retained eanings
3.517
6.907
Total shareholders equity
9812
12.407
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
22.536
23.259
The accompanying Notes to the Consolidated Financial Statements are an integral part of this atatement

NIKE, Inc. Consolidated Statements of Cash Flows
Year Ended May 31.
(in milions)
2018
2017
2016
Cash provided by operations
Net income
1.933
S
4,240
3.700
Adjustments to reconcile net income to net cash provided by operations:
Depreciation
747
706
649
Deferred income taxes
G47
(273)
(80)
Stock-based compensation
218
215
236
Amortization and other
27
10
13
Not foreign curency adjustments
(99)
(117)
Changes in certain working capital components and other assets and labiities:
Decrease (increase) in accounts receivable
187
(426)
60
(Increase) in inventories
(255)
(231)
(590)
Decrease (increase) in prepaid expenses and other current and non-current assets
35
(120)
(161)
Increase (decrease) in accounts payatle, acorued labilities and other current and non-curent labilites
1.515
(158)
(506)
Cash provided by operations
4.955
3.846
3.399
Cash provided (used) by investing activities:
Purchases of short-term investments
(4.783)
(5,928)
(5,367)
Maturities of short-term investments
3.613
3,623
2.924
Sales of short-term investments
2.496
2.423
2.386
Investments in reverse repurchase agreements
150
Additions to property, plant and equipment
(1.028)
(1.105)
(1,143)
Disposals of property, plant and equipment
3
13
10
Other investing activities
(25)
(34)
Cash provided (used) by investing activities
276
(1,008)
(1,034)
Cash used by financing activities:
Net proceeds from long-term debt issuance
1,482
981
Long-term debt payments, including current portion
(6)
(44)
(106)
Increase (decrease) in notes payable
13
327
(67)
Payments on capital lease and other financing obligations
(23)
(17)
Proceeds from exercise of stock options and other stock issuances
733
489
607
Repurchase of common stock
(4.254)
a.223)
3.238)
Dividends- common and preferred
(1,243)
(1,133)
(1,022)
Tax payments for net share settiement of equity awards
(55)
(20)
(22)
Cash used by financing activities
(4,835)
(2.148)
2.074)
Effect of exchange rate changes on cash and equivalents
45
(20)
(105)
Net increase (decrease) in cash and equlvalents
441
670
(714)
Cash and equivalents. beginning of year
CASH AND EQUIVALENTS, END OF YrEAR
3.808
3,138
3652
4,249 S
3,008
3,138
Supplemental disciosure of cash flow information:
Cash paid during the year for:
Interest, net of capitalized interest
125
98
70
Income taxes
529
703
748
Non-cash additions to property. plant and equipment
294
266
252
Dividends declared and not paid
320
300
271
The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.
NIKE, Inc. Consolidated Statements of Shareholders' Equity
Commen Steck
Capitat n
Accumutated
Cless A
Glass
Shares Amunt
whensive
Retained
nge
7.203 12,707
m er sr ta
Rhares
comprenm
Farninu
Amunt
Tatal
malanee at May 31, 20s
a
1,24
Snock ootiona exerciaed
Comversn Cha n Cem R
Repurchase of Cass Common Sock
Dividends an
(10)
d terd (S
ahare)
euance
(1.0sa
(1.05a)
nptoyees net or
sos
moca-Dsea comeosaton
Net income
O compret on
atance atMay 31, 2010
3.760
3.760
31
. 3 12.350
1,329
Snoc opiona exercised
17
sas
Comverson te Class Common o
(24)
24
Repurchaseof Clas Common Sock
Dividends on common atock o.ro per
and preferred
(1.1
(1.1
5)
y n or
shares wthheld
o a a compensation
121
(13)
100
215
215
Net income
4.240
4.240
Cer comereteve eot
matane at May 31, 2017
Sno opona exercd
ww
(213)
1314
24
G00
Conversion so Clann Common sinock
(4.013)
Repurchase of Cas Common Snock
Dividenda on common atock
share) and preterred
nare
Uance
shares
c254)
(4.207)
(1.205)
yees.net of
e
218
218
Net
Oer compretevece os
Kelassatisre a gs
cordance wh AU 201O-02
Balance et My 31, 2018
1aa
104
17
(17)
3.517 S 0.12
329 -
1,272
6.384
e92)
Te yng Can nt narr nte s are an dgral part tte

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