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# BAO5734 Financial Analysis

• Course Code: BAO5734
• University: Victoria University
• Country: Australia

## Questions:

1. What was Nike’s total revenue during the fiscal year ending on 5/31/2017?
1. What were the total gross and net accounts receivables for Nike on 5/31/2017?
1. Was Nike’s bad debt expense higher, equal or lower than actual write off of accounts receivable during the fiscal year ending on 5/31/2017? Briefly explain your answer.
1. What was the total inventory for Nike on 5/31/2017?
1. What was Nike’s Gross Profit Margin during the fiscal year ending on 5/31/2017? How do you interpret this number?
1. One of Nike’s main competitors reported the following information for the 2017 fiscal year:
Revenue under LIFO (in millions):                \$3,963
COGS under LIFO (in millions):                    \$2,259
LIFO Reserve: \$422 (in millions) in 2016, \$518 (in millions) in 2017

Was Nike’s Gross Profit Margin higher, the same or lower than its competitor’s during the fiscal year ending on 5/31/2017? Provide the calculations to support your answer.
1. What were the total gross and net Property, Plant and Equipment (PPE) for Nike on 5/31/2017? How do you interpret these amounts?

In answering questions 8-12, assume that the transactions described below are in addition to those in the financial statements you have. For example, Nike shows \$3,808 million in cash and equivalents on 5/31/2017.  Any cash generated/used by the following transactions are in addition to this \$3,808 million.

Suppose Nike was considering one of the two alternatives to finance a set of machines for its Flyknit shoe lines. Also assume the decision is made on the very first day of the following fiscal year (that is, on 6/1/2017).

Issue a par bond with a face value of \$50 million and a coupon rate of 2%. The face value is due at the end of year 5. Invest the proceeds from the bond to purchase the machines (recorded as Property, Plant and Equipment). The machines have a useful life of five years and zero salvage value.

Sign a rental agreement of five payments of \$10.06 million per year. The lease will be treated as an operating lease for accounting purposes.
1. Use the Balance Sheet Equation (BSE) to identify the transactions Nike would record to reflect the issuance of the bond and the acquisition of the PPE (option A) at the decision date. That is, at the beginning of the 2018 fiscal year on 6/1/2017.
1. Use the Balance Sheet Equation (BSE) to identify the transactions Nike would record to reflect the issuance of the bond and the acquisition of the PPE (option A) at the end of the next fiscal year on 5/31/2018.
1. Use the Balance Sheet Equation (BSE) to identify the transactions Nike would record to reflect the rental agreement (option B) at the decision date. That is, at the beginning of the 2018 fiscal year on 6/1/2017.
1. Use the Balance Sheet Equation (BSE) to identify the transactions Nike would record to reflect the rental agreement (option B) at the end of the next fiscal year on 5/31/2018.
1. Suppose that the bonus plan for Nike’s employees is partially tied to a performance metric such as return on assets (ROA). How would the two options above affect the return on assets (ROA), and ultimately the bonus plan, during the 2018 fiscal year? In 1-2 sentences explain your answer. Ignore taxes.
1. What was the total net identifiable intangible assets for Nike on 5/31/2017? What do these intangibles consist of?
1. What was the total goodwill for Nike on 5/31/2017?
1. Did Nike impair its goodwill during the fiscal year ending on 5/31/2017? If so, by how much?

In answering questions 16-20, assume that the transactions described below are in addition to those in the financial statements you have. For example, Nike shows \$3,808 million in cash and equivalents on 5/31/2017.  Any cash generated/used by the following transactions are in addition to this \$3,808 million.

Suppose Nike was considering one of the two alternatives to invest in a new technology of its Dry Fit shirts. Also assume the decision is made on the very first day of the following fiscal year (that is, on 6/1/2017).

Spend \$10 million per year over the next three years. This decision would be treated as Research and Development for accounting purpose

Acquire a startup that has developed a recent Dry Fit technology for \$40 million. The acquisition cost consists of a patent worth of \$32 million and \$8 million of acquisition synergies. The patent has a useful life of four years.
1. Use the Balance Sheet Equation (BSE) to identify the transactions Nike would record to reflect the R&D investment (option A) at the decision date. That is, at the beginning of the 2018 fiscal year on 6/1/2017.
1. Use the Balance Sheet Equation (BSE) to identify the transactions Nike would record to reflect the R&D investment (option A) at the end of the next fiscal year on 5/31/2018.
1. Use the Balance Sheet Equation (BSE) to identify the transactions Nike would record to reflect the acquisition (option B) at the decision date. That is, at the beginning of the 2018 fiscal year on 6/1/2017.
1. Use the Balance Sheet Equation (BSE) to identify the transactions Nike would record to reflect the acquisition (option B) at the end of the next fiscal year on 5/31/2018. Assume that the value of the goodwill was impaired by \$1 million during the 2018 fiscal year.
1. Which of the two options would result in a higher net income during the 2018 fiscal year? In 1-2 sentences explain your answer. Ignore taxes.
1. Use the DuPont decomposition learned in class to decompose Nike’s return on equity (ROE) into (i) Profit Margin, (ii) Asset Turnover and (iii) Leverage. For this question use the numbers as reported in the financial statements without any adjustments.
1. One of Nike’s main competitors reported the following information for the 2017 fiscal year:

ROE:                                     15.35%
ROA:                                      9.36%
Profit Margin:                          5.85%
Asset Turnover:                      1.60
Leverage:                              1.64

How do you compare Nike to its competitors? Use different metrics to substantiate your answer.
1. What was Nike’s effective tax rate during the fiscal year ending on 5/31/2017? Which factor contributed to the largest difference between the effective tax rate and the statutory rate?
1. Provide an example of Nike’s accrued liabilities during the fiscal year ending on 5/31/2017? Use the Balance Sheet Equation (BSE) to record this transaction.
1. How much cash did Nike return to its investors in the form of dividends and share repurchases during the fiscal year ending on 5/31/2017?
1. Did Nike buy/sell marketable securities in the form of short-term investments using cash during the fiscal year ending on 5/31/2017? If so, by how much?
1. What was Nike’s total advertising and promotion expenses (or demand creation expense) during the fiscal year ending on 5/31/2017
1. What were Nike’s cash flow from operations (CFO), cash flow from investment (CFI) and cash flow from financing (CFF) during the fiscal year ending on 5/31/2017? Based on these numbers which stage of life cycle is Nike in?

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My Assignment Help (2020) Financial Analysis [Online]. Available from: https://myassignmenthelp.com/free-samples/bao5734-financial-analysis/nikes-total-revenue.html
[Accessed 12 August 2022].

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