ACCT 201 Lecture Notes - Lecture 5: Gross Margin, Inventory Turnover, Debt Ratio
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Analysis and Use of Financial StatementsProject
NIKE Inc.
https://www.sec.gov/Archives/edgar/data/320187/000032018715000113/nke-5312015x10k.htm
This assignment requires financial ratio analysis on Nike Inc.company. You will be required to examine Nike's companyâs annualreport and calculate the ratios listed below. You will calculatethe ratios for the two most recent years fromavailable annual reports.
Once you have performed an analysis of the financial statements,you will write up a report summarizing thefindings. The report will include a brief introduction,synopsis of the companyâs business and current business situation,a summary of the studentâs interpretation of teamâs analysis, and aconclusion.
Written proof of how the ratios were calculated MUST beattached to the report. You must calculate the ratiosyourself.
Use the attached work page below to show proof of yourcalculations of the ratios (show all numbers in the calculations ânot just the end result). The paper should be six (4) typedpages (not including the ratios and the ratiocalculations). Roughly, the paper should have one page ofintroduction, four pages of analysis and interpretation, and onepage of conclusion. The focus should be on the analysis and yourinterpretation.
The analysis of the financial ratios should include insightsinto the meanings behind the ratios. The ratios should tell a storyabout how the company is doing and its prospects for the future.You need to tell that story. In order to make the ratios moremeaningful, a benchmark company or industry average for each ratioshould also be included. You must calculate the benchmark companyâsratios as well. I do not need these calculations attached. Theconclusion should provide insight into the financial future of thecompany. An investment recommendation should also be made in theconclusion.
Required ratios:
Liquidity Ratios and Asset Utilizationratios:
Current Ratio
Quick Ratio
Accounts receivable turnover
Inventory turnover
Average collection period
Total assets turnover
Fixed Asset turnover
Solvency & Leverage Ratios
Times interest earned
Debt-to-equity ratio
Debt to total assets
Fixed charge coverage
Profitability Ratios:
Profit margin ratio
Gross Margin ratio
Return on total assets
Return on common stockholdersâ equity
Evidence of Ratio Calculations
Please show your calculations of the financial rations of thecompany in the column labeled âYour Company.â You can calculate theratios by hand or attached a sheet that clearly demonstrates howyou calculated the ratio (i.e. X/Y = Z). The ratios you provide foryour competitor or industry average do not need to be calculated(you can find these on various finance websites â though you willmost likely have to calculate some yourself). Pleaseattached this sheet to the back of your writtenproject.
Ratio | Your Company | Competitor/Industry Avg. |
Current Ratio | ||
Quick Ratio | ||
A/R Turnover | ||
Inventory Turnover | ||
Average collection period | ||
Total Assets Turnover | ||
Fixed Asset turnover | ||
Times-interest Earned Ratio | ||
Debt-to-Equity Ratio | ||
Fixed charge coverage | ||
Profit Margin Ratio | ||
Gross Margin Ratio | ||
Return-on-Total Assets Ratio | ||
Return-on-Common Stockholdersâ Equity Ratio |
1.) analyze ratios
liquidity ratios
| LIQUIDITY Ratios | Are wemeeting our current obligations? | ||||
| Working Capital | $ 7,143 | $ 2,162 | $ 2,357 | $ (1,204) | $ 1,888 |
| Current Ratio | 1.55 | 1.51 | 1.52 | 1.57 | 1.52 |
2.) Solvency ratio: analyze the ratio
| SOLVENCY Ratios | Are wehandling debt appropriately? | ||||
| Financial LEVerage | 2.82 | 2.95 | 2.91 | 2.74 | 2.94 |
| Debt ratio | 65% | 66% | 66% | 64% | 66% |
| Free Cash Flow | $ (1,066) | $ (2,048) | $ (3,067) | $ 6,225 | $ 7,282 |
3.) Investment Appeal of Target analysis
| Dividends per share | $ (1.10) | $ (1.32) | $ (1.58) | $ (1.90) | $ (2.13) |
| Market Value per share | $ 59.00 | $ 56.00 | $ 54.00 | $ 53.00 | $ 53.00 |
| Dividend Yield | -1.87% | -2.37% | -2.93% | -3.59% | -4.01% |
| Price-to-Earnings (P/E) ratio | -53.49 | -42.27 | -34.14 | -27.84 | -24.91 |
| Price-to-Sales (P/S) ratio | 38.09 | 37.00 | 35.44 | 33.69 | 34.98 |
| Price-to-Book (P/B) ratio | 22.00 | 23.64 | 25.13 | 25.56 | 25.57 |
4.) Du pont Analyis analysis
| DuPont Analysis of ROE = ROS xAsset turnover = ROA x Financial LEVerage = ROE | |||||
| Return on Sales(ROS), also known as Net Profit Margin | 4.19% | 4.09% | 2.77% | -2.25% | 4.56% |
| Asset Turnover | 1.60 | 1.57 | 1.48 | 1.63 | 1.79 |
| Return on Assets (ROA) | 6.70% | 6.43% | 4.09% | -3.67% | 8.17% |
| Financial LEVerage | 2.82 | 2.95 | 2.91 | 2.74 | 2.94 |
| Return on Equity (ROE) | 18.91% | 18.96% | 11.90% | -10.08% | 24.03% |
e.) How does your stack up against its competiton?graph/charts
(1.) is your company in attractive industry? Yes/No
(2.) What metrics determine superior companies for yourindustry?
f.) State your investment thesis-investment philosophy(graphs/charts) (target corporation ) 2011-2015
a.) Sustainability economic moats profitability ? your test yourcompany pass/fail explain
b) growth? stable? dividends ? your test yours company pass/failexplain
c.) financial health? financial risk? your test your companypass/fail explain
d.) quality of income? your test your company pass/failexplain
e.) good value? buy now your test your company pass/failexplain
This stock appears to be trading below/ about /over theprice.
g.) investment decisions (target corporation)
overall, this company is a long term buy/ review again at lowprice / bust )
Why? list 5 good reasons 1, 2, 3, 4, 5,
