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NIKE was named after the Greek goddess of victory. NIKE was incorporated on
September 8, 1969, is engaged in the design, development, marketing and selling of athletic
footwear, apparel, equipment, accessories and services. The Company's operating segments
include North America, Western Europe, Central & Eastern Europe, Greater China, Japan and
Emerging Markets. The Company's portfolio brands include the NIKE Brand, Jordan Brand,
Hurley and Converse. The Company sells its products to retail accounts, through its retail stores
and Internet Websites, and through a mix of independent distributors and licensees across the
As of May 31, 2016, the Company focused its NIKE brand product offerings in nine
categories: Running, NIKE Basketball, the Jordan Brand, Football (Soccer), Men's Training,
Women's Training, Action Sports, Sportswear (its sports-inspired lifestyle products) and Golf.
Men's Training includes its baseball and American football product offerings. The Company also
markets products designed for kids, as well as for other athletic and recreational uses, such as
cricket, lacrosse, tennis, volleyball, wrestling, walking and outdoor activities. NIKEs athletic
footwear products are designed primarily for specific athletic use. Its products are also worn for
casual or leisure purposes. The Company also sells sports apparel. NIKE also markets apparel
Top competitors for NIKE, Inc. are ATHLETICS, INC., Puma SE, and Adidas AG.
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Aleksandar Kovacevic December 6, 2016
According to Jan R. Williams, and other co., authors of Financial and Managerial
Accounting, 17th Edition, Profits are the lifeblood of a business entity. No entity can
survive indefinitely and accomplish its other goals unless it is profitable. A satisfactory
level of return, or profitability, show the companys capability of paying off its obligations;
including debts and dividends. These levels of profitability are mainly drawn from the
income statement, and are put into different ratios and formulas to indicate different
aspects of the company, mainly with the goal of allowing potential-investors to analyze
how the company works in terms of its financial aspects.
Accounts receivable turnover rate indicates how quickly a company converts its
accounts receivable account into cash. This turnover rate is one half of the operating
cycle and is therefore significant. Accounts Receivable Turnover Rate for Nike can be
seen in Table 1, below.
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Aleksandar Kovacevic December 6, 2016
(Dollar amounts in
millions)
Net Sales (a) $30,601 $27,799
Accounts Receivable, Beginning of year (b) $3,434 $3,117
Accounts Receivable, End of year (c) $3,358 $3,434
Average Accounts Receivable (b+c)/2 (d) $3,396 $3,275
Accounts Receivable Turnover per year (a/d) 9.0 times 8.5 times
Average Number of days to collect Accounts
Receivable 41 days 43 days
There has been no big change in the average time to collect receivables, and
therefore the ultimate comprehension depends on Nikes credit terms and financial
activity right before the end of the year. For example, if Nikes management gave out a
30-day credit term to one of its customers in December of 2015, that would have
changed the outcome of accounts receivable at the end of the year, and consequently
also the accounts receivable turnover rate.
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Debt ratio is the basic measure of the safety of creditors claims and potential
long-term risk. It indicates how much the company is more dependent on creditors over
stockholders. The calculation of Nikes Debt Ratio can be seen in Table 5, below.
From the point of view of the common stockholders, the increase, and generally
high debt ratio for Nike, shows that management is maximizing benefits from creditors
and liabilities. As long as the Return on Assets (See table 8) is greater than the rate of
interest paid to creditors (normally between 3 and 8% for Nike and throughout the
United States).
From the point of view of creditors, a lower debt ratio is better, and therefore
Nikes high and increasing debt ratio is unfavorable, as the margin of protection to the
creditors when put up against a shrinkage of the assets is high.
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Aleksandar Kovacevic December 6, 2016
Earnings Per Share, also known as EPS, is one of the most popular and
acceptable accounting ratios. Trends in EPS from one year to another, as well as the
expected earnings, are each major factors that affect the market value of a companys
shares.
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for PepsiCo to bounce back up their return on equity rates, they must grow their net
income, turn over on assets, or leverage. POGLEDAJ TABELU 9 I napisi tekst)
Table 10: Market Value and Dividends per Share Dollar and Percent Changes
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stockholder who sells his stock to a new investor will earn 24.35 percent of his original
investment, or almost 25 dollars per share that he sells.
On the other hand, for stockholders who tend to be long-term in the company, the
increase in dividends per share is what interests them. A favorable increase of 24.35
percent in 2015s dividends per share means that for each share, the stockholder will
earn 24.35 percent more than he did in the previous year.
For investors to get a clear picture of Nikes dividends standing, and more
importantly dividend yield percentage, a comparison with a competing company should
be done in order to decide what is the better investment. In Nikes case, Adidas
Company are the biggest competitors in the industry, and therefore a potential investor
should look at each of these two companies. See Table 12 for Adidas Dividend Yield.
Dividend Yield
Market Value Per Dividends Per Dividend Yield
Adidas Company Share Share Percentage
2015-year end 89.91 1.6 1.77%
2014-year end 57.62 1.5 2.60%
Adidas Companys Market value per share is under of Nikes, and but not their
dividends per share. This smaller market value per share of the company may attract
many more investors. At the end of the day though, a potential investor that is looking to
invest one thousand dollars in a company, is not as interested in the market value per
share, or even dividends per share, but in the computation of both of them put together:
The companys dividend yield percentage in relation to the market value per share.
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than in PepsiCo. An investor looking to leave his investment in the company for a long
period of time, and hence looking to make a profit from his investment through
dividends, the Coca Cola Company would be a better investment because of their
higher dividend yield percentage, and earnings of 1 cent more per each dollar invested
in the company.
On the other hand, an investor looking at the market value price, and henceforth
potentially make a profit from buying and then selling share, PepsiCo would be a better
investment. PepsiCos rate of increase for its market value per share from 2014 to 2015
is 9 percent, while Coca-Cola companys is only a 2 percent increase. An investor that
bought 24 shares of the Coca-Cola Company for 991 dollars in 2014 would be able to
sell all those shares for 1,013 dollars in 2015, making a profit of 22 dollars (not including
potential dividends). On the other hand, an investor buying 11 shares of PepsiCo in
2014 for 988 dollars in 2014, would sell them for 1,076 dollars in 2015, and therefore
make a profit of 88 dollars (not including potential dividends). Therefore, the investor
would make 66 more dollars on the investment and selling of his shares in PepsiCo
over the Coca-Cola Company. (OVDE GDE JE CRVENO IZVRSI NOV PRORACUN SA
PODACIMA NIKE I ADIDAS)
Interest coverage ratio is for long-term creditors and bondholders. This ratio
shows if the company earns enough income to cover its annual interest obligations, and
preferably by a comfortable margin. See table 13 for the computation of Nikes Interest
coverage ratio.
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Potential new-suitors on the other hand, can also be con confident from this ratio, which
proves that Nikes can cover their interest expenses 149 times in the end of 2015,
making certain that any bondholders investments are safe.
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PepsiCo had a decrease in many financial aspects and ratios during the year
2015, showing that it was not as financially successful and strong as the year before.
When looking at the companys statement of income (see consolidated statement of
income attached) one can notice a minor decrease in net revenue, cost of sales, as well
as selling, general, and administrative expenses; proving that they took a small effort to
decrease their sales and expenses during the year. This decrease cause for quite a
major decrease in the companys Earnings Per Share (see table 6). Another
unfavorable change was the companys very small increase in the average number of
days to complete the operating cycle, from 74 days in 2014 to 75 days in 2015. The
debt ratio had an unfavorable increase as well, shifting from 75 percent to 83 percent of
assets covered by debt (or liabilities). This happened due to the companys decrease in
total assets and increase in total liabilities.
Interest coverage ratio proves that the investors of the company are safe, having
a much higher rate of interest coverage than what is desirable by potential suitors.
Alongside this, the return on common stockholders equity ratio provides potential
investors with an insight in the return earned by the management of the company on the
stockholders investment. With a generally desirable 12 percent of return on
stockholders equity, PepsiCo offers a return of 20 percent in 2015 and regardless of
this drop from the year before, investors should see this as a positive and favorable
rate.
In contrast to the unfavorable changes, the company also had many fortunate
changes that show a promising future. See Table 14 for PepsiCos summary of
earnings and Dividend Data. The companys Market Value per share, and cohesively
also the Dividends per Share increased by an equal 9 percent, respectively (see Table
11 for dollar and percent changes). The increase in price-earnings ratio, which
represents the investors expectations concerning the companys future performance,
indicates a potentially bright future with improvements of the companys earnings per
share, market value per share, and consequently also dividends per share. The
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increases and theoretically promising future increases in these categories, are what
investors are looking at when they want to invest. It can be assumed that all investors
make investments in a company for their individual financial benefits, and therefore, the
increases in market value, dividends, and earnings, all respectively per share, allow for
all types of investors, long or short term, to be attracted to investing in PepsiCos stocks.
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Nike, Inc.
Comparative Schedule of Working Capital
As of May 31, 2015 and 2014
(In Millions $) Increase/Decrease Percentage of total
current items
Current Assets: 2015 2014 Dollars Percent 2015 2014
Cash and Cash $3852 $2220 $1632 42% 24.1% 16.2%
Equivalents
Marketable $2072 $2922 ($850) (41%) 13% 21.3%
Securities
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