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    Accounting Return Analysis

    Uploaded by

    Onickul Haque
    This document analyzes the accounting return and cash flow of Nike's apparel division from 2010 to 2013. It shows that while return on investment (ROI) increased each year from 2.13% to 10.02%, the total project value after 4 years of 2460 million is less than the initial investment of 2500 million. The net present value (NPV) is calculated to be 433.1 million, but this does not account for the unrecovered initial investment. Therefore, the conclusion is that the project is not profitable and should not be accepted since it does not generate profit for the company.

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    Accounting Return Analysis

    Uploaded by

    Onickul Haque
    8 views3 pages
    This document analyzes the accounting return and cash flow of Nike's apparel division from 2010 to 2013. It shows that while return on investment (ROI) increased each year from 2.13% to 10.02%, the total project value after 4 years of 2460 million is less than the initial investment of 2500 million. The net present value (NPV) is calculated to be 433.1 million, but this does not account for the unrecovered initial investment. Therefore, the conclusion is that the project is not profitable and should not be accepted since it does not generate profit for the company.

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    This document analyzes the accounting return and cash flow of Nike's apparel division from 2010 to 2013. It shows that while return on investment (ROI) increased each year from 2.13% to 10.02%, the total project value after 4 years of 2460 million is less than the initial investment of 2500 million. The net present value (NPV) is calculated to be 433.1 million, but this does not account for the unrecovered initial investment. Therefore, the conclusion is that the project is not profitable and should not be accepted since it does not generate profit for the company.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    8 views3 pages

    Accounting Return Analysis

    Uploaded by

    Onickul Haque
    This document analyzes the accounting return and cash flow of Nike's apparel division from 2010 to 2013. It shows that while return on investment (ROI) increased each year from 2.13% to 10.02%, the total project value after 4 years of 2460 million is less than the initial investment of 2500 million. The net present value (NPV) is calculated to be 433.1 million, but this does not account for the unrecovered initial investment. Therefore, the conclusion is that the project is not profitable and should not be accepted since it does not generate profit for the company.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as doc, pdf, or txt
    of 3

    Accounting Return Analysis

    Nike Apparel
    Income Statement
    (Million)

    2010

    2011

    2012

    2013

    Revenue

    2171

    2735

    3350

    4020

    Gross Margin

    455.9

    574.4

    703.5

    844

    General and Administration Expense

    (165.8)

    (171.5)

    (177.6)

    (184)

    Advertising Expense

    (78.9)

    (81.9)

    (85.2)

    (88.6)

    Depreciation

    (300)

    (240)

    (192)

    (153.6)

    (88.8)

    81

    248.7

    417.8

    Operating
    Income

    35.5

    (32.4)

    (99.48)

    167.1

    (53.3)

    48.6

    149.2

    250.68

    (2.13%)

    1.94%

    5.97%

    10.02%

    Interest
    Tax
    After Tax
    Return
    ROI (Return on Investment)

    Based upon after tax return on capital, we calculate ROI (Return on investment). After
    calculating the ROI we saw that the ROI is increasing. So, the project may be accepted on the
    increasing ROI basis.

    Cash Flow Analysis


    Nike Apparel
    Cash flow Statement
    (MILLION)
    2010

    2011

    2012

    2013

    Income before tax

    (88.8)

    81

    248.7

    417.8

    ADD: Depreciation

    300

    240

    192

    153

    211.2

    321

    440.7

    570.8

    ADD: Accounts Payable

    34.19

    43.08

    52.73

    63.3

    LESS: Account Receivables

    (108.55)

    (136.75)

    (167.5)

    (201)

    227.33

    325.93

    433.1

    Net Cash Flow 136.84

    Total Net Income = 395.18


    Investment =

    2500

    Less: Depreciation =

    (885)
    1645

    Add: Total net income = 395.18


    2040
    420
    Total Project value
    After 4 years

    2460

    Initial Investment = 2500

    NPV = PV of cash flow + PV of assets sold


    Here, none of the assets has been sold. So, the PV of assets sold is 0.
    SO,
    NPV = 433.1 + 0
    = 433.1

    Another,
    NPV = PV of cash flow + PV of 3rd year cash flow + PV of 2nd year cash flow + PV of 1st year
    Cash flow
    =

    433.1

    325.93

    227.33

    136.84

    = 1123.2

    So, based upon our Analysis we say that, the value of the project after 4 th year is 2460 which is
    less than the initial value of the project 2500. For that cause we do not need to calculate NPV OR
    IRR to take decision but also we do some NPV calculation.
    At this stage, we see ROI is increasing but the project value is less than the initial value of the
    project.
    So the decision is not profitable. At that cause, the project may not be taken because it does not
    generate profit for the company.

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