NIKE COMPANY

 Net Operating Working Capital:

( Current asset – Excess cash) – ( Current liability – Notes Payable)

NOWC 2021:
(26,291,000 – 9,889,000) – (9,674,000 – 2000)
= 6,730,000

NOWC 2020:
(20,556,000 – 8,348,000) – (8,284,000 – 248,000)
= 4,172,000

▲NOWC = NOWC 2021 – NOWC 2020

= 6,730,000 – 4,172,000
= 2,558,000
 Financial Ratios

1. Liquidity Ratios
a. Current Ratio = Current Assets / Current Liability
Current ratio 2021 = 26,291,000 / 9,674,000 = 2.72
Current ratio 2020 = 20,556,000 / 8,284,000 = 2.48
b. Quick Ratio = (Current Assets - Inv.) / Current Liability
Quick ratio 2021 = (26,291,000- 6,854,000) / 9,674,000 = 2
Quick ratio 2020 = (20,556,000-7,367,000) / 8,284,000 = 1.59

2021 2020 Ind

Current ratio 2.72x 2.48x 2.70x
Quick ratio 2.00x 1.59x 1.00x
2. Asset Management Ratios
a. Inventory turnover = Sales / Inventories
Inventory turnover 2021 = 44,538,000 / 6,854,000 = 6.50
Inventory turnover 2020 = 37,403,000 / 7,367,000 = 5.08
b. DSO = Receivables / (Annual Sales / 365)
DSO 2021 = 4,463,000 / (44,538,000 / 365 ) = 36.58
DSO 2020 = 2,749,000 / (37,403,000 / 365 ) = 26.83
c. FA Turnover = Sales / Net Fixed Assets
FA Turnover 2021 = 44,538,000 / 8,017,000 = 5.56
FA Turnover 2020 = 37,403,000 / 7,963,000 = 4.70
d. TA Turnover = Sales / Total Assets
TA Turnover 2021 = 44,538,000 / 37,740,000 = 1.18
TA Turnover 2020 = 37,403,000 / 31, 342,000 = 1.19

2021 2020 Ind

Inv. Turnover 6.50x 5.08x 6.10x
DSO 36.58x 26.83 32.00x
FA Turnover 5.56x 4.70x 7.00x
TA Turnover 1.18x 1.19x 2.60x
3. Debt Management Ratios
a. Debt to Capital = Total debt / Total invested capital
Total debt = Notes Payable + Long Term Debt
Total invested capital = Total debt + Total Equity

Debt to capital ratio 2021 = 9,415,000 / 22,182,000 = 42.44%

Debt to capital ratio 2020 = 9,654,000 / 17,709,000 = 54.51%
b. TIE = EBIT / Interest
Interest = Interest income (expense)
TIE 2021 = 6,937,000 / -262,000 = -26.48
TIE 2020 = 3,115,000 / -14,000 = -222.5

2021 2020 Ind

Debt to Capital 42.44% 54.51% 40.00%
TIE -26.48x -222.5x 6.20x
4. Profitability Ratios
a. Operating margin = EBIT / Sales
Operating margin 2021= 6,937,000 / 44,538,000 = 15.85%
Operating margin 2020 = 3,115,000 / 37,403,000 = 8.33%
b. Profit Margin = Net income / Sales
Profit margin 2021 = 5,727,000 / 44,538,000 = 12.86%
Profit margin 2020 = 2,539,000 / 37,403,000 = 6.79%
c. Basic Earning Power = EBIT / Total Assets
Basic Earning Power 2021 = 6,937,000 / 37,740,000 = 18.38%
Basic Earning Power 2020 = 3,115,000 / 31,342,000 = 9.94%

2021 2020 Ind

Operating margin 15.58% 8.33% 7.30%
Profit Margin 12.86% 6.79% 3.50%
Basic Earning Power 18.38% 9.94% 19.10%
  Appraising Profitability Ratios

a. ROA = Net income / Total Assets

ROA 2021 = 5,727,000 / 37,740,000 = 15.17%
ROA 2020 = 2,539,000 / 31,342,000 = 8.10%
b. ROE = Net income / Total Common Equity
ROE 2021 = 5,727,000 / 12,767,000 = 44.86%
ROE 2020 = 2,539,000 / 8,055,000 = 31.52%
c. ROIC = EBIT ( 1 - T ) / Total invested Capital
ROIC 2021 = 6,937,000 ( 1- 0.4 ) / 22,182,000 = 18.76%
ROIC 2020 = 3,115,000 ( 1- 0.4 ) / 17,709,000 = 10.55%

2021 2020 Ind

ROA 15.17% 8.10% 9.10%
ROE 44.86% 31.44% 18.20%
ROIC 18.76% 10.55% 14.50%
 Analysis of Nike company

 Statement of cash flow

i. First, the net cash from operations equals to

6,657,000 which is a good point for the company.
ii. Second, net change in cash for this company equals
to 1,541,000 which means that they have a profit.

 Liquidity Ratios

i. We know that quick ratio is an indicator for the

company it can pay back the creditors. In 2020, it is
below the industry average which is risky, but in
2021 it becomes good because it is above the
industry.
ii. Liquidity position is good.
  Asset management Ratios

i. Inventory turnover for this company is doing

good in 2021 because it is above the industry
standard, but in 2020, it was not good because
it is far below the industry standard. Maybe
there was a stock of inventory they can’t sell.
ii. DSO for this company was somehow good
because the collection is being made quickly,
but in 2021, it is not good. It means the
collection is late 4 days, so it should be
improved.
iii. FA turnover for this company is not good
because it is below the industry average. They
buy assets, but there is no improvement is
sales for both years.
iv. TA turnover is bad for both years. It means that
once you start to go to the industry average,
this performance should be improved.
  Debt Management Ratios

i. Debt-to-capital ratio (the lesser the better) for

this company is somehow bad. It is true that
they have improved their situation in terms of
debt. In 2020, they took a debt by 54%, but this
debt is decreasing to 42% in 2021. However,
this is still above the industry average which is
bad for the company.
ii. TIE (the higher the better because it is an
expense) for this company too bad because it is
far below the industry standard.

 Profitability Ratios

i. Operating margin for this company is looking

good because it is above the industry average.
ii. Profit margin for this this company is also good
because it is above the industry average.
iii. Basic Earning Power for this company was bad.
In 2020, it is far below the industry standard,
but in 2021, there is an improvement but it is
still below the industry average.
 Appraising Profitability Ratios

i. ROA(Return of Asset) for this company was

bad in 2020 because it is below the industry
standard, but in 2021, it becomes good
because there is an improvement which
makes it above the industry average.
ii. ROE(Return of Equity) for this company is
good for both years because it is above the
industry average.
iii. ROIC(Return on invested capital) for this
company was bad in 2020 because it is
below the industry standard, but in 2021, it
becomes good because there is an
improvement which makes it above the
industry average.

Done BY :- Azam Tawfiq Mohammed Al-Qadasi

ID :- 62030186
Section :- C
Dr. Ibrahim Alshutbi