The document provides a financial ratio analysis of Nike, Inc. (NKE) conducted by two students. It includes: 1) A brief background history of Nike and recent developments. 2) Analyses of Nike's profitability ratios from 2012-2013 which show improving returns and margins. 3) Analyses of Nike's financial stability ratios from 2012-2013 which show increasing working capital and debt coverage but also higher total debt levels. 4) A conclusion that Nike's shares may not be worth investing in due to an expensive price-to-earnings ratio above what conservative investors typically pay.

1. 1
SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN
Financial Ratio Analysis
NAME : LEE PEI GIE ( 0315653 )
KHOO XIN YEE ( 0316180 )
COURSE : FNBE
MODULE : BASIC ACCOUNTING[FNBE0145]
SESSION : FEBRUARY, 2014
LECTURER : MR. CHANG JAU HO
SUBMISSION DATE: 31TH
MAY 2014

2. 2
Content
No. Content Page
1. Brief Background History of NIKE, Inc. ( NKE ) 3
2. Recent Development of NIKE, Inc. ( NKE ) 4
3. Profitability ratios 5,6
4. Financial Stability Ratios 7,8
5. P/E ratio
(Justification on whether the company’s shares are worthy of investment.)
9
6. Appendix 10-22
7. References 23

3. 3
HISTORY & HERITAGE
Before there was the Swoosh, before there was Nike, there were two visionary men who
pioneered a revolution in athletic footwear that redefined the industry.
Nike, originally known as Blue Ribbon Sports (BRS), was founded by University of Oregon track
athlete Philip Knight and his coach Bill Bowerman in January 1964. The company initially operated as
a distributor for Japanese shoe maker Onitsuka Tiger (now ASICS), making most sales at track meets
out of Knight's automobile.
In 1964, in its first year in business, BRS sold 1,300 pairs of Japanese running shoes grossing $8,000.
By 1965 the fledgling company had acquired a full-time employee, and sales had reached $20,000. In
1966, BRS opened its first retail store, located at 3107 Pico Boulevard in Santa Monica, California next
to a beauty salon, so its employees no longer needed to sell inventory from the back of their cars. In
1967, due to rapidly increasing sales, BRS expanded retail and distribution operations on the East
Coast, in Wellesley, Massachusetts.
By 1971, the relationship between BRS and Onitsuka Tiger was nearing an end. BRS prepared to
launch its own line of footwear, which would bear the Swoosh newly designed by Carolyn Davidson.
The Swoosh was first used by Nike on June 18, 1971, and was registered with the U.S. Patent and
Trademark Office on January 22, 1974.
In 1976, the company hired John Brown and Partners, based in Seattle, as its first advertising agency.
The following year, the agency created the first "brand ad" for Nike, called "There is no finish line", in
which no Nike product was shown. By 1980, Nike had attained a 50% market share in the U.S. athletic
shoe market, and the company went public in December of that year.
Together, Nike and Wieden+Kennedy have created many print and television advertisements, and
Wieden+Kennedy remains Nike's primary ad agency. It was agency co-founder Dan Wieden who
coined the now-famous slogan "Just Do It" for a 1988 Nike ad campaign, which was chosen
by Advertising Age as one of the top five ad slogans of the 20th century and enshrined in
the Smithsonian Institution. Walt Stack was featured in Nike's first "Just Do It" advertisement, which
debuted on July 1, 1988. Wieden credits the inspiration for the slogan to "Let's do it", the last words
spoken by Gary Gilmore before he was executed.
Throughout the 1980s, Nike expanded its product line to encompass many sports and regions
throughout the world. In 1990, Nike moved into its eight-building World Headquarters campus in
Beaverton, Oregon.

4. 4
Recent development
2000 – Present: Leading a New Generation
Nike rang in the new millennium with a new footwear cushioning system called Nike Shox, which
debuted during Sydney in 2000. The development of Nike Shox culminated more than 15 years of
perseverance and dedication, as Nike designers stuck with their idea until technology could catch up. The
result was a cushioning and stability system worthy of joining Nike Air as the industry’s gold standard.
Just as Nike’s products have evolved, so has Nike’s approach to marketing. The 2002 “Secret
Tournament” campaign was Nike’s first truly integrated, global marketing effort. Departing from the
traditional “big athlete, big ad, big product” formula, Nike created a multi-faceted consumer experience
in support of the World Cup.
“Secret Tournament” incorporated advertising, the Internet, public relations, retail and consumer events
to create excitement for Nike’s soccer products and athletes in a way no single ad could ever achieve.
This new integrated approach has become the cornerstone for Nike marketing and communications.
Today, Nike continues to seek new and innovative ways to develop superior athletic products, and
creative methods to communicate directly with our consumers. The company has continued to expand in
new ways, including strong growth in China and a deal to become the official sponsor of the National
Football League (NFL) beginning in 2012.
President and CEO Mark Parker said: “At NIKE, Inc. we run a complete offense, and it’s based on a core
commitment to innovation. That’s how we stay opportunistic, serve the athlete, reward our shareholders,
and continue to lead our industry.”

5. 5
PROFITABILITY RATIOS
PROFITABILITY
RATIOS
2012
(In millions)
2013
(In millions)
INTERPRETATION
RETURN ON
EQUITY (ROE)
2, 223
10, 112 x 100%
= 21.98%
2, 485
10, 768.5 x 100%
= 23.08%
 During 2012-2013
period, the business
of Nike Company
ROE has increased
from 21.98% to
23.08%.
 The Nike Company
is getting more
return from its
investment.
NET PROFIT
MARGIN (NPM)
2, 223
24, 128 x 100%
= 9.21%
2, 485
25, 313 x 100%
= 9.82%
 During 2012-2013
period, the business
of Nike Company
NPM has increased
from 9.21% to
9.82%.
 This means that
Nike Company is
getting better of
controlling its
overall expenses.
GROSS PROFIT
MARGIN (GPM)
10, 471
24, 128 x 100%
= 43.40%
11, 034
25, 313 x 100%
= 43.60%
 During 2012-2013
period, the business
of Nike Company
GPM has increased
from 43.40% to
43.60%.
 This means that
Nike Company is
getting better of
controlling its Cost
Of Goods Sold
(COGS).
SELLING
EXPENSE RATIO
(SER)
3, 715. 5
24, 128 x 100%
= 15.40%
3, 890
25, 313 x 100%
= 15.37%
 During 2012-21013
period, the business
of Nike Company
SER has increased
from 15.40% to
15.37%.
 This means that
Nike Company is

6. 6
getting better at
controlling its
selling expenses.
GENERAL
EXPENSE RATIO
(GER)
3, 715.5
24, 128 x 100%
= 15.40%
3, 890
25, 313 x 100%
= 15.37%
 During 2012-21013
period, the business
of Nike Company
SER has increased
from 15.40% to
15.37%.
 This means that
Nike Company is
getting better at
controlling its
general expenses.
FINANCIAL
EXPENSE RATIO
(FER)
2, 118
24, 128 x100%
= 8.78%
1, 040
25, 313 x100%
= 4.11%
 During 2012- 2013
period, the business
of Nike Company
FER has decreased
from 8.78% to
4.11%.
 This means that
Nike Company is
getting better at
controlling its
financial expenses.

7. 7
FINANCIAL STABILITY RATIOS
STABILITY
RATIOS
2012
(In millions)
2013
(In millions)
INTERPRETATION
WORKING
CAPITAL (WCR)
11, 531
3, 865
= 2.98: 1
13, 626
3, 926
= 3.47: 1
 During 2012- 2013
period, the business
of Nike Company
WCR has increased
from 2.98: 1 to
3.47: 1.
 This means that
Nike Company
ability to pay
current liability
with current asset is
getting better.
 In addition, the
business of Nike
Company satisfies
the requirement of
2:1.
TOTAL DEBT
(TDR)
5,084
15,465 x100%
= 32.87%
6, 428
17, 584 x100%
= 36.56%
 During 2012- 2013
period, the business
of Nike Company
TDR has increased
from 32.87% to
36.56%.
 This means that
Nike Company’s
total debt has
increased.
 However, it is still
less than the
maximum limit of
debt which is 50%.
STOCK
TURNOVER (ITR)
365 days ÷
(13, 657)
3, 032. 5
= 81 days
365 days ÷
(14, 279)
3, 328
= 85 days
 During 2012- 2013
period, the business
of Nike Company
ITR has increased
from 81 days to 85
days.
 This means that
Nike Company is
selling its inventory
slower.

8. 8
DEBTOR
TURNOVER (DIR)
365 days ÷
(12, 064)
3, 209
= 97.1 days
365 days ÷
(12, 656. 5)
3, 124. 5
= 90.1 days
 During 2012-2013
period, the business
of Nike Company
has decreased from
97.1 days to 90.1
days.
 This means that
Nike Company is
collecting its debts
faster.
INTEREST
COVERAGE (ICR)
4 + 2,223
4
= 556.8 times
3+ 2,485
3
= 829.3 times
 During 2012-2013
period, the business
Nike Company has
increased from
556.8 times to
829.3 times.
 This means that
Nike Company’s
ability to pay its
interest expense is
stronger.
 In addition, the
business satisfies
the minimum
requirement of five
times.

9. 9
Price/Earning Ratio (P/E Ratio)
Investment Recommendation
In our recommendation through our analysis, the company NKE would not be a company worth investing
on.
It is obvious that the company does not exhibit good profitability, as shown in the profitability ratio
analysis. Firstly, the Return on Enquity has increased by 1.1% which shows that the net profit has also
increased through the years. NKE also showed that it is getting better of controlling Gross Profit Margin,
which shows the company is getting better of controlling its Cost of Goods Sold. Furthermore, the
Selling Expense Ratio and General Expense Ratio has shown an improvement of the company’s control
on their selling and general expenses. Moreover, the Net Profit Margin, which shows how the business
controls all its expenses, has prominently been increased by 4.67%.
As for stability, even though the Total Debt has increased has increased, it is still lower than the
maximum 50% limit for both years 2012 and 2013, which means the business has kept it below the limit
for a long time. In addition, the debtors are getting faster at paying their debts to the company as seen in
the Debtor Turnover Ratio. In addition, the company has also improved their ability to pay current
liability with current asset as shown in Working Capital. This situation goes same to their ability to pay its
interest expense which is reflected by the Interest Coverage. However, this business has some flaws too.
It is selling its inventory slower in 2013 as compared to 2012.
When it comes to the aspect of price, the share is considered expensive. The price per earning is higher
than what a conservative investor would pay, which is higher than 15 years. The investors can
receive their investments only after 29 years.
Thus even though the business portrayed good profitability and stability, it is the matter of price that
make us think that the company NKE would not be a company worth investing on.
Price/ Earning Current ( 29th
May 2014 ) Interpretation
P/E
Ratio
Current share price
Earnings per share
= $ 76.27
$ 2.68
= $ 28.5 days
The P/E ratio of NKE as of 29th
May
2014 is 28.5 years. This means
investors who bought a share of NKE
would have to wait 28.5 years in
order to retain their investments, in
this case, $ 76.27. The P/E ratio is
also higher than what a conservative
investor would pay, which is higher
than 15 years.

10. 10
APPENDIX

11. 11
Nike, Inc ( NKE )’ Balance Sheet
Period Ending May 31, 2013 May 31, 2012 May 31, 2011
Assets
Current Assets
Cash And Cash Equivalents 3,337,000 2,317,000 1,955,000
Short Term Investments 2,628,000 1,440,000 2,583,000
Net Receivables 3,425,000 3,394,000 3,450,000
Inventory 3,434,000 3,222,000 2,715,000
Other Current Assets 802,000 1,472,000 594,000
Total Current Assets 13,626,000 11,845,000 11,297,000
Long Term Investments - - -
Property Plant and Equipment 2,452,000 2,209,000 2,115,000
Goodwill 131,000 131,000 205,000
Intangible Assets 382,000 370,000 487,000
Accumulated Amortization - - -
Other Assets - - -
Deferred Long Term Asset Charges 993,000 910,000 894,000
Total Assets 17,584,000 15,465,000 14,998,000
Liabilities
Current Liabilities
Accounts Payable 3,730,000 3,555,000 3,571,000
Short/Current Long Term Debt 178,000 157,000 387,000
Other Current Liabilities 18,000 170,000 -
Total Current Liabilities 3,926,000 3,882,000 3,958,000
Long Term Debt 1,210,000 228,000 276,000
Other Liabilities - - -
Deferred Long Term Liability Charges 1,292,000 974,000 921,000
Minority Interest - - -
Negative Goodwill - - -
Total Liabilities 6,428,000 5,084,000 5,155,000
Stockholders' Equity
Misc Stocks Options Warrants - - -
Redeemable Preferred Stock - - -

12. 12
Preferred Stock - - -
Common Stock 3,000 3,000 3,000
Retained Earnings 5,695,000 5,588,000 5,801,000
Treasury Stock - - -
Capital Surplus 5,184,000 4,641,000 3,944,000
Other Stockholder Equity 274,000 149,000 95,000
Total Stockholder Equity 11,156,000 10,381,000 9,843,000
Net Tangible Assets 10,643,000 9,880,000 9,151,000

13. 13
Nike, Inc ( NKE )’s Income ( P&L ) Statements
Period Ending May 31, 2013 May 31, 2012 May 31, 2011
Total Revenue 25,313,000 23,331,000 20,117,000
Cost of Revenue 14,279,000 13,183,000 10,915,000
Gross Profit 11,034,000 10,148,000 9,202,000
Operating Expenses
Research Development - - -
Selling General and Administrative 7,780,000 7,065,000 6,361,000
Non Recurring - - -
Others - - -
Total Operating Expenses - - -
Operating Income or Loss 3,254,000 3,083,000 2,841,000
Income from Continuing Operations
Total Other Income/Expenses Net 15,000 (54,000) 25,000
Earnings Before Interest And Taxes 3,272,000 3,025,000 2,862,000
Interest Expense - - -
Income Before Tax 3,272,000 3,025,000 2,862,000
Income Tax Expense 808,000 756,000 690,000
Minority Interest - - -
Net Income From Continuing Ops 2,464,000 2,269,000 2,172,000
Non-recurring Events
Discontinued Operations 21,000 (46,000) (39,000)
Extraordinary Items - - -
Effect Of Accounting Changes - - -
Other Items - - -
Net Income 2,485,000 2,223,000 2,133,000
Preferred Stock And Other Adjustments - - -
Net Income Applicable To Common Shares 2,485,000 2,223,000 2,133,000

14. 14
Nike, Inc ( NKE )’s Cash Flow
Period Ending May 31, 2013 May 31, 2012 May 31, 2011
Net Income 2,485,000 2,223,000 2,133,000
Operating Activities, Cash Flows Provided By or Used In
Depreciation
513,000 405,000 358,000
Adjustments To Net Income 71,000 70,000 29,000
Changes In Accounts Receivables 142,000 (323,000) (273,000)
Changes In Liabilities 41,000 470,000 151,000
Changes In Inventories (197,000) (805,000) (551,000)
Changes In Other Operating Activities (28,000) (141,000) (35,000)
Total Cash Flow From Operating
Activities
3,027,000 1,899,000 1,812,000
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures
(636,000) (597,000) (432,000)
Investments (1,203,000) 1,146,000 (560,000)
Other Cash flows from Investing Activities 772,000 (35,000) (29,000)
Total Cash Flows From Investing Activities(1,067,000) 514,000 (1,021,000)
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid
(703,000) (619,000) (555,000)
Sale Purchase of Stock (1,361,000) (1,346,000) (1,514,000)
Net Borrowings 937,000 (203,000) (8,000)
Other Cash Flows from Financing Activities - - -

15. 15
Total Cash Flows From Financing
Activities
(1,040,000) (2,118,000) (1,972,000)
Effect Of Exchange Rate Changes 100,000 67,000 57,000
Change In Cash and Cash Equivalents 1,020,000 362,000 (1,124,000)

16. 16
Price Earning ( P/E ) Ratio
( refer to Earning per share )

17. 17
NIKE, Inc. ( NKE ) Consolidated
Statements Of Income

18. 18
NIKE, Inc.( NKE ) Consolidated
Statements of Comprehensive Income

19. 19
NIKE, Inc. ( NKE ) Consolidated Balance Sheets

20. 20
Consolidated Statements of Income

21. 21
Consolidated Balance Sheets

22. 22
Price Earning ( P/E ) Ratio

23. 23
References
1) http://nikeinc.com/pages/history-heritage
2) http://investors.nikeinc.com/files/doc_financials/AnnualReports/2013/docs/nike-2013-
proxy.pdf
3)http://investing.businessweek.com/research/stocks/financials/financials.asp?ticker=NKE&data
set=incomeStatement&period=A&currency=native
4) http://investors.nikeinc.com/files/doc_financials/AnnualReports/2013/docs/nike-2013-form-
10K.pdf
5) http://investors.nikeinc.com/files/doc_financials/AnnualReports/2012/docs/nike-2012-form-
10K.pdf
6) http://investors.nikeinc.com/Investors/Stock-Information/Stock-Quote-and-Chart/default.aspx