Financial Analysis of Nike

During the 1986-1995 period, Nike, Inc. was financially one of the most successful of all American corporations. The results of the critical financial analysis performed project even greater financial success by Nike, Inc. during the 1996-2005 period.

This research develops a critical financial analysis of Nike, Inc. The company, headquartered in Beaverton, Oregon, designs and markets globally footwear, apparel, and accessories for athletic and leisure apparel (Ferguson, 1996a, p. 1671). The overwhelming majority of the company's products are produced in low-wage, developing economies. Net sales for the fiscal year ending 31 May 1995 totaled $4.76 billion on a total asset base of $3.14 billion and a total capitalization (equity plus long-term debt) of $1.98 billion.

The findings of this critical financial analysis are presented in (1) assessments of the company's current financial performance and position, and (2) projections of the company's future

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r toe 1996-2005 period. Nike's level of long-term debt is not projected to increase over the 1996-2005 period because of the company's exceptionally strong financial position and the capacity to generate capital internally. Continued substantial sales growth, however, may be expected to be accompanied with a commensurate growth in current debt levels. Therefore, a debt ratio of 35 percent, slightly below the level for fiscal 1995, is projected for the 1996-2005 period. Nike's markets are expected to remain highly competitive over the 1996-2005 period (Labich, 1995, pp. 90-97). The competitive character of the market will act to restrain profitability levels. The net profit on sales projection of 8.8 percent per annum presented above is based on Value Line projections for Nike profitability for the fiscal year 1996-2001 period (Ferguson, 1996a, p. 1671). Value Line projects a firming of dividend payout rates by Nike beginning in fiscal 1997 and extending through fiscal 1997 (Ferguson, 1996, p. 1671). The 15.6 percent dividend payout ratio above is based on this Value Line projection. Strategies Required to Attain the Projections At the close of fiscal 1995, Nike was the world leader in the athletic shoe market in terms of
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Approximate Word count = 2691
Approximate Pages = 11 (250 words per page)

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