Analysis of the Financial Position of Nike Inc.

One of the most important scopes of any given business is to make profit. And, this calls for the trade of goods and services. However, to achieve this goal, a company has to invest capital. The capital might not be readily available or enough to sustain it through its operation period. And, the company thus has to look for creative ways to raise the much-needed capital. While there are many ways to raise capital, trading a company's share to public members through initial public offers (IPOs) remains one of the cheapest and sustainable ways to do it. And, this results to the company ceding part of its power structure to public members who own the shares. There are various platforms where public limited companies trade their shares but none matches the size of the New York Stock Exchange (NYSE) market. It is arguably the largest stock market in the United States together with NASDAQ (Heckman p32). The market differs from the Dow Jones Index, which lists the thirty top stocks from some of the largest companies in the world. Among the most famous companies listed in the NYSE stock market is Nike Inc. The paper will look at the company's history, products, accounting practices, and its financial health before making a recommendation on whether it is a feasible company to invest in.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

Nike Inc. is one of the largest American multinational corporations that deal with the design, development, manufacturing and global marketing and sale of sports gear, footwear, equipment, apparel, accessories and sports services (PANDEY p.12). And, this makes it the largest supplier and manufacturer of apparel, athletic shoes and sports equipment in the world. Headquartered in Beaverton in the Portland Metropolitan State of Oregon, Nike Inc. has grown over to become one of the most popular brands. It was founded on 25th January 1964 as Blue Ribbon Sports by Phil Knight and Bill Bowerman. And, it officially gained its current name Nike Inc. on 30th May 1971. The name was inspired by the allusion to the Greek goddess of victory "Nike" (PANDEY p.14). It has gone on to have various brands such as Nike Pro, Nike Golf, Nike+, Air Force 1, Air Max and Air Jordan among other subsidiaries. Its highly marketable trademarks have been "Just Do It" and the "Swoosh logo." And, all this has resulted in the development of Nike Inc. as one of the world's strongest brands in the world.

Initially, Nike Inc. dealt with the development, manufacture, and selling of track running shoes. And, with the growth of the company's brand, the company ventured into other products such as sports shoes, sports jerseys, apparel, base lavers, and short cleats for different sports; both track and field, ice hockey, soccer, tennis, baseball, cricket, and basketball among others. Other products such as Nike 6.0, Nike SB shoes, and Nike NYX specifically designed for skateboarding have been added to Nike's line of product. Besides the listed products, the company deals in products such as the Air Jordan XX3 shoes specifically suited for the basket environment (PANDEY p.14). It can thus be stated that Nike's niche is in the sale of an assortment of sports products such as shoes, apparel and equipment for sports such as American football, basketball, football association, athletics, American football, and cross-country. Others include shoes for outdoor activities such as wrestling, tennis, cycling, auto-racing, soccer, athletics and volleyball among other sports. The products cut across all the genders.

Running a company of the magnitude as that of Nike Inc. requires prudent practice of acceptable and standardized accounting practices. For the case of Nike Inc., a public limited company valued at $29.6 billion as at 2017 and having an operating income of $4.95 billion and revenue of $34.35 billion as at the same period, proper accounting practices are required (NYSE). The company's financial accounting is based on the analysis of its financial condition and results of its operations. They are all based on the consolidation of its financial statements. And, all these financial statements are all prepared in accordance with proper and standardized accounting principles that are accepted all over the United States of America. This calls for the company to prepare financial statements based on estimates and judgments that have a significant impact on the reported figures in the assets, liabilities, expenses, revenues, and expenses. Therefore, the accounting practices at Nike Inc. call for transparent disclosure of its contingent liabilities and assets. They all comply with the accounting standards stipulated under the Generally Accepted Accounting Principles (GAAP) and those established by the NYSE.

The financial position of a company is an important factor that guides investors who wish to invest in its stock. As for the case of Nike Inc., its total assets declined from 2015 to the financial year 2016; from $21.6 billion to $21.396 billion. However, this was later to increase to $23.259 billion asset value in the year 2017 (NYSE). And, the total asset in 2017 exceeded the 2015 value. Compared against its total expenses in the years listed above, the company's prepaid expenses and other current assets for the years 2015, 2016, and 2017 amounted to $1.968 billion, $1.489 billion and $1.150 billion respectively (NYSE). And, this points at a reduction in the company's expenses against its total asset base for the three years; an indication of a healthy financial position. The year 2017 marked the company's best financial performing year with a net income of $4.24 billion. This is indicative of a healthy company.

Conclusion

A careful analysis of Nike's financial position as at 2017 shows a healthy company that is a viable option for any-would be an investor. The decision to invest in the company is backed by the company's recent growth of its share values, which has seen its share price stabilizing at $66.09 and an intrinsic value of $78.92 and a positive dividend per share of 0.77 (NYSE). This is in perfect harmony with the values projected in 2013 of the company's growth estimated at an annual sales growth rate of 10% (Townsend). Therefore, the company's stability in its share value and recent revenue growth over the years is a good reason to invest in it especially with the sports industry growing to be a multi-billion industry all over the world. I would advise one to invest in the company based on its potential for growth and competitive advantage it has over other companies in the sportswear industry.

Works Cited

Heckman, Lucy. The New York Stock Exchange: A Guide to Information Sources. Vol. 2. Routledge, 2017.

BIBLIOGRAPHY NYSE. https://www.stock-analysis-on.net/NYSE/Company/Nike-Inc/Financial-Statement/Assets. 2017. 22 April 2018.

PANDEY, BANKIM CHANDRA. Nike Inc-Complete Analysis: SWOT, PESTLE, and Marketing strategy. BookRix, 2017.

Townsend, Matt. https://www.bloomberg.com/news/articles/2013-10-09/nike-sees-36-billion-in-annual-sales-by-fiscal-year-2017. 9 October 2013. 22 April 2018.