Nike Financial Analysis Essay

Nike  is a company that has thoroughly embedded itself into the psyche of people around the world. It’s a company that started with humble origins from selling footwear in the basement to becoming the behemoth in the athletic industry. Bill Bowerman, University of Oregon track ; field coach, and Phil Knight, middle-distance runner under Bowerman co-founded Nike. Nike was first established as Blue Ribbon Sports in 1964 as a partnership and the name Nike was officially adopted on May 30, 1978. The infamous Nike Logo – Swoosh, was created for a fee of $35 by Carolyn Davidson, a graphics design student. In 1980, Nike becomes a publicly traded company with the completion of its Initial Public Offering of 2,377,000 shares of Class B Common Stock on New York Stock Exchange with the stock symbol NKE. Today, Nike employs over 27,000 people across the globe, and has net revenue in excess of $13 billion. The purpose of this paper is to provide investors with comprehensive information on Nike, its financial health and activities, its strength and weaknesses, and whether Nike creates value to its shareholders. This paper will analyze Nike’s capital structure, scope of international operations, recent stock performance, and dividend policy. We will examine how Nike’s international operations are conducted, its criticisms and strengths. Nike’s debt ratios, dividend payout ratios, dividend yield, and interest coverage ratios over the previous 5 years will be discussed and compared with industry benchmarks. Its bond ratings and the relation between the operating characteristics and its leverage will also be analyzed. Managers for Nike are creating value for shareholders by expanding Nike operations in foreign markets as much as possible. Nike’s sales and earnings outpaced Wall Street estimates FY 06. Nike’s sales reached $15 billion and its earnings per share were up 18%. Over the past 5 years, Nike’s earnings per share on compounded rate were up 20%, gross margins averaged 42% and in the past year, Nike delivered 44% margins in a period of rising costs. The current managers are maximizing shareholder’s wealth but in the footwear industry, Nike’s performance still falls. The footwear industry averaged about 14. 25%, while Nike’s growth in stock was 10. 48%. If the increase in value of shares is a benchmark of performance for managers, Nike’s performance is unimpressive. Nike has a Price to Book (MRQ) ratio of 3. 97, while the industry Nike competes in has a ratio of 3. 96. S;P 500 has a Price to Book (MRQ) ratio of 3. 90. Nike has a Price to Tangible Book (MRQ) ratio of 4. 26, while the industry has a ratio of 4. 44, and the S;P 500 has a ratio of 7. 22. The Nike brand itself is the biggest strength of Nike. Its other strengths include international operations where it is expanding aggressively, innovation of new products and ability to connect with its consumers. People’s perception of Nike as an exploiter of workers in developing nations, might cause considerable damage to its brand, and the poor performance of its stock relative to its industry is also one of its weaknesses. Nike’s managers must maximize shareholders wealth, which is not at its optimum level. As a world-renowned multi-national corporation, Nike has a presence in almost every nation. Nike itself started by importing athletic shoes from a Japanese company called Onitsuka Tiger Company. Nike earns more revenues from its international operations than its domestic market. Nike earned about $6. 5 billion FY 2005 from its international operations, compared to $5. 1 billion from its domestic market. International operations appear to be a key driver of Nike’s growth. Nike’s international operations are divided into 3 different regions. The EMEA region oversees operations in Europe, Middle East, and Africa. The Asia Pacific Region oversees operations in East Asia, South Asia, Southeast Asia, and the Pacific. The Americas region oversees operations in South America, and North America (excluding United States). Europe, Middle East, ; Africa (EMEA) is headquartered in Hilversum, Netherlands. In terms of revenue, the EMEA is Nike’s second largest region. EMEA region contributed about $4. 3 billion in revenues for Nike. Of these, footwear revenues contributed $2. 5 billion, apparel revenues contributed $1. 5 billion and equipment revenues contributed $284.million. FY’05, 31% of Nike brand revenue was generated by sales in the EMEA region. This region is also the third largest in terms of manufacturing. EMEA region employs about 6,000 Nike employees, and has about 104 contract factories. These factories in addition, employ 29,242 workers. The Asia Pacific region is Nike’s third largest in terms of rev enue, and the largest in terms of manufacturing. Nike has 13 branch offices and subsidiaries in the Asia Pacific region. China has become both a source country and a vital market for Nike. Asia Pacific region has 3,282 Nike employees approximately. The region also has 252 contract factories located in North Asia, and 238 contract factories located in South Asia. Combined, these factories employ 550,821 workers. Nike’s revenues for year 2004 from its Asian operations were about $1. 6 billion. Of these revenues, approximately $855 million were from footwear sales, $612 million from apparel sales and $146 million from equipment sales. The Americas region is the smallest in terms of revenue 2nd largest in regards to manufacturing. The first Nike shoe ever contracted out was done in Mexico in 1971. For year 2003, the region provided Nike with revenues of $624 million. Of these revenues $412 million were from footwear sales, $166 million from apparel sales and $47 million from equipment sales. This region has approximately 1076 Nike employees and additional 44,568 workers working in 137 total contract factories. Nike has branch offices and subsidiaries in five countries. Some of the challenges that Nike has faced and still faces are in regards to its manufacturing facilities and violation of labor laws. Nike has been accused on numerous occasions of employing children in its factories or exploiting workers in developing countries. In response to these allegations, Nike implemented strict standards for manufacturing facilities, including minimum age, air quality, mandatory education programs, expansion of micro-loan programs, factory monitoring, and enhanced transparency of Nike’s corporate responsibility practices. In order to better its image, Nike even ceased orders from Pakistan in November 20, 2006 as the soccer-ball manufacturer there failed to correct labor-compliance violations. Examination of Nike’s debt ratios reveals that the company has less debt in proportion to its assets. In 2002, Nike had a debt ratio of . 404 with total assets being worth about $6. 44 billion, and total debt of $2. 60 billion. In 2003, Nike’s debt ratio increased to . 415, its total assets increased by $378. 1 million, and its total debt increased by $226. 4 million. Debt ratio fell to . 394 in 2004, and fell further in 2005 to . 358. In the year 2006, Nike’s debt ratio increased to . 363, and had total assets of $9. 87 billion and total debt of $3. 58 billion. Examination of Nike’s interest coverage ratio reveals that the firm can sufficiently pay outstanding debt. If one were to take only Nike’s interest coverage ratios into account, it can be said that Nike generates sufficient revenue to satisfy interest expenses. In the year 2002, Nike had an interest coverage ratio of 22. 43. This further increased to 29. 04 the following year with EBIT amounting $1. 25 billion and interest expense amounting to $42. 9 million. In the year 2004, interest coverage ratio increased phenomenally to 59, with EBIT being $1. 48 billion and interest expense being $25 million. Finally for the year 2005, the interest coverage ratio was 388. 485 with EBIT being $1. 86 billion and interest expense being $4.million. Nike has a 5-year average leverage ratio of 1. 5, the industry leverage ratio is about 1. 5, and S;P 500 Index has a leverage of 4. 9. The firm’s leverage shows that Nike is using long-term debt, and it is measurable and appropriate. The operating characteristics include volume of sales in tune of $13,739. 7 million FY 2005, $12,739. 7 million sales in 2004, $10,697. 0 million sales in 2003, 9893. 0 million sales in 2002, and 9488. 8 million sales in 2001. These financial conditions indicate that Nike, Inc. percentages are not high and provide protection for the stockholders. Nike’s bond ratings by Moody for Senior Unsecured loan has a rating of A2, an Aa3 rating for Credit Default Swap, Aaa for Equity-Implied, and an A2 rating for Bond-implied. Nike pays dividends to its shareholders every quarter. In the past 5 years, Nike’s dividends ranged from $. 12 a share in March of 2002 to $. 37 a share in December of 2006. Nike’s dividend rate is much higher than both the industry average, and the S;P 500 Index. For the last 12 months, the dividend rate paid by Nike was 1. 48; while the industry average was . 32, and the S;P index dividend rate was . 74. Nike’s annual dividend yield is about 1. 0%, while the payout ratio is 24%. K-Swiss, one of Nike’s competitors has an annual dividend rate of . 20, annual dividend yield of . 60% and a payout ratio of 9%. Skechers USA, another competitor, paid no dividends. The dividend yield of S;P 500 was 2. 06%, while the dividend yield in the footwear industry was 1. 44%. The payout ratio f or the footwear industry was 20. 37%, and the S;P payout ratio was 28. 23%. Although, S;P 500 performed better than Nike in regards to dividend yield and payout ratio, one has to take into account that in footwear industry, Nike’s dividend yield and payout ratio were considerably higher than its competitors. In regards to its dividend policy, Nike is very attractive, and is very much â€Å"ahead of the pack†. Nike also has a Dividend Reinvestment Plan (DRIP) and allows its shareholders to participate in it through its Nike Direct-SERVICE Program. Through this program, shareholders can convert their cash dividends into shares at a significant discount to the current share price. Nike has a market value of $24. 41 billion. Approximately 1. 33 million shares are traded daily on average. Over the course of 5 years, Nike’s stock price went from $56. 92 as of Jan 2, 2002 to $97. 45 as of Dec 11, 2006 – an increase of 71. 5%. The graph below illustrates Nike’s 5 Year trend. In the recent year, the firm’s shares were traded as high as $99. 30, and as low as $75. 52. The firm started with a stock price of $85. 95 in the beginning of the year and as of December 12, 2006 closed at $96. 57 – a . 90% decrease from the previous day. The stock performance trend reveals that Nike experiences a greater loss during the months of August and September, and greater gains in October thru December, which is the holiday season. The graph below shows Nike’s stock performance trend in the recent year. The chart below shows growth in Footwear Industry in comparison to S&P 500 index. In conclusion, Nike’s future growth would primarily derive from its foreign operations. As the footwear industry in the domestic market has slowed, Nike has to expand aggressively in foreign markets. Nike pays more dividends in comparison to its competitors; the firm should reinvest that money in aggressive expansion in foreign markets rather than giving back the shareholders the profit. Nike’s returns are also significantly less than the S&P 500 index and within its own industry.

Political Philosophy of Thomas Hobbes and Rene Descartes Essay

â€Å"Politics should be the application of the science Of man to the construction of the community† Explain this remark and discuss what reasons there might be for thinking it is not trueIn this essay I intend to examine the political philosophy of Thomas Hobbes and Rene Descartes, in particular their ideas relating to the science of man, and attempt to explain why their ideas prove that it is not possible to construct a science of man. I will also briefly mention the philosophy of Donald Davidson in regards to a science of man. The theories of Hobbes and the contemporary socio-biologists attempt to recognise how man works and on that basis build a society. â€Å"Hobbes wished to be seen as the inventor of the science of politics† (Sorrell, p45) He went about this by looking at the psychology of man and discovering that man is a mechanism. Hobbes wanted to understand mechanics. He wanted to look at why men live the way that they do in society and therefore, breaks it down. By doing this he discovered that people are cogs in the social machine. Therefore he wants to examine this cogs to achieve an understanding of the social mechanism, and does this by looking at the psychology of the mind. Hobbes is both an empirist and a materialist. Empirists believe that sense gives all knowledge. Generally, they do not believe in astrology, god, electrons etc. Their philosophy is summed up by saying that all things that give true knowledge can be sensed. Materialists believe that all things in existence are physical matter. In other words, the soul and the spirit do not exist. Therefore Hobbes believes that thoughts are material, that they are caused by sense and vice versa. Tom Sorrell suggests in his essay, entitled â€Å"Hobbes’ scheme of the sciences†, that rather than have knowledge of how the mechanics of the mind’s passions work, a more successful way of gaining political knowledge is to understand what these passions cause. They cause various degrees of action, with the possessor going to various extents to achieve what they want. In chapter six of â€Å"De Corpere†, Hobbes makes a connection between the knowledge of the principles of politics and the knowledge of the motions of the average human mind. Hobbes’ account of political science is an idea of what man must do if his goal is self-preservation. These ideas are not what mankind will do but what it will have to do, in a rational way, to form a political civilisation. One would assume that as Hobbes identifies both a natural science (that of the work of nature), and a civil science – that of the common wealth – (which makes laws and wills), he would suggest that they are parallels which, in political philosophy, work together. However, there are a few problems with Hobbes’ theory. Hobbes suggests that a monarch makes a better sovereign than an assembly. Yet, surely he would not agree that a monarch who is not dedicated would be better suited than a group of thoughtful representatives. A politically secure society is built up from its people. Hobbes believes that these people all have one motivation; self-gain, or to be more precise self-preservation. Hobbes suggests that there is a link between voluntary motion and vital motion. He goes on to say that senses work together with the vital motions to produce that which is voluntary, i.e. an endeavour. These endeavours can be categorised in two ways; attractions and aversions. An example of an attraction is to pick up a piece of cake because it looks good. That of an aversion is to run away from a dog because you are scared of dogs. As it is possible to see these actions are derived from the senses, again agreeing with Hobbes empirist theory. Endeavours are the small motions within man which occur before he walks, talks, runs or carries out any other voluntary motion. These endeavours are so small that they are undetectable. By understanding why men act the way that they do, it is easier to come to a conclusion as to how society should be structured. However, the idea that the existence of a science of man can be questioned suggests that society can be constructed without it. This is due to the fact that many psychological and political theories are founded on the basis that there is a science of man. Without this â€Å"science of man† these theories are in turn questioned and therefore cannot be viably backed as reasons for the construction of the community. Another prolific philosopher whose arguments should be taken into account is Rene Descartes. Descartes thinks that we, as humans, are made up of two separate substances. The body is the physical stuff and the mind – the res cogitans (thinking thing) – purely mental stuff. The res cogitans can will your body to move. The difficulty with Descartes’ theory is that the mind and body interact; if you pour boiling water on you hand, you will feel pain. Again we have to take into account voluntary and vital motions. A voluntary motion is me moving my arm. A vital motion is my arm moving. I move my arm because I want to; but I may not necessarily want it to be moved. This can happen for a number of reasons. It may be possible that I have a muscle spasm in my arm or that somebody moves it. All of this suggests that for Descartes’ theory to be correct there must be some kind of connection between a material substance (the body) and an immaterial substance (the mind). However, we will find it impossible to understand the idea of a science of man if we cannot understand how the two substances interact. Therefore, again, we have no proof that it is possible to build a political philosophy on the basis of a science of man. On p213 of Davidson , we find an explanation of monisms and dualisms. â€Å"Theories are thus divided into four sorts: nomological monism, which affirms that there are correlating laws and that the events correlated are one (materialists belong in this category); nomological dualism, which compromises various forms of parallelism, interactionism and epiphenominalism; anomalous dualism which combines ontological dualism with the general failure of laws correlating the mental and the physical (cartesianism). And finally there is anomalous monism which shows an ontological bias only in that it allows the possibility that not all events are mental, while insisting that all events are physical. â€Å"The final position is that which Davidson himself follows. Davidson’s argument suggests that the psychology of man does not follow any causal laws. Therefore, it is impossible to impose any rationality on theories involving the mind. These anomological psychological states are defeasable. They are defeasable because it is possible that by adding another condition to the situation the expected behaviour changes. Therefore it is impossible to agree with any political philosophy that involves the necessity of a science of man. What is easily discovered is that there are many different political philosophies and many different concepts as to what is a science of man. Philosophers such as Hobbes and his counterparts, Mill and Marx, possess the shared assumption that political philosophers must accept the political opinion that they are arguing for. They all think that rational agents must accept their arguments yet they all have different arguments. They all believe that for a successful political structure human nature cannot be ignored, if the structure is to command respect. As I have shown, Descartes and Davidson on the other hand, believe that a science of man is impossible; Descartes because he believes that our minds are immaterial and Davidson because man’s behaviour follows no causal laws. All of this shows us that trying to interpret man’s actions and apply them to a science is an impossible conquest. Man is too complicated a mechanism to understand and therefore political philosophy, for a sensible and rational social structure, must be founded on another basis.

Future Goals of Nursing Essay

During my childhood and early teenage years, I can remember my English teachers asking things like â€Å"what do you want to be when you grow up?† and â€Å"What do you want to study in college?† As a child I would give a quick sentence or a couple of words of how I wanted to be a teacher, a counselor, or a marine biologist. As a student I have been expected to outline and prepare written papers about what I wanted to be when I grow up. My answers varied each and every year. I can remember many kids saying they wanted to become a nurse or a doctor. I can never remember wanting to become a nurse myself. It is through hearing the many stories I have heard from family members that are in the medical field and a sister that became a CAN and had planned to be a nurse that made me really begin thinking about nursing as a possible career. The further I learned and read about nursing, the more I was intrigued. I chose to take Health Occupations 1 at KEC this year, my senior yea r in High School. By the end of this course I will become a CNA. Through this experience, it has not only provided me a deeper look into the medical field, but also has given my hands-on experience. I have come to realize that working in this environment and doing some of the dirtiest jobs seems to be a natural fit for me. I have surprised myself at my ability to do some of the jobs that most dread. It is my personality to want to help others and be there for them during their hard times, being the medical field can allow me to do just that. I am aware that the training required to become a nurse is challenging and I am ready and willing to take this challenge on to get the training needed in order to become a nurse. I am excited about learning all that I need to learn. My future goal is to go through medical school, and become a Union Registered Nurse where I can help others and be in the midst of the medical field, which I love.

Corporate Governance Assignment Example | Topics and Well Written Essays - 2250 words

Corporate Governance - Assignment Example The framework also contains the procedures for proper control, supervision, and information flows which are ought to serve as checks and balances system. Corporate governance provides a framework for attaining the objectives of the company. It makes it encompass practically every sphere of management, from internal controls and action plans to corporate disclosure and performance measurement. Most firms nowadays strive to have a high degree of corporate governance (Solomon, 2004). Most companies no longer desire to be only profitable but also demonstrate perfect corporate citizenship through ethical behavior, environmental awareness, and sound corporate governance practices. Corporate governance helps in streamlining processes and guides in giving people accountability. Corporate governance helps in the process of decision making. One of the primary goals of corporate governance is to explain clearly to the stakeholders, the board, and the shareholders what their responsibilities and duties are within the company. It becomes easier for the people within the firm to understand whatever they are accountable for, after understanding their duties and responsibilities. If the board has the responsibility for proper evaluation of the management of the company, then they are held accountable for it. If the companys management is poor, then the board is held accountable because it is its role to evaluate the management of the company (Sheikh, 1995). The blame will thus not be transferred to other members of the corporation and in this case the blame will be with the board. It thus helps in preventing situations in which there are no ways to know the accountable people for whatever actions. Accountability helps in decision making within the company setup. Accountability helps in finding out about who should get an acknowledgment for the good work done in their respective fields and who should get punished

Sea Water Intrusion in Estuaries Article Example | Topics and Well Written Essays - 750 words

Sea Water Intrusion in Estuaries - Article Example The results obtained using the model includes the measure of water level, discharge and salinity level. These have shown good agreement with the observed results. Also, a direct relationship between longitudinal salt dispersion with flood-ebb loop length and tidal efficiency is also confirmed in this study (Nguyen et al, 2008b). The prediction of the salinity distribution in the complex situations like multi-channel estuaries like Mekong delta have also been reported in the literature (Nguyen and Savenije, 2006). Mekong delta is unique in its character. It has large number of branches and transports huge quantity of water (2000 cu.m per second) even during summer. The prediction model is framed on the principle that the multi-channel estuarine system would function as single entity and the paired branches could be appropriately combined to one. The results obtained from the analysis show that steady state models could predict the salinity levels very well. They could also explain the equilibrium conditions established in the estuaries during variable flow period especially during the dry seasons. Also, authors have computed the system response time for Mekong also. The data used in the paper was collected during the period 1991 to 1998. As Mekong delta is a very active morphologically, it's topography too is undergoing continuous change due to the transport of sediments through the river. Hence, the model would require continuous improvement by incorporating the recent topographical details. Further, the model also has parameters like mean estuary depth and river discharge that have high degree of uncertainty (Nguyen and Savenije, 2006). Determination of fresh water discharge is essential for quantification of salinity distribution. In the case of very low flows the salinity distribution is observed to be maximum. But the low fresh water flows coupled with high tidal flows make the accurate estimate of fresh water discharges very difficult. And in the case of Mekong delta, the multi channel characteristics make the accurate direct determination of discharge computation very cumbersome. A reliable model has been proposed to estimate the river discharge under the above situations (Nguyen et al, 2008a). The principle applied in this process is the reverse calculation, from the known values of salinity distribution the authors have developed equations to determine the river discharge. In this connection, two separate approaches have been attempted for different clusters of rivers in this basin. In the first approach, based on the information on the salinity distribution and estuarine shape of each branch the discharge i n the individual branches is computed. And in the other approach, from the combined shape of estuarine branches and the salinity distribution, the combined discharge is estimated. These analytical models could be used to compute the river discharges in multi channel estuarine regions by collecting the salinity distributions (Nguyen et al, 2008a). References Nguyen, A.D. and Savenije, H.H.G Salt intrusion in multi channel estuaries : a case study in Mekong delta, Vietnam, Hydrology and Earth System Sciences, 10, 2006, 743 -754. Nguyen, A.D., Savenije, H.H.G, Pham, D N and Tang, D T, Using salt intrusion measurements to determine the freshwater discharge distribution over

Capital budgeting Essay Example | Topics and Well Written Essays - 750 words

Capital budgeting - Essay Example The criteria for selection of projects is that any project evaluated having positive NPV should be undertaken. This method has the advantage of being that it recognizes the time value of money and risks associated with projected future cash flows. However, it has the limitation of not taking into account the scarcity of capital, and secondly, it’s overly simple (Baker and Kent 2005 pp. 234-86). The profitability index is also known as a cost-benefit ratio it works by ascertaining whether an investment is viable and how much profit will result from it. PI is evaluated as follows;Profitability Index = (Net Present Value + Initial Investment) / Initial InvestmentThe criteria for accepting a project is that if the PI is greater than one it should be accepted otherwise it should be rejected. Its drawbacks and advantages are similar to those of NPV (Pogue 2010 pp.86-146).IRR as investment evaluation technique is widely accepted and cushions against NPV and PI limitations. An interna l rate of return also known as the discounted cash flow rate of return offers a means to financial analysts to quantify the rates of return an investment is envisioned to bring if implemented. It is calculated NPV =∑_(n=0)^Nââ€"’Cn/ã€â€"(1+r)ã€â€"^n = 0 Which is equivalent to NPV/(1+IRR)^year) of all positive and negative cash flows While evaluating investments using IRR any project which has an internal rate of return greater than the opportunity cost of a project usually taken to be a weighted average cost of capital-WACC are accepted.

Financial Management for Small Business Essay Example | Topics and Well Written Essays - 2750 words

Financial Management for Small Business - Essay Example In this case, it is critical to form a business plan to assist the agency’s long term objectives. This is especially if it is the first time trying to make it in this entrepreneurial venture (BARRINGER, 2008). Some of the aspects that surround this business need addressing so as to make it simpler to deal with the hurdles that these businesses face. This paper will examine such a plan in the car hire service, and how it may impact the growth and development of the business, in the long run. The name of the car hire service company will be Delta. The chosen business needs explaining because not everyone might comprehend the concepts being introduced in the car hire service. It must, therefore, articulate and explain these details to everyone so as to find out what might be needed to make the agency a success. The business plans formulated ought to look at all factors surrounding the business; the good, the bad, and the ugly. It must acknowledge the presence of all factors present in the environment that might enable it to grow, decline, or remain stagnant (FINCH, 2006). In order to attract a wide variety of customers, it is vital to have an image of the cars that are to be hired. In this fast globalising environment, the cars that need hiring are personal that are capable of running for many miles. These include personal cars that can accommodate a fairly large amount of individuals. Nowadays, individuals are keen on having the fun day out while visiting different areas. Having a car hire service that can address these needs is fundamental in the business’s growth. It is vital to understand their needs so as to have the right car to provide the customer (HOSMER, 1976).). Many young couples are interested in cars that are out for their interests. This means that; they want cars that are trendy and lavish to match the new lifestyle (JACKSACK, 1998). The common vehicle models from popular vehicle industries are the