Florida Atlantic University Nike Company Worksheet

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Business Finance

Florida Atlantic University

Description

COURSE PROJECT/CHECKPOINT ASSIGNMENT

Each student will be assigned a company ( Nike )for which they will conduct a financial analysis. Included in the analysis will be the following items:

  • Background Information/Environmental Scan
  • DuPont Identity
  • Current Ratio
  • Quick Ratio
  • Inventory Holding Period
  • Average Collection Period
  • Debt Ratio
  • Free Cash Flow
  • Market Value Added
  • Economic Value Added
  • Dividend Yield
  • Required Rate of Return based on the Capital Asset Pricing Model

After calculating the above items, the student will make a recommendation to buy, sell, or hold the company’s common stock at its current price. The recommendation should be based on the calculations required plus any other information about the company that the student believes pertinent.

In a separate section of the paper, the student will describe a situation in which his/her company would make use of capital budgeting. No calculations are required. This section of the paper would be about one to two pages describing the process that the company would make use of for analyzing the capital budgeting situation.

In a third section of the paper, the student should describe how the company would use cost-volume-profit analysis for one of its products. No calculations are necessary; just provide an explanation of how the process works. This section of the paper should be one to two pages.

Grading for the analysis will be based on the following:

  • Environmental Scan/Background 20 points
  • Ratio Calculations 15 points
  • Free Cash Flow Calculations 8 points
  • Market Value Added? Economic Value Added 7 points
  • Capital Budgeting Discussion 15 points
  • Cost-Volume-Profit Analysis Discussion 15 points
  • Conclusions 10 points
  • Quality of Writing and Sources 10 points

Extra credit is not applicable or available in this course.

Rubric for Company Analysis

BUS 311, Financial Management

Critical Assignment

The critical assignment for BUS 311, Financial Management is one of a series of assignments designed to demonstrate that students have achieved the learning outcomes established for the majors in the College of Business and Management.

The specific objective of this critical assignment is to assure that students have a sufficient level of accounting and finance skills to conduct financial analyses of an organization. These exercises will provide students with the opportunity to integrate and implement theory to practice and will prepare students to develop a comprehensive business plan in the capstone course during the final year of study.

For the purpose of this exercise, students will choose a company for which they will conduct an environmental scan and a financial analysis. The analysis of the company should culminate with students recommending that the company is “excellent,” “healthy,” or “ill.” Students will be evaluated based on correctness of the calculations, the insight of the analysis, and the quality of the discussion relating to the requirements.

Before performing the financial analysis, students will prepare an environmental scan, which will discuss the various forces with which an organization must contend to assure that its business model has a chance for success.

The specific calculations should include:

  • DuPont Identity
  • Current Ratio
  • Quick Ratio
  • Inventory Holding Period
  • Average Collection Period
  • Debt Ratio
  • Dividend Yield
  • Required Rate of Return based on the Capital Asset Pricing Model
  • Free Cash Flow
  • Market Value Added
  • Economic Value Added

Additionally, students will be expected to prepare an executive summary of the process of capital budgeting, using an example that is specific to the company that is being analyzed. An executive summary of cost-volume-profit analysis is also required, using an example that is specific to the company that is being analyzed.

The written paper is to be typed double–spaced, 1’ margins, Times New Roman and 12-point font, with correct spelling and grammar, proper citation, references, with a cover page and organized with headings. The instructor’s approval of the topic is required.

The following Library resources and websites could assist students in conducting the research to do the Critical Assignment:

Lynn Library Sources:

Business majors can also avail themselves of all Lynn University Library databases(Links to an external site.) and the business specific databases (Links to an external site.) such as: ABI/Inform, Business Insights: Essentials, Passport by Euromonitor, and Statista.

Directions to access:

Go to Lynn University Website: www.lynn.edu (Links to an external site.)

Click the Libraries Tab

Click Databases

Click on the « All Subject » dropdown= Business http://lynnlibrary.libguides.com/az.php?s=43296 (Links to an external site.)

Websites:

www.zacks.com (Links to an external site.)

www.bloomberg.com/markets/rates/index.html (Links to an external site.)

www.moodys.com (Links to an external site.)

www.bondsonline.com (Links to an external site.)

www.federalreserve.gov (Links to an external site.)

www.morningstar.com (Links to an external site.)

http://finance.yahoo.com/ (Links to an external site.)

http://www.gurufocus.com/ (Links to an external site.)

https://www.google.com/finance (Links to an external site.)

Student Learning Outcomes:

Students will be able to:

  1. Conduct an environmental scan, indicating future prospects for a company. (SLO 3.3, SLO 7.4, SLO 12.3) (20% of grade for project)
  2. Calculate and interpret financial ratios to ascertain the overall health of a company. (SLO 1.2, SLO 6.1, SLO 13.4) (15% of grade for project)
  3. Determine and explain free cash flow to assess the cash position for a company. (SLO 6.2, SLO 10.4, SLO 13.4) (8% of grade for project)
  4. Determine and explain the market value added and economic value added to ascertain whether a company is creating or destroying value. (SLO 6.2, SLO 13.4) (7% of grade for project)
  5. Specifically describe the capital budgeting process, in particular the net present value method in order to demonstrate the importance of the timing and risks associated with cash flows. (SLO 6.3, SLO 6.5, SLO 10.4, SLO 13.3, SLO 13.4) (15% of grade for project)
  6. Specifically describe cost-volume-profit analysis for the company to assure the understanding of the elements of operating income. (SLO 1.5, SLO 11.6, SLO 13.3, SLO 13.4) (15% of grade for project)
  7. Make a recommendation that the company’s financial condition is: “excellent”, “healthy”, or “ill”. (SLO 13.3, SLO 13.4) (10% of grade for project)
  8. Demonstrate proficient writing skills (SLO 13.6) (10% of grade for project)

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Attached.

Running Head: COURSE PROJECT/CHECKPOINT ASSIGNMENT (NIKE INC.)

Course Project/Checkpoint Assignment
Nike Inc. Financial Analysis
Student’s Name
Institution affiliation

1

BACKGROUND/ENVIRONMENTAL SCAN OF NIKE INC.

2

Table of Contents
SECTION ONE .......................................................................................................................................... 3
Background information ..................................................................................................................... 3
Environmental scan............................................................................................................................. 3
DuPont Identity ................................................................................................................................... 4
Liquidity Ratio ..................................................................................................................................... 5
Current Ratio ................................................................................................................................... 5
Quick ratio ....................................................................................................................................... 5
Efficiency Ratio.................................................................................................................................... 6
Inventory holding period ................................................................................................................ 6
Average collection period ............................................................................................................... 7
Leverage Ratio..................................................................................................................................... 7
Debt Ratio ....................................................................................................................................... 7
Dividend Yield ................................................................................................................................. 7
Economic and Market Value-added and Free Cashflow ..................................................................... 8
Recommendation................................................................................................................................ 8
SECTION TWO ......................................................................................................................................... 9
SECTION THREE ..................................................................................................................................... 10
Cost-volume-profit analysis .............................................................................................................. 10
Comprehending fixed and variable costs...................................................................................... 11
Break-even point analysis ............................................................................................................. 11
References ........................................................................................................................................ 13

BACKGROUND/ENVIRONMENTAL SCAN OF NIKE INC.

3

SECTION ONE
Background information
Nike is an international corporation located in the united states. Its headquarters based
in Beaverton, Oregon, and it was initiated by bill Bowerman in 1964, who is a track field
instructor at the Oregon University. The company is known for the production of functional
and trendy sportswear worldwide. Nike opened its first selling channel in 1966, and the first
brand new shoes and launched in 1972. its primary purpose is to inspire and bring innovation
to the athletes worldwide. Just like any other company, Nike has to keep a high guard due to
the existing competitive market despite being the largest sportswear producing company.
The company changed its name to Nike, Inc., in the year 1978 and during the 21st
century had several selling channels and suppliers in more than a hundred and seventy
countries in the world. The business expanded steadily and extended the line of product
through several achievements, which include converse and the sports gear manufacturer
Canstar sports. Nike began selling high altitude wrist compasses and heart rate monitors,
which are technology-based sports equipment. The success of this company is much owed to
the confirmation by athletes, including Tiger Woods, Jordan, Roger Federer, and Mia Hamm
(Chung, 2013). The image of the company suffered shortly in the 1990s due to the poor
working conditions, which was poor.
Environmental scan
The external and internal factors are essential to achieve the environmental scan of a
company., The external factors involve the use of strengths, weaknesses, opportunities, and
threats (SWOT analysis) to analyze the factors affecting the company. Nike has a robust
worldwide presence giving the organization to infiltrate upcoming markets in economies such

BACKGROUND/ENVIRONMENTAL SCAN OF NIKE INC.

4

as China and India, which are growing fast. Nike, as a top sportswear producing company,
has threats from several competitors and instabilities in global sales. The competitors include
Adidas and puma, including the upcoming markets such as lululemon and Under Armor.
Durable products increase the probability of strengthening the brand (Mahdi, 2015).
Issues concerning the environment are of ever-growing advantage. The mass
production by the Nike company damages the environment. The release of atmospheric
pollution and, worst of all, directly pollutes the rivers. The contamination of the environment
affects the Nikes company internally though they have promised to work on the issues of
pollution to the rivers and become more environmentally friendly. Nike's major strength is
that it has the right image, and it is widely recognized all over the world. Its products are
known to be of good quality and are so popular due to their marketing strategy. Nike has
advertised and promoted its company throughout the world and therefore increasing its sales.
Nike also has an excellent loyalty and base to the customers.
DuPont Identity
The Dupont identity is an expression that shows the return on equity of a company
ROE. It is calculated using three ratios, namely the profit margin, asset turnover, and the
equity multiplier. DuPont identity measures the operating efficiency, the asset use efficiency,
and financial leverage using profit margin, asset turnover, and the equity multiplier,
respectively.
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Anonymous
Really helpful material, saved me a great deal of time.

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