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Custom Company Nike Essay

Characteristics of Common Stock

Nike Inc. figures of common stock for the last three years

Year

Value($millions)

2010

3

2011

3

2012

3

Table 1: Nike Common Stock (Nike Inc., 2012)

From the table above, the value of common stock has remained constant at $3,000,000 for the last three years. The share price has gone up by 30.33% in the 2012 year, and is currently trading at $92.59.

Nike Common stock has the following characteristics:

  1. Limited Liability

Common stockholders can never lose more than 100% of their investment in the company. Their liability is limited up to the value of their shareholding. In case Nike Inc. was to go bankrupt, common stockholders cannot be forced to bail out the company. Common stockholders are protected from financial obligations that Nike Inc. enters to (Rose et al 2010).

  1. Voting Rights

 Nike common stockholders have the following voting rights:

  1. Election of directors
  2. They can vote for unusual events such as mergers, stock splits, mergers, acquisitions

Each common stock carries one vote. Common stockholders have the right to vote at the Annual General Meeting of Nike Inc.

  1. Preemptive Rights

Common stockholders at Nike Inc. have preemptive rights when the company issues new classes of stocks. Existing shareholders have the first option to subscribe to new shares, sometimes at reduced prices, before the shares are offered to the public

  1. Dividend Payments

Common shareholders at Nike are entitled to receive dividends when they are declared by the elected board of directors.

  1. Priority in Bankruptcy Claims

Common stock at Nike is the most junior security. If Nike goes Bankrupt, common shareholders receive their compensation after creditors, bondholders, preference shareholders and the managers have been paid off.

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Characteristics of Bonds

The following are the characteristics of bonds at Nike Inc.

Amount Outstanding: $190 Million

Issuer: Corporate

Percentage of total debts: 2.4%

Domicile of Issuer: United States

Nike currently has two bonds that are yet to mature

  1. Nike Inc. Be 5.15%

Maturity Date:           October 2015

Amount:                     $100 Million

Credit Quality:           High

Price:                          113.5

Coupon %:                 5.15

Coupon type:             Fixed

Yield to Maturity:      0.58

  1. Nike Inc. Be 4.7%

Maturity Date:           January 2013

Amount:                     $50 Million

Credit Quality:           High

Price:                          103.8

Coupon %:                 4.7

Coupon type:             Fixed

Yield to Maturity:      0.34

Explanations of Characteristics

Maturity Date: refers to a date in the future when the principle amount is supposed to be repaid

Amount: Refers to the total amount collected from issuing the bond

Credit Quality: The credit worthiness of the company

Price: this refers to the bond’s face value; it is the amount a holder will get at the maturity date

Coupon %: This refers to the interest rate attached to the bond

Coupon type: this can either be fixed or floating

Yield to Maturity: This is the expected when a bond is help up to the maturity date. (Rose et al, 2010)

FINANCIAL RATIOS OF NIKE INC. FOR THE LAST THREE YEARS

ITEM

2010

2011

2012

INDUSTRY

AVERAGE

Gross Margin

46.28

45.58

43.40

43.21

Operating Margin

13.01

13.49

12.60

 

EBT Margin

13.24

13.63

12.36

13.52

Net Profit Margin

10.03

10.22

9.21

7.21

Asset Turnover

1.37

1.42

1.58

1.7

Return on Assets (%)

13.78

14.5

14.59

12.20

Financial Leverage (Average)

1.48

1.52

1.49

 

Return on Equity (%)

20.67

21.77

21.98

21.51

Return On Invested Capital (%)

19.21

20.46

20.90

19.20

EFFICIENCY

 

 

 

 

Days Sales Outstanding

53.11

50.63

48.54

 

Payables Period

40.85

43.78

40.85

 

Receivables Period

6.87

7.21

7.52

7.4 times

Payables Period

40.85

43.78

40.85

 

Cash Conversion Cycle

90.84

83.30

88.74

75.56

LIQUIDITY

 

 

 

 

Quick Ratio

2.32

1.94

1.82

1.8 times

Current Ratio

3.26

2.85

2.98

2.9 times

Debt/Equity

0.05

0.03

0.02

0.036

Table 2: Nike Key Ratios (Nike Inc., n.d)

RECOMMENDATION

The stock price of Nike Inc. has gone up by 30.33% in the 2012 fiscal year, and by 19.2% for the first quarter of 2013. In addition, its revenues have grown by 9.88%. on top of this, the company has a healthy profit margin averaging 10% compared to industry average of 7%. The company is also cutting its production costs massively.

Nike therefore is a good buy for any investor. If the company current performance persists, investors can expect a return of between 8 and 15%.

Custom Company Nike Essay

Code: Sample20

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