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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:
- 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).
- Voting Rights
Nike common stockholders have the following voting rights:
- Election of directors
- 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.
- 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
- Dividend Payments
Common shareholders at Nike are entitled to receive dividends when they are declared by the elected board of directors.
- 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.
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
- 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
- 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
