Macroeconomics

Financial Accounting Acct-2010

Financial Analysis of Nike

After reviewing Nike’s 10k, it can be assumed that Nike is in an optimal financial condition relative to that of their industry. Nike exceeds the industry in liquidity, solvency, and profitability. The bottom line is that Nike’s managerial decisions have put the company ahead of the industry and on the track to long term sustainability and growth.

Risks and Strengths:

Nike has a long list of risks, but the two biggest could be considered their image, and its relations to sales and competition, as well as the negative externalities that come along with being a global company. Nike’s brand image is part of its large success; it has intrinsic value to the consumers. Thus, Nike must spend money to protect their image, as well as monitor all of their actions in the global community, so that they do not become guilty by association to a second party that engages in illicit activities. Also, Nike must stay current with the market trends and preferences in consumer tastes, as well as constantly innovate and release new technologies, as a failure to do so may tarnish their idolized brand image and allow the competition, which is already intense, to usurp the industry. However, Nike has the cash and income to afford the high advertising and R&D expenses. Also, Nike sets standards, allegedly, with their supply chain to ensure the working conditions are humane.

Because Nike is a global company, they are subject to the volatility of the global community. This means that changes in exchange rates could lead to increased labor and material costs, or a decrease in exchange rates may out price them in the regional market. Also, Nike may be adversely affected by its retailers, especially if concentrated, in specific geographic areas in which the economy is downturned. There is also the risk of raw materials running short in the local geography of their manufacturing plants, which would increase not...