Stock Analysis on Net

Nike Inc. (NYSE:NKE)

Financial Reporting Quality: Aggregate Accruals

Microsoft Excel

Earnings can be decomposed into cash and accrual components. The accrual component (aggregate accruals) has been found to have less persistence than the cash component, and therefore (1) earnings with higher accrual component are less persistent than earnings with smaller accrual component, all else equal; and (2) the cash component of earnings should receive a higher weighting evaluating company performance.


Balance-Sheet-Based Accruals Ratio

Nike Inc., balance sheet computation of aggregate accruals

US$ in millions

Microsoft Excel
May 31, 2023 May 31, 2022 May 31, 2021 May 31, 2020 May 31, 2019 May 31, 2018
Operating Assets
Total assets 37,531 40,321 37,740 31,342 23,717 22,536
Less: Cash and equivalents 7,441 8,574 9,889 8,348 4,466 4,249
Less: Short-term investments 3,234 4,423 3,587 439 197 996
Operating assets 26,856 27,324 24,264 22,555 19,054 17,291
Operating Liabilities
Total liabilities 23,527 25,040 24,973 23,287 14,677 12,724
Less: Current portion of long-term debt 500 3 6 6
Less: Notes payable 6 10 2 248 9 336
Less: Long-term debt, excluding current portion 8,927 8,920 9,413 9,406 3,464 3,468
Operating liabilities 14,594 15,610 15,558 13,630 11,198 8,914
 
Net operating assets1 12,262 11,714 8,706 8,925 7,856 8,377
Balance-sheet-based aggregate accruals2 548 3,008 (219) 1,069 (521)
Financial Ratio
Balance-sheet-based accruals ratio3 4.57% 29.46% -2.48% 12.74% -6.42%
Benchmarks
Balance-Sheet-Based Accruals Ratio, Competitors4
Deckers Outdoor Corp. 11.98% 64.83% -38.04% 6.87% -10.87%
lululemon athletica inc. 29.58% 4.99% 48.47% 41.32%
Balance-Sheet-Based Accruals Ratio, Sector
Consumer Durables & Apparel 7.95% 28.09% 1.58% 14.55% 200.00%
Balance-Sheet-Based Accruals Ratio, Industry
Consumer Discretionary 10.97% 11.48% 14.28% 5.02% 200.00%

Based on: 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31), 10-K (reporting date: 2018-05-31).

1 2023 Calculation
Net operating assets = Operating assets – Operating liabilities
= 26,85614,594 = 12,262

2 2023 Calculation
Balance-sheet-based aggregate accruals = Net operating assets2023 – Net operating assets2022
= 12,26211,714 = 548

3 2023 Calculation
Balance-sheet-based accruals ratio = 100 × Balance-sheet-based aggregate accruals ÷ Avg. net operating assets
= 100 × 548 ÷ [(12,262 + 11,714) ÷ 2] = 4.57%

4 Click competitor name to see calculations.

Financial ratio Description The company
Balance-sheet-based accruals ratio Ratio is found by dividing balance-sheet-based aggregate accruals by average net operating assets. Using the balance-sheet-based accruals ratio, Nike Inc. improved earnings quality from 2022 to 2023.

Cash-Flow-Statement-Based Accruals Ratio

Nike Inc., cash flow statement computation of aggregate accruals

US$ in millions

Microsoft Excel
May 31, 2023 May 31, 2022 May 31, 2021 May 31, 2020 May 31, 2019 May 31, 2018
Net income 5,070 6,046 5,727 2,539 4,029 1,933
Less: Cash provided by operations 5,841 5,188 6,657 2,485 5,903 4,955
Less: Cash (used) provided by investing activities 564 (1,524) (3,800) (1,028) (264) 276
Cash-flow-statement-based aggregate accruals (1,335) 2,382 2,870 1,082 (1,610) (3,298)
Financial Ratio
Cash-flow-statement-based accruals ratio1 -11.14% 23.33% 32.56% 12.90% -19.84%
Benchmarks
Cash-Flow-Statement-Based Accruals Ratio, Competitors2
Deckers Outdoor Corp. 8.17% 62.96% -41.41% 4.32% -12.85%
lululemon athletica inc. 26.38% 0.98% 42.45% 35.79%
Cash-Flow-Statement-Based Accruals Ratio, Sector
Consumer Durables & Apparel -5.64% 22.39% 30.52% 14.14% -38.00%
Cash-Flow-Statement-Based Accruals Ratio, Industry
Consumer Discretionary 4.38% 1.95% 10.92% 3.35% -6.48%

Based on: 10-K (reporting date: 2023-05-31), 10-K (reporting date: 2022-05-31), 10-K (reporting date: 2021-05-31), 10-K (reporting date: 2020-05-31), 10-K (reporting date: 2019-05-31), 10-K (reporting date: 2018-05-31).

1 2023 Calculation
Cash-flow-statement-based accruals ratio = 100 × Cash-flow-statement-based aggregate accruals ÷ Avg. net operating assets
= 100 × -1,335 ÷ [(12,262 + 11,714) ÷ 2] = -11.14%

2 Click competitor name to see calculations.

Financial ratio Description The company
Cash-flow-statement-based accruals ratio Ratio is found by dividing cash-flow-statement-based aggregate accruals by average net operating assets. Using the cash-flow-statement-based accruals ratio, Nike Inc. improved earnings quality from 2022 to 2023.