Nike Inc. (NKE)

Short-term (Operating) Activity Analysis

Difficulty level: Basic

Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.

Ratios (Summary)

Nike Inc., short-term (operating) activity ratios

	May 31, 2014	May 31, 2013	May 31, 2012	May 31, 2011	May 31, 2010	May 31, 2009
Turnover Ratios
Inventory turnover	3.89	4.16	4.08	4.18	5.00	4.49
Receivables turnover	8.10	8.12	7.36	6.65	7.18	6.65
Payables turnover	7.95	8.67	8.60	7.73	8.14	10.24
Working capital turnover	3.21	2.61	3.15	2.84	2.50	2.97
Average No. of Days
Average inventory processing period	94	88	90	87	73	81
Add: Average receivable collection period	45	45	50	55	51	55
Operating cycle	139	133	140	142	124	136
Less: Average payables payment period	46	42	42	47	45	36
Cash conversion cycle	93	91	98	95	79	100

Source: Based on data from Nike Inc. Annual Reports

Ratio	Description	The company
Inventory turnover	An activity ratio calculated as cost of goods sold divided by inventory.	Nike Inc.'s inventory turnover improved from 2012 to 2013 but then deteriorated significantly from 2013 to 2014.
Receivables turnover	An activity ratio equal to revenue divided by receivables.	Nike Inc.'s receivables turnover improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014.
Payables turnover	An activity ratio calculated as cost of goods sold divided by payables.	Nike Inc.'s payables turnover increased from 2012 to 2013 but then declined significantly from 2013 to 2014.
Working capital turnover	An activity ratio calculated as revenue divided by working capital.	Nike Inc.'s working capital turnover deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level.
Average inventory processing period	An activity ratio equal to the number of days in the period divided by inventory turnover over the period.	Nike Inc.'s average inventory processing period improved from 2012 to 2013 but then deteriorated significantly from 2013 to 2014.
Average receivable collection period	An activity ratio equal to the number of days in the period divided by receivables turnoverd.
Operating cycle	Equal to average inventory processing period plus average receivables collection period.	Nike Inc.'s operating cycle improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014 not reaching 2012 level.
Average payables payment period	An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period.
Cash conversion cycle	A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period.	Nike Inc.'s cash conversion cycle improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014.

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Inventory Turnover

Nike Inc., inventory turnover calculation, comparison to benchmarks

	May 31, 2014	May 31, 2013	May 31, 2012	May 31, 2011	May 31, 2010	May 31, 2009
Selected Financial Data (USD $ in millions)
Cost of sales	15,353	14,279	13,657	11,354	10,214	10,572
Inventories	3,947	3,434	3,350	2,715	2,041	2,357
Ratio
Inventory turnover¹	3.89	4.16	4.08	4.18	5.00	4.49
Benchmarks
Inventory Turnover, Industry
Consumer Goods	–	7.61	7.46	8.10	7.81	–

Source: Based on data from Nike Inc. Annual Reports

2014 Calculations

¹ Inventory turnover = Cost of sales ÷ Inventories
= 15,353 ÷ 3,947 = 3.89

Ratio	Description	The company
Inventory turnover	An activity ratio calculated as cost of goods sold divided by inventory.	Nike Inc.'s inventory turnover improved from 2012 to 2013 but then deteriorated significantly from 2013 to 2014.

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Receivables Turnover

Nike Inc., receivables turnover calculation, comparison to benchmarks

	May 31, 2014	May 31, 2013	May 31, 2012	May 31, 2011	May 31, 2010	May 31, 2009
Selected Financial Data (USD $ in millions)
Revenues	27,799	25,313	24,128	20,862	19,014	19,176
Accounts receivable, net	3,434	3,117	3,280	3,138	2,650	2,884
Ratio
Receivables turnover¹	8.10	8.12	7.36	6.65	7.18	6.65
Benchmarks
Receivables Turnover, Industry
Consumer Goods	–	13.25	11.91	13.58	12.51	–

Source: Based on data from Nike Inc. Annual Reports

2014 Calculations

¹ Receivables turnover = Revenues ÷ Accounts receivable, net
= 27,799 ÷ 3,434 = 8.10

Ratio	Description	The company
Receivables turnover	An activity ratio equal to revenue divided by receivables.	Nike Inc.'s receivables turnover improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014.

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Payables Turnover

Nike Inc., payables turnover calculation, comparison to benchmarks

	May 31, 2014	May 31, 2013	May 31, 2012	May 31, 2011	May 31, 2010	May 31, 2009
Selected Financial Data (USD $ in millions)
Cost of sales	15,353	14,279	13,657	11,354	10,214	10,572
Accounts payable	1,930	1,646	1,588	1,469	1,255	1,032
Ratio
Payables turnover¹	7.95	8.67	8.60	7.73	8.14	10.24
Benchmarks
Payables Turnover, Industry
Consumer Goods	–	6.75	6.31	7.28	6.79	–

Source: Based on data from Nike Inc. Annual Reports

2014 Calculations

¹ Payables turnover = Cost of sales ÷ Accounts payable
= 15,353 ÷ 1,930 = 7.95

Ratio	Description	The company
Payables turnover	An activity ratio calculated as cost of goods sold divided by payables.	Nike Inc.'s payables turnover increased from 2012 to 2013 but then declined significantly from 2013 to 2014.

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Working Capital Turnover

Nike Inc., working capital turnover calculation, comparison to benchmarks

	May 31, 2014	May 31, 2013	May 31, 2012	May 31, 2011	May 31, 2010	May 31, 2009
Selected Financial Data (USD $ in millions)
Current assets	13,696	13,626	11,531	11,297	10,959	9,734
Less: Current liabilities	5,027	3,926	3,865	3,958	3,364	3,277
Working capital	8,669	9,700	7,666	7,339	7,595	6,457
Revenues	27,799	25,313	24,128	20,862	19,014	19,176
Ratio
Working capital turnover¹	3.21	2.61	3.15	2.84	2.50	2.97
Benchmarks
Working Capital Turnover, Industry
Consumer Goods	–	16.25	16.91	21.02	16.16	–

Source: Based on data from Nike Inc. Annual Reports

2014 Calculations

¹ Working capital turnover = Revenues ÷ Working capital
= 27,799 ÷ 8,669 = 3.21

Ratio	Description	The company
Working capital turnover	An activity ratio calculated as revenue divided by working capital.	Nike Inc.'s working capital turnover deteriorated from 2012 to 2013 but then improved from 2013 to 2014 exceeding 2012 level.

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Average Inventory Processing Period

Nike Inc., average inventory processing period calculation, comparison to benchmarks

	May 31, 2014	May 31, 2013	May 31, 2012	May 31, 2011	May 31, 2010	May 31, 2009
Selected Financial Data
Inventory turnover	3.89	4.16	4.08	4.18	5.00	4.49
Ratio (no. of days)
Average inventory processing period¹	94	88	90	87	73	81
Benchmarks (no. of days)
Average Inventory Processing Period, Industry
Consumer Goods	–	48	49	45	47	–

Source: Based on data from Nike Inc. Annual Reports

2014 Calculations

¹ Average inventory processing period = 365 ÷ Inventory turnover
= 365 ÷ 3.89 = 94

Ratio	Description	The company
Average inventory processing period	An activity ratio equal to the number of days in the period divided by inventory turnover over the period.	Nike Inc.'s average inventory processing period improved from 2012 to 2013 but then deteriorated significantly from 2013 to 2014.

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Average Receivable Collection Period

Nike Inc., average receivable collection period calculation, comparison to benchmarks

	May 31, 2014	May 31, 2013	May 31, 2012	May 31, 2011	May 31, 2010	May 31, 2009
Selected Financial Data
Receivables turnover	8.10	8.12	7.36	6.65	7.18	6.65
Ratio (no. of days)
Average receivable collection period¹	45	45	50	55	51	55
Benchmarks (no. of days)
Average Receivable Collection Period, Industry
Consumer Goods	–	28	31	27	29	–

Source: Based on data from Nike Inc. Annual Reports

2014 Calculations

¹ Average receivable collection period = 365 ÷ Receivables turnover
= 365 ÷ 8.10 = 45

Ratio	Description	The company
Average receivable collection period	An activity ratio equal to the number of days in the period divided by receivables turnoverd.

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Operating Cycle

Nike Inc., operating cycle calculation, comparison to benchmarks

No. of days

	May 31, 2014	May 31, 2013	May 31, 2012	May 31, 2011	May 31, 2010	May 31, 2009
Selected Financial Data
Average inventory processing period	94	88	90	87	73	81
Average receivable collection period	45	45	50	55	51	55
Ratio
Operating cycle¹	139	133	140	142	124	136
Benchmarks
Operating Cycle, Industry
Consumer Goods	–	76	80	72	76	–

Source: Based on data from Nike Inc. Annual Reports

2014 Calculations

¹ Operating cycle = Average inventory processing period + Average receivable collection period
= 94 + 45 = 139

Ratio	Description	The company
Operating cycle	Equal to average inventory processing period plus average receivables collection period.	Nike Inc.'s operating cycle improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014 not reaching 2012 level.

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Average Payables Payment Period

Nike Inc., average payables payment period calculation, comparison to benchmarks

	May 31, 2014	May 31, 2013	May 31, 2012	May 31, 2011	May 31, 2010	May 31, 2009
Selected Financial Data
Payables turnover	7.95	8.67	8.60	7.73	8.14	10.24
Ratio (no. of days)
Average payables payment period¹	46	42	42	47	45	36
Benchmarks (no. of days)
Average Payables Payment Period, Industry
Consumer Goods	–	54	58	50	54	–

Source: Based on data from Nike Inc. Annual Reports

2014 Calculations

¹ Average payables payment period = 365 ÷ Payables turnover
= 365 ÷ 7.95 = 46

Ratio	Description	The company
Average payables payment period	An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period.

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Cash Conversion Cycle

Nike Inc., cash conversion cycle calculation, comparison to benchmarks

No. of days

	May 31, 2014	May 31, 2013	May 31, 2012	May 31, 2011	May 31, 2010	May 31, 2009
Selected Financial Data
Average inventory processing period	94	88	90	87	73	81
Average receivable collection period	45	45	50	55	51	55
Average payables payment period	46	42	42	47	45	36
Ratio
Cash conversion cycle¹	93	91	98	95	79	100
Benchmarks
Cash Conversion Cycle, Industry
Consumer Goods	–	22	22	22	22	–

Source: Based on data from Nike Inc. Annual Reports

2014 Calculations

¹ Cash conversion cycle = Average inventory processing period + Average receivable collection period – Average payables payment period
= 94 + 45 – 46 = 93

Ratio	Description	The company
Cash conversion cycle	A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period.	Nike Inc.'s cash conversion cycle improved from 2012 to 2013 but then slightly deteriorated from 2013 to 2014.

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