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Nike's Common Size Income Statement - Excel

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					Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006


Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product


Introduction

This roadmap leads you through the steps to create a valuation tool. With this tool you will be able to reformulate
financial statements in a spreadsheet program, analyze the financial statements using the techniques in the book,
forecast pro forma financial statements, and value firms from those pro forma financial statements. In the end you
will have a valuable tool to carry with you into your professional life and to use for your own personal investing.

Use the tool for:

 Reformulating financial statements (as in Chapters 8-10)
 Analyzing financial statements (as in Chapters 11-12)
 Forecasting and valuation (as in Chapters 13-15)
 Sensitivity analysis and scenario planning (as in Chapters 14, 15, and 18)
 Generating risk profiles (as in Chapters 18-19)

You will find that building your own analysis product is very satisfying. It will help you grasp the concepts behind the
analysis, for the concepts come to life as you make them work for you in practice. And you will discover the points
where your understanding is weak. Off-the-shelf spreadsheet programs that you can use at the press of a button are
available but pressing buttons is dangerous if you are not sure about what is going on inside the program. Better to
develop your own model, following sound principles, and so be assured of the integrity of the product.

Once you have followed the roadmap here, think of adding your own bells and whistles. You can customize the tool
for particular industries. You can add a quality of earnings analysis (as in Chapter 17). You can utilize spreadsheets
features for scenario planning and risk analysis (as in Chapter 18). And you can add a credit analysis (as in Chapter
19).


                                                   Financial Statement Analysis and Security Valuation: Roadmap            Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product


The roadmap: steps for building the product

Chapter 7 gives the form of the financial statements you should work with and the accounting relations
that tie the various parts of the statements together. So read this chapter before beginning.

Start with reformulation of the financial statements within a spreadsheet, following the design in the
book. Then carry out the financial statement analysis to identify the relevant drivers for forecasting.
Next forecast future financial statements and develop a valuation from the forecasts.

Work with the textbook beside you. The most relevant part of the text is Chapter 7 to Chapter 15,
where financial statement analysis and valuation are covered in detail. Nike Inc. serves as an example
of the application techniques described in the chapters. This case utilizes Nike's financials for 1996-
2004.

The steps:

1. Download financial statements

2. Reformulate financial statements
     Statements of shareholders' equity
     Income statements
     Balance sheets
     Statements of cash flows


                                            Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
3. Financial statement analysis
      Ratios based on reformulated financial statements
      Analysis of profitability
      Analysis of growth
      Common size and trend analysis

4. Forecasting and valuation
      Valuation essentials
      Simple forecasting and valuation
      Full-information forecasts and valuation

5. Bells and whistles

The sections in this primer cover these steps in order.




                                           Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 1: Download Financial Statements

The US Securities and Exchange Commission's Electronic Data Gathering, Analysis and Retrieval (SEC
EDGAR) system provides electronic access to companies' financial reports. Several more intelligent
interfaces to the EDGAR database have been developed, which enable the downloading of the individual
financial statements directly to a spreadsheet program like Microsoft Excel. Three of these popular
interfaces are:

   1. EDGARscan developed by PricewaterhouseCoopers at http://edgarscan.pwcglobal.com;
   2. 10k Wizard at http://www.10kwizard.com;
   3. Edgar Online at http://www.edgar-online.com.

All these websites allow searches for companies using either company name or its ticker. You can then
select the reports you need. Most of the time, you need the annual 10K reports that contain annual
financial statements. You can find the financial statements within the annual 10K reports and will see
instructions on how to extract them into Excel files. As each annual report contains financial statements for
the year and one or two years before, you will need to go back to another annual reports of the company to
get financial statements for a longer period. Individual spreadsheet files can then be merged into the
format you like.




                                           Financial Statement Analysis and Security Valuation: Roadmap         Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 2: Reformulation

Analysis begins with the reformulation of financial statements. Reformulation readies the statements for
analysis within a spreadsheet. The aim is to:

   Separate operating and financing items in the statements

   Bring additional information into the statements from footnotes and elsewhere. The financial statements
   aggregate a lot of information (particularly the income statements). Break down the aggregation to give
   more detail.

   Allocate taxes in the income statement to operating and financing activities

   Distinguish different components of income such as core operating income from sales, other core
   operating income, and unusual items

Before beginning, make sure you understand the reformulation template in Chapter 7 of the book. Chapters
7-10 cover the rules and principles for reformulation.

Spreadsheet programs like Excel allows you to use either the simple copy-and-paste method or the formula
method to manipulate the financial statements when doing the reformulation.

In the next section, the reformulated statements of shareholders' equity, balance sheets, income
statements, and cash flow statements for Nike Inc. for 1996-2004 are given next to the original statements.
Note the following points on the reformulation:



                                           Financial Statement Analysis and Security Valuation: Roadmap       Stephen H. Penman 2003
(a) Unearned stock compensation that arose from issuing shares to employees in fiscal year 2004 is an
operating asset, so is moved from the statement of shareholders' equity to the balance sheet. This is like
prepaid wages and is amortized to the income statement over a service period.

(b) Cash and cash equivalents in the balance sheets are split between a portion for operating needs and
investment of excess cash in financial assets

(c) Some additional expense items have been added to the income statements from the footnotes.

(d) Core and unusual operating items have been distinguished in the income statements.

(e) The tax allocation in the income statements involves not only allocating taxes between operating and
financing activities but also between core operating income and the restructuring charges. Note that foreign
currency translation gains and losses are already after tax.




                                          Financial Statement Analysis and Security Valuation: Roadmap         Stephen H. Penman 2003
Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 2: Reformulation
2.1. Reformulation of the Statement of Shareholders' Equity


NIKE INC. STATEMENT OF SHAREHOLDERS' EQUITY
(in millions)

                                                                   COMMON STOCK                     CAPITAL IN              ACCUMULATED
                                                                CLASS A       CLASS B               EXCESS OF    UNEARNED         OTHER
                                                                                                       STATED       STOCK COMPREHENSIVE RETAINED
in millions                                                SHARES AMOUNT             SHARES AMOUNT      VALUE COMPENSATION       INCOME EARNINGS     TOTAL
BALANCE AT MAY 31, 1995                                       25.9   $0.2               45.6   $2.7     $122.4        $0.0          $1.6  $1,837.8 $1,964.7
Stock options exercised                                                                   0.7             32.8                                         32.8
Conversion to Class B Common                                   (0.7)                      0.7                                                            -
Repurchase of Class B Common                                                             (0.2)            (0.4)                              (18.3)   (18.7)
Two-for-one Stock Split October 30, 1995                       25.9                     45.7
Dividends on Common Stock                                                                                                                    (82.5)   (82.5)
Comprehensive Income:
   Net income                                                                                                                                    553.2       553.2
   Translation of statements of non-U.S. operations                                                                                    (18.1)                (18.1)
Comprehensive Income                                                                                                                   (18.1)     535.1      535.1
BALANCE AT MAY 31, 1996                                        51.1           0.2          92.5            2.7           154.8     -   (16.5)   2,290.2    2,431.4
Stock options exercised                                                                     1.5                           55.8                                55.8
Conversion to Class B Common                                   (0.3)                        0.3                                                                 -
Two-for-one Stock Split October 23, 1996                       50.9                        93.3
Dividends on Common Stock                                                                                                                        (108.2)    (108.2)
Net income for the month ended May 1996, due to the
change in fiscal year-end of certain non-U.S. operations                                                                                           (4.1)       (4.1)
Comprehensive Income:
  Net income                                                                                                                                     795.8       795.8
  Translation of statements of non-U.S. operations                                                                                     (14.8)                (14.8)
Comprehensive Income                                                                                                                   (14.8)     791.7      781.0
BALANCE AT MAY 31, 1997                                       101.7           0.2        187.6             2.7           210.6     -   (31.3)   2,973.7    3,155.9
Stock options exercised                                                                    2.1                            57.2                                57.2
Conversion to Class B Common Stock                             (0.2)                       0.2
Repurchase of Class B Common Stock                                                        (4.4)                            (5.3)                 (197.0)    (202.3)
Dividends on Common Stock                                                                                                                        (132.9)    (132.9)
Comprehensive income:
  Net income                                                                                                                                     399.6       399.6




                                                                   Financial Statement Analysis and Security Valuation: Roadmap                  Stephen H. Penman 2003
  Foreign currency translation (net of tax benefit of $3.7)                                                                                   (15.9)                (15.9)
Comprehensive income                                                                                                                          (15.9)     399.6      383.7
BALANCE AT MAY 31, 1998                                        101.5           0.2        185.5             2.7           262.5        -      (47.2)   3,043.4    3,261.6
Stock options exercised                                                                     2.7                            80.5                                      80.5
Conversion to Class B Common Stock                              (0.8)                       0.8
Repurchase of Class B Common Stock                                                         (7.4)                            (8.9)                       (292.7)    (301.6)
Dividends on Common Stock                                                                                                                               (135.6)    (135.6)
Comprehensive income:
  Net income                                                                                                                                            451.4       451.4
  Foreign currency translation (net of tax benefit of $12.5)                                                                                  (21.7)                (21.7)
Comprehensive income                                                                                                                          (21.7)     451.4      429.7
BALANCE AT MAY 31, 1999                                        100.7           0.2        181.6             2.7           334.1        -      (68.9)   3,066.5    3,334.6
Stock options exercised                                                                     1.3                            38.7                                      38.7
Conversion to Class B Common                                    (1.5)                       1.5
Repurchase of Class B Common                                                              (14.5)           (0.1)           (17.3)                       (627.1)    (644.5)
Dividends on Common Stock                                                                                                                               (131.5)    (131.5)
Issuance of shares to employees                                                               0.5                           13.5    (13.5)                             -
Amortization of unearned compensation                                                                                                 1.8                             1.8

Comprehensive income:
  Net income                                                                                                                                            579.1       579.1
  Foreign currency translation                                                                                                                (42.2)                (42.2)
Comprehensive Income                                                                                                                          (42.2)     579.1      536.9
BALANCE AT MAY 31, 2000                                         99.2           0.2        170.4             2.6           369.0     (11.7)   (111.1)   2,887.0    3,136.0
Stock options exercised                                                                     2.9                            91.0                                      91.0
Conversion to Class B Common                                    (0.1)                       0.1                                                                        -
Repurchase of Class B Common                                                               (4.0)                            (4.8)                       (152.2)    (157.0)
Dividends on Common Stock                                                                                                                               (129.6)    (129.6)
Issuance of shares to employees                                                               0.1                            6.7     (6.7)                             -
Amortization of unearned compensation                                                                                                 7.3                             7.3
Forfeiture of shares from employees                                                                                         (2.5)     1.2                 (0.6)      (1.9)

Comprehensive income:
  Net income                                                                                                                                            589.7       589.7
  Foreign currency translation                                                                                                                (41.0)                (41.0)
Comprehensive Income                                                                                                                          (41.0)     589.7      548.7
BALANCE AT MAY 31, 2001                                         99.1           0.2        169.5             2.6           459.4      (9.9)   (152.1)   3,194.3    3,494.5
Stock options exercised                                                                     1.7                            72.9                                      72.9
Conversion to Class B Common                                    (1.0)                       1.0
Repurchase of Class B Common                                                               (4.3)                            (5.2)                       (232.5)    (237.7)
Dividends on Common Stock                                                                                                                               (128.6)    (128.6)
Issuance of shares to employees                                                               0.2                           13.2     (1.9)                           11.3
Amortization of unearned compensation                                                                                                 6.5                             6.5
Forfeiture of shares from employees                                                          (0.1)                          (1.6)     0.2                 (1.5)      (2.9)

Comprehensive income:



                                                                    Financial Statement Analysis and Security Valuation: Roadmap                        Stephen H. Penman 2003
  Net income                                                                                                                                    663.3       663.3
  Foreign currency translation                                                                                                         (1.5)                 (1.5)
  Cumulative effect of change in accounting principle                                                                                  56.8                  56.8
  Adjustment for fair value of hedge derivatives                                                                                      (95.6)                (95.6)
Comprehensive Income                                                                                                                  (40.3)     663.3      623.0
BALANCE AT MAY 31, 2002                                 98.1            0.2        168.0             2.6           538.7     (5.1)   (192.4)   3,495.0    3,839.0
Stock options exercised                                                              1.3                            48.2                                     48.2
Conversion to Class B Common                             (0.3)                       0.3
Repurchase of Class B Common                                                        (4.0)                            (4.8)                      (186.2)    (191.0)
Dividends on Common Stock                                                                                                                       (142.7)    (142.7)
Issuance of shares to employees                                                        0.3                            9.6    (0.2)                            9.4
Amortization of unearned compensation                                                                                         3.7                             3.7
Forfeiture of shares from employees                                                   (0.1)                          (2.7)    1.0                 (0.9)      (2.6)

Comprehensive income:
  Net income                                                                                                                                    474.0       474.0
  Foreign currency translation                                                                                                        127.4                 127.4
  Adjustment for fair value of hedge derivatives                                                                                     (174.7)               (174.7)
Comprehensive Income                                                                                                                  (47.3)     474.0      426.7
BALANCE AT MAY 31, 2003                                 97.8            0.2        165.8             2.6           589.0     (0.6)   (239.7)   3,639.2    3,990.7
Stock options exercised                                                              5.5                           284.9                                    284.9
Conversion to Class B Common                            (20.2)         (0.1)        20.2             0.1
Repurchase of Class B Common                                                        (6.4)                            (7.6)                      (406.7)    (414.3)
Dividends on Common Stock                                                                                                                       (194.9)    (194.9)
Issuance of shares to employees                                                        0.4                           23.2    (7.5)                           15.7
Amortization of unearned compensation                                                                                         2.6                             2.6
Forfeiture of shares from employees                                                                                  (1.7)                        (0.3)      (2.0)

Comprehensive income:
  Net income                                                                                                                                    945.6       945.6
  Foreign currency translation                                                                                                        27.5                   27.5
  Adjustment for fair value of hedge derivatives                                                                                     125.9                  125.9
Comprehensive Income                                                                                                                 153.4       945.6    1,099.0
BALANCE AT MAY 31, 2004                                 77.6            0.1        185.5             2.7           887.8     (5.5)   (86.3)    3,982.9    4,781.7




                                                             Financial Statement Analysis and Security Valuation: Roadmap                       Stephen H. Penman 2003
(in millions)




Balance at May 31, 1995                               $1,964.7
Transactions with Shareholders
  Stock issues                         32.8
  Stock repurchases                   (18.7)
  Common dividends                    (82.5)              (68.4)
Comprehensive income
  Net income                         553.2
  Other comprehensive income         (18.1)
  Loss on option exercise        -
    Tax benefit                  -       -
  Preferred dividends                    -                535.1
Balance at May 31, 1996                                 2,431.4
Transactions with Shareholders
  Stock issues                        55.8
  Stock repurchases                     -

  Common dividends                   (108.2)              (52.4)
Comprehensive income
  Net income                         795.8
  Other comprehensive income         (18.9)
  Loss on option exercise        -
    Tax benefit                  -       -
  Preferred dividends                    -                776.9
Balance at May 31, 1997                                 3,155.9
Transactions with Shareholders
  Stock issues                         57.2
  Stock repurchases                  (202.3)
  Common dividends                   (132.9)             (278.0)
Comprehensive income
  Net income                         399.6
  Other comprehensive income         (15.9)
  Loss on option exercise        -
    Tax benefit                  -       -
  Preferred dividends                    -                383.7
Balance at May 31, 1998                                 3,261.6
Transactions with Shareholders
  Stock issues                        134.3
  Stock repurchases                  (301.6)
  Common dividends                   (135.6)             (302.9)



                                     Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
Comprehensive income
  Net income                              451.4
  Other comprehensive income              (21.7)
  Loss on option exercise         87.2
    Tax benefit                  (33.4)    (53.8)
  Preferred dividends                         -                375.9
Balance at May 31, 1999                                      3,334.6
Transactions with Shareholders
  Stock issues                              77.2
  Stock repurchases                       (644.5)
  Common dividends                        (131.5)             (698.8)
Comprehensive income
  Net income                              579.1
  Other comprehensive income              (42.2)
  Loss on option exercise         39.9
    Tax benefit                  (14.9)    (25.0)
  Preferred dividends                         -                511.9
Balance at May 31, 2000                                      3,147.7
Transactions with Shareholders
  Stock issues                             151.9
  Stock repurchases                       (160.1)
  Common dividends                        (129.6)             (137.8)
Comprehensive income
  Net income                              589.7
  Other comprehensive income              (41.0)
  Loss on option exercise         86.6
    Tax benefit                  (32.4)    (54.2)
  Preferred dividends                         -                494.5
Balance at May 31, 2001                                      3,504.4
Transactions with Shareholders
  Stock issues                             109.6
  Stock repurchases                       (240.8)
  Common dividends                        (128.6)             (259.8)
Comprehensive income
  Net income                              663.3
  Other comprehensive income              (40.3)
  Loss on option exercise         37.4
    Tax benefit                  (13.9)    (23.5)
  Preferred dividends                         -                599.5
Balance at May 31, 2002                                      3,844.1




                                          Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 2: Reformulation
2.2. Reformulation of Balance Sheets


NIKE INC. BALANCE SHEETS
(in millions)

                                                 CLASSIFICATION   2004/05/31    2003/05/31    2002/05/31    2001/05/31    2000/05/31
ASSETS
Current Assets:
  Cash and equivalents                              OA & FA          $828.0        $634.0        $575.5        $304.0        $254.3
  Short-term investments                              FA               400.8            -             -             -             -
  Accounts receivable, net                            OA             2,120.2       2,083.9       1,804.1       1,621.4       1,567.2
  Inventories                                         OA             1,633.6       1,514.9       1,373.8       1,424.1       1,446.0
  Deferred income taxes                               OA               165.0         221.8         140.8         113.3         111.5
  Income taxes receivable                             OA                  -             -             -             -            2.2
  Prepaid expenses and other current assets           OA               364.4         332.5         260.5         162.5         215.2
    Total current assets                                             5,512.0       4,787.1       4,154.7       3,625.3       3,596.4
Property, plant and equipment, net                    OA             1,586.9       1,620.8       1,614.5       1,618.8       1,583.4
Goodwill                                              OA               135.4          65.6         232.7         178.7         195.7
Identifiable intangible assets                        OA               366.3         118.2         206.0         218.6         215.2
Deferred income taxes and other assets                OA               291.0         229.4         232.1         178.2         266.2
    Total assets                                                     7,891.6       6,821.1       6,440.0       5,819.6       5,856.9
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Current portion of long-term debt                   FL                 6.6         205.7          55.3           5.4          50.1
  Notes payable                                       FL               146.0          75.4         425.2         855.3         924.2
  Accounts payable                                    OL               763.8         572.7         504.4         432.0         543.8
  Accrued liabilities                                 OL               974.4       1,036.2         765.3         472.1         621.9
  Income taxes payable                                OL               118.2         130.6          83.0          21.9            -
    Total current liabilities                                        2,009.0       2,020.6       1,833.2       1,786.7       2,140.0
Long-term debt                                        FL               682.4         551.6         625.9         435.9         470.3
Deferred income taxes and other liabilities           OL               418.2         257.9         141.6         102.2         110.3
Commitments and contingencies                         OL                  -             -             -             -             -
Redeemable Preferred Stock                            FL                 0.3           0.3           0.3           0.3           0.3
Shareholders' Equity:
  Common Stock at stated value:
    Class A convertible                                                  0.1           0.2           0.2           0.2           0.2
    Class B                                                              2.7           2.6           2.6           2.6           2.6
  Capital in excess of stated value                                    887.8         589.0         538.7         459.4         369.0
  Unearned stock compensation                         OA                (5.5)         (0.6)         (5.1)         (9.9)        (11.7)
  Accumulated other comprehensive income                               (86.3)       (239.7)       (192.4)       (152.1)       (111.1)
  Retained earnings                                                  3,982.9       3,639.2       3,495.0       3,194.3       2,887.0
    Total shareholders' equity                        CSE            4,781.7       3,990.7       3,839.0       3,494.5       3,136.0
    Total liabilities and shareholders' equity                       7,891.6       6,821.1       6,440.0       5,819.6       5,856.9




                                                                       Financial Statement Analysis and Valuation: Roadmap              Stephen H. Penman 2001
                           NIKE INC. REFORMULATED BALANCE SHEETS
                           (in millions)

1997/05/31   1996/05/31                                                                  2004/05/31
                           Net operating assets (NOA):
                           Operating assets
   $445.4       $262.1       Cash and equivalents                                             $61.3
        -            -       Accounts receivable, less allowance for doubtful accounts      2,120.2
   1,754.1      1,346.1      Inventories                                                    1,633.6
   1,338.6        931.2     Prepaid expenses and other current assets                         369.9
     135.7         93.1      Property, plant and equipment, net                             1,586.9
        -            -       Goodwill                                                         135.4
     157.1         94.4      Identifiable intangible assets                                   366.3
   3,830.9      2,726.9      Deferred income taxes and other assets                           456.0
     922.4        643.5    Total operating assets                                           6,729.6
     245.0        265.2    Operating liabilities
     219.2        209.6      Accounts payable - non-interest bearing                          719.9
     143.7        106.4      Accrued liabilities                                              921.8
   5,361.2      3,951.6      Income taxes payable                                             118.2
                             Deferred income taxes and other liabilities                      418.2
                           Total operating liabilities                                      2,178.1
       2.2          7.3    Net operating assets (NOA):                                      4,551.5
     553.2        445.1
     687.1        455.0    Net financial assets (obligations) (NFA/NFO):
     570.5        480.4    Financial assets
      53.9         79.3       Cash equivalent                                                 766.7
   1,866.9      1,467.1      Short-term investments                                           400.8
     296.0          9.6    Total financial assets                                           1,167.5
      42.1         43.3    Financial liabilities
        -            -        Current portion of long-term debt                                6.6
       0.3          0.3       Notes payable                                                  146.0
                              Accounts payable - interest bearing                              43.9
                              Long-term debt                                                 682.4
      0.2           0.2       Redeemable Preferred Stock                                       0.3
      2.7           2.7    Total financial liabilities                                       879.2
    210.6         154.8    Net financial assets (obligations) (NFA/NFO)                      288.3
       -             -
    (31.3)        (16.5)   Common Shareholders' Equity (CSE)                                4,839.8




                                                  Financial Statement Analysis and Valuation: Roadmap   Stephen H. Penman 2001
for the year ended                                 2004/05/31         2003/05/31         2002/05/31
Operating revenue                                    $12,253.1          $10,697.0          $9,893.0
  Cost of sales                                         7,001.4           6,313.6           6,004.7
Gross margin                                            5,251.7           4,383.4           3,888.3
Operating expenses
  Administrative expenses                                2,312.1            1,981.3           1,803.5
  Advertising                                            1,377.9            1,166.8           1,027.9
  Amortization of identifiable intangibles                  12.0                3.6               2.6
  Other expense, net                                        74.7               79.9               3.0
Total operating expenses                                 3,776.7            3,231.6           2,837.0

Core operating income (before tax)                       1,475.0            1,151.8           1,051.3
Tax on operating income

 Tax as reported                                           504.4              382.9             349.0

 Tax on other operating income                                -                  -                 -
 Tax benefit from net interest expenses                      9.3               10.8              12.6
Total tax on operating income                              513.7              393.7             361.6
Core operating income (after tax)                          961.3              758.1             689.7
Other operating income (expense) (net of tax)
 Restructuring charge, net                                    -                  -                 -
 Tax on restructuring charge                                  -                  -                 -
 Restructuring charge after tax                               -                  -                 -
 Foreign currency translation                               27.5              127.4              (1.5)
 Adjustment for fair value of hedge derivatives            125.9             (174.7)            (95.6)
 Loss on option exercise                                   (80.0)             (20.8)            (23.5)
 Cumulative effect of accounting change                       -              (266.1)             51.8
Total other operating income (expense)                      73.4             (334.2)            (68.8)
Operating income after tax                               1,034.7              423.9             620.9

Net financial expense (NFE)
 Interest expense                                             40.3              42.9              47.6
 Interest income                                            (15.3)             (14.1)            (13.6)
Net interest expense before tax                              25.0               28.8              34.0
Tax benefit of debt                                          (9.3)             (10.8)            (12.6)
Net interest after tax                                       15.7               18.0              21.4



                                                  Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
Preferred dividends                                       -                  -                -
Net financial expense (NFE)                             15.7               18.0             21.4

Comprehensive income (available to common)          1,019.0              405.9             599.5




                                             Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 2: Reformulation
2.4. Reformulation of the Statement of Cash Flows


NIKE INC. STATEMENT OF CASH FLOWS
in millions

year ended                                            2004/05/31     2003/05/31     2002/05/31    2001/05/31     2000/05/31
Cash provided (used) by operations:
 Net income                                                $945.6         $474.0        $663.3         $589.7        $579.1
 Income charges (credits) not affecting cash:
   Cumulative effect of accounting change                      -           266.1           5.0             -             -
   Depreciation                                             252.1          239.3         223.5          197.4         188.0
   Non-cash portion of restructuring charge                    -              -             -              -             -
   Deferred income taxes                                     19.0           50.4          15.2           79.8          36.8
   Amortization and other                                    58.3           23.2          48.1           16.7          35.6
 Income tax benefit from exercise of stock options           47.2           12.5          13.9           32.4            -

  Changes in certain working capital components:
   Increase in inventories                                   82.5         (136.3)         55.4          (16.7)       (275.4)
   Decrease (increase) in accounts receivable               (55.9)        (102.8)       (135.2)        (141.4)        (27.1)
   Decrease (increase) in other current assets and
income taxes receivable                                    (103.5)          60.9          16.9           78.0          65.6
   (Decrease) increase in accounts payable,
accrued liabilities and income taxes payable                269.1           30.1         175.4         (179.4)        157.3
  Cash provided by operations                             1,514.4          917.4       1,081.5          656.5         759.9
Cash provided (used) by investing activities:
  Purchases of short-term investments                      (400.8)            -             -              -             -
  Additions to property, plant and equipment               (213.9)        (185.9)       (282.8)        (317.6)       (419.9)
  Disposals of property, plant and equipment                 11.6           14.8          15.6           12.7          25.3



                                                 Financial Statement Analysis and Valuation: Roadmap                           Stephen H. Penman 2001
 Increase in other assets                                      (53.4)         (46.3)       (39.1)          (42.5)    (51.3)
 Increase (decrease) in other liabilities                       (0.9)           1.8          3.5             5.1       5.9
 Acquisition of subsidiary, net of cash acquired              (289.1)            -            -               -         -
 Cash used by investing activities                            (946.5)        (215.6)      (302.8)         (342.3)   (440.0)


Cash provided (used) by financing activities:
Additions to long-term debt                                    153.8           90.4        329.9              -        0.1
Reductions in long-term debt including current
portion                                                       (206.6)         (55.9)       (80.3)          (50.3)     (1.8)
(Decrease) increase in notes payable                            (0.3)        (349.8)      (431.5)          (68.9)    505.1
Proceeds from exercise of options                              253.6           44.2         59.5            56.0      23.9
Repurchase of stock                                               -          (196.3)      (226.9)         (157.0)   (646.3)
Dividends--common and preferred                               (419.8)        (137.8)      (128.9)         (129.7)   (133.1)
 Cash (used) provided by financing activities                 (179.2)        (605.2)      (478.2)         (349.9)   (252.1)
Effect of exchange rate changes on cash                       (398.5)         (38.1)       (29.0)           85.4     (11.6)
Effect of May 1996 cash flow activity for certain
subsidiaries                                                    24.6             -            -               -         -
Net (decrease) increase in cash and equivalents                194.0           58.5        271.5            49.7      56.2
Cash and equivalents, beginning of year                        634.0          575.5        304.0           254.3     198.1
Cash and equivalents, end of year                              828.0         $634.0       $575.5          $304.0    $254.3
Supplemental disclosure of cash flow
information:
 Cash paid during the year for:
   Interest (net of amount capitalized)                        $37.8          $38.9        $54.2           $68.5     $45.0
   Income taxes                                                418.6          330.2        262.0           173.1     221.1
Non-cash investing and financing activity:
Assumption of long-term debt to acquire property,
plant, and equipment                                               -           $0.0         $0.0            $0.0    $108.9




                                                    Financial Statement Analysis and Valuation: Roadmap                       Stephen H. Penman 2001
Nike: Calculation of Free Cash Flow Using Reformulated Statements

Year ended May 31, 2004

Method 1:
C - I = OI - change in NOA

Operating income, 2004                                        1,034.7
NOA, 2004                                4,551.5
NOA, 2003                                4,330.3               221.2


Free cash flow                                                 813.5




Method 2:

C - I = NFE - change in NFO + d

NFE, 2004                                                        15.7
NFO, 2004                                 (288.3)
NFO, 2003                                  302.1               (590.4)
Net dividend, 2004                                              207.4

Free cash flow                                                 813.5




                                            Financial Statement Analysis and Valuation: Roadmap   Stephen H. Penman 2001
     Financial Statement Analysis & Security Valuation (Third Edition)
Financial Statement Analysis & Security Valuation
     Stephen H. Penman
Stephen H. Penman 2003 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product


Step 3: Financial Statement Analysis

3.1. Financial Statement Ratios

With the financial statements reformulated, analysis can begin. Ratios are calculated from the
reformulated statements in Step 2. The analysis follows the following order. First, calculate ratios from
the reformulated statements of shareholders' equity. Second, derive ratios from reformulated income
statements and balance sheets. Then analyze the profitability and growth of the firm.

Note: Calculations in the Nike example are done using formulas. To see how the ratios and other
numbers are computed, click on the cell and view the underlying formulas (with cell references).


Ratios based on reformulated statements of shareholders' equity

 No.                     Ratios                          Definition                                       Formula               For Nike 2004    For Nike 2003
  1    Dividend payout ratio                                                              Div./Comprehensive income                     17.59%            26.07%
                                                                                          (Div. + Stock repurchases) /
  2    Total payout ratio                                                                                                               58.44%            74.01%
                                                                                          Comprehensive income
  3    Dividends-to-Book Value                                                            Div./(BV of CSE+Div.)                          3.57%             2.56%
                                                                                          (Div. + Stock repurchases) / (BV of
  4    Total Payout-to-Book Value                                                                                                       10.96%             6.94%
                                                                                          CSE + Div. + Stock repurchases)
  5    Retention ratio                                                                    1 - Dividends payout ratio                    82.41%            73.93%
                                                                                          Comprehensive income / [(CSEt +
  6    ROCE                               Return on Common Equity                                                                       22.98%            10.31%
                                                                                          CSEt-1)/2]
                                                                                          Net transactions with shareholders
  7    Net investment rate                                                                                                               5.15%             5.77%
                                                                                          / Beginning BV of CSE
  8    Growth rate of CSE                 Growth in Common Shareholders' Equity           Change in CSE / Beginning CSE                 20.15%             4.79%




                                                         Financial Statement Analysis and Security Valuation: Roadmap                                 Stephen H. Penman 2003
Ratios based on reformulated balance sheets and income statements

 No.                     Ratios                                      Definition                                    Formula                  For Nike 2004    For Nike 2003
                                                                                                      Operating income after tax /
  9    RNOA                                         Return on Net Operating Assets                                                                  23.30%             9.64%
                                                                                                      [(NOAt+NOAt-1)/2]
                                                                                                      Core operating income after tax /
 10    Core RNOA                                    Core Return on Net Operating Assets                                                             21.65%            17.25%
                                                                                                      [(NOAt+NOAt-1)/2]

 11    NBC                                          Net Borrowing Cost                                NFE after tax / [(NFOt+NFOt-1)/2]            228.72%             3.92%

 12    PM                                           Operating profit margin                           OI after tax / Sales                           8.44%             3.96%

 13    Net Comprehensive Profit Margin                                                                Comprehensive income / Sales                   8.32%             3.79%

                                                                                                      Operating liability / Net operating
 14    OLLEV                                        Operating Liability Leverage                                                                    46.04%            38.32%
                                                                                                      assets
 15    Capitalization ratio                                                                           NOA/CSE                                       94.04%          107.50%

 16    FLEV                                         Financial Liability Leverage                      (NFOt+NFOt-1)/(CSEt+CSEt-1)                    0.16%            11.67%

 17    Short-term borrowing rate (after tax)                                                          Short-term borrowing rate*(1-T)                3.15%             3.15%

 18    SPREAD                                                                                         RNOA-NBC                                    -205.42%             5.73%
                                                                                                      (Operating income after tax +
 19    ROOA                                         Return on Operating Assets                        Implicit Interest after tax)/                 16.95%             7.84%
                                                                                                      [(OAt+OAt-1)/2]
                                                                                                      ROOA - Short-term Borrowing Rate
 20    OLSPREAD                                     Operating Liability Leverage Spread                                                             13.80%             4.69%
                                                                                                      (after tax)
 21    ATO                                          Asset Turnover                                    Sales / NOA                                     2.76              2.43
                                                                                                      Change in sales / Prior period's
 22    Growth rate in sales                                                                                                                         14.55%             8.13%
                                                                                                      sales
                                                                                                      Change in OI after tax / Prior
 23    Growth rate in operating income                                                                                                             144.11%           -31.73%
                                                                                                      period's OI
 24    Growth in NOA                                                                                  Change in NOA / Beginning NOA                  5.11%            -2.93%

 25    Growth in CSE                                                                                  Change in CSE / Beginning CSE                 20.15%             4.79%
       Implicit interest on operating liabilities                                                     Short-term borrowing rate (after
 26                                                                                                                                                  64.40              53.06
       after tax                                                                                      tax) * Operating liabilities
                                                                                                      [Net income+Interest Expense
 27    ROA                                          Return on Assets                                                                                13.07%             7.55%
                                                                                                      (after tax)]/Average total assets



                                                                     Financial Statement Analysis and Security Valuation: Roadmap                                 Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product


Step 3: Financial Statement Analysis

3.3. Analysis of Profitability and Growth

NIKE, year ended May 31, 2004
A systematic analysis of profitability

           Summary measure                           ROCE                                                       RNOA
                                                     22.98%                                                     23.30%

           First level breakdown          RNOA+[FLEV*(RNOA-NBC)]                                 ROOA+(OLLEV*OLSPREAD)
                                                  22.98%                                                     23.30%

           Second level breakdown              RNOA = PM*ATO
                                                PM = OI / Sales                    ATO = Sales / NOA
                                                    8.44%                                2.76

           Third level breakdown
           individual revenue and expense ratios - seen from common size analysis




                                                 Financial Statement Analysis and Security Valuation: Roadmap            Stephen H. Penman 2003
A systematic analysis of growth

          NIKE Inc. Summary information from balance sheets and income statements
                                                              2004                                      2003      2002      2001       2000
          Average NOA                                      4,440.9                                   4,395.7   4,518.1   4,509.2    4,264.0
          Average NFO                                          6.9                                     459.5     843.9   1,183.1    1,022.9
          Average CSE                                      4,434.0                                   3,936.2   3,674.3   3,326.1    3,241.2

          Sales                                                12,253.1                     10,697.0          9,893.0     9,488.8    8,995.1
          Operating income                                       1,034.7                       423.9            620.9       522.5      531.5
          Comprehensive income                                   1,019.0                       405.9            599.5       494.5      511.9
          Net financial expense                                     15.7                        18.0             21.4        28.0       19.7
          ROCE                                                    22.98%                      10.31%           16.32%      14.87%     15.79%
          RNOA                                                    23.30%                       9.64%           13.74%      11.59%     12.47%
          NBC                                                   228.72%                        3.92%            2.53%       2.37%      1.92%
          PM                                                       8.44%                       3.96%            6.28%       5.51%      5.91%
          Core sales PM                                            7.85%                       7.09%            6.97%       6.51%      6.64%
          ATO                                                   275.92%                      243.35%         218.96%     210.43%    210.95%
          FLEV                                                     0.16%                      11.67%           22.97%      35.57%     31.56%
          SPREAD                                               -205.42%                        5.73%           11.21%       9.22%     10.54%
          * Balance sheet numbers are averages for the year, except those for 1996, which are year-end numbers.




                                                Financial Statement Analysis and Security Valuation: Roadmap                    Stephen H. Penman 2003
Nike Residual Earnings Growth: 1996 - 2004
          Residual earnings          [ROCEt - Cost of Equity Capitalt]*CSEt

                                                                     2004                              2003       2002     2001      2000
          Revenue growth rate                                      14.55%                             8.13%      4.26%    5.49%     2.49%
          Growth in CSE                                            12.65%                             7.13%     10.47%    2.62%    -1.73%
          Growth in comprehensive income                          151.06%                           -32.30%     21.25%   -3.40%    36.17%
          Residual earnings (at cost of
                                                                    642.09                              71.29   287.22   211.75    236.36
          equity of 8.50%)

                               For change in residual earnings from 2003 to 2004
           Change in residual earnings change due to change in ROCE        Change due to change in
                        =                     over cost of equity +             common equity
                     570.79                          498.70                        72.09




                                                Financial Statement Analysis and Security Valuation: Roadmap                  Stephen H. Penman 2003
A systematic analysis of the change in ROCE


Analysis of change in RNOA

Level 1: Distinguish core and unusual components of RNOA
                      RNOA =                    Core OI / NOA +                          UI / NOA
                      23.30%                        21.65%                                1.65%


                                                                                                                                Change
                                                                                                               Change due to     due to
                                         Change in core sales PM at            Change due to change in
Level 2:        Change in RNOA =                                                                               change in other change in
                                        previous asset turnover level +            asset turnover +
                                                                                                                core income + unusual
                                                                                                                                  items
                      13.66%                         1.85%                                2.55%                      0           9.26%


Analysis of change in financing

Level 1:   Change in financing
              Change in SPREAD                 Change in FLEV
                    -211.15%                      -11.52%

Level 2:   Change in SPREAD
              Change in Core NBC           Unusual financing items




                                                Financial Statement Analysis and Security Valuation: Roadmap                             Stephen H. Penman 2003
Analysis of changes in ROCE

                                                                           Change due to change in           Change due to
                                                                          spread at previous level of          change in
               Change in ROCE =       Change in RNOA                    +
                                                                          financial leverage                    financial
                                                                                        +                       leverage
                    12.67%                        13.66%                             -24.65%                     23.66%




A systematic analysis of the change in investment (CSE)

                Change in CSE =              Change in NOA -                       Change in NFO
                    811.6                         221.2                                590.4

                    NOA =                      Sales / ATO
                    4,440.9                     4,440.9

                                      Change due to change in sales          Change due to change in           Change in
               Change in CSE =          at previous level of asset         asset turnover                       financial
                                                turnover +                               -                      leverage
                                        (Change in Sales / ATOt-1)          (Sales*(change in 1/ATOt))       Change in NFO
                     497.9                        639.4                               -594.2                      -452.6




                                              Financial Statement Analysis and Security Valuation: Roadmap                   Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product


Step 3: Financial Statement Analysis

3.3. Common size and trend analysis


Common size and trend analysis helps understand the business and how it changes over time. It is a
useful step in financial statement analysis in preparation for full-information forecasting and valuation.


Nike Inc.
Common size analysis of income statements


for the year ended                                     2004/05/31 2003/05/31 2002/05/31 2001/05/31 2000/05/31
Operating revenue                                         100.0%     100.0%     100.0%     100.0%     100.0%
  Cost of sales                                            57.1%      59.0%      60.7%      61.0%      60.1%
Gross margin                                               42.9%      41.0%      39.3%      39.0%      39.9%
Operating expenses
   Administrative expenses                                  18.9%      18.5%         18.2%          17.9%          18.0%
   Advertising                                              11.2%      10.9%         10.4%          10.5%          10.9%
   Amortization of identifiable intangibles                  0.1%       0.0%          0.0%           0.0%           0.2%
   Other expense, net                                        0.6%       0.7%          0.0%           0.4%           0.3%
Total operating expenses                                    30.8%      30.2%         28.7%          28.9%          29.4%
Core operating income (before tax)                          12.0%      10.8%         10.6%          10.2%          10.5%
Tax on operating income
   Tax as reported                                           4.1%       3.6%           3.5%          3.5%           3.8%
   Tax on other operating income                             0.0%       0.0%           0.0%          0.0%           0.0%
   Tax benefit from net interest expenses                    0.1%       0.1%           0.1%          0.2%           0.1%
Total tax on operating income                                4.2%       3.7%           3.7%          3.7%           3.9%
Core operating income (after tax)                            7.8%       7.1%           7.0%          6.5%           6.6%
Other operating income (expense) (net of tax)
   Restructuring charge, net                                 0.0%        0.0%          0.0%          0.0%           0.0%
   Tax on restructuring charge                               0.0%        0.0%          0.0%          0.0%           0.0%
   Restructuring charge after tax                            0.0%        0.0%          0.0%          0.0%           0.0%
   Foreign currency translation                              0.2%        1.2%          0.0%         -0.4%          -0.5%
   Adjustment for fair value of hedge derivatives            1.0%       -1.6%         -1.0%          0.0%           0.0%
   Loss on option exercise                                  -0.7%       -0.2%         -0.2%         -0.6%          -0.3%
   Cumulative effect of accounting change                    0.0%       -2.5%          0.5%          0.0%           0.0%
Total other operating income (expense)                       0.6%       -3.1%         -0.7%         -1.0%          -0.7%
Operating income after tax                                   8.4%        4.0%          6.3%          5.5%           5.9%

Net financial expense (NFE)
  Interest expense                                           0.3%        0.4%          0.5%          0.6%           0.5%
  Interest income                                           -0.1%       -0.1%         -0.1%         -0.1%          -0.2%
Net interest expense before tax                              0.2%        0.3%          0.3%          0.5%           0.3%
Tax benefit of debt                                         -0.1%       -0.1%         -0.1%         -0.2%          -0.1%
Net interest after tax                                       0.1%        0.2%          0.2%          0.3%           0.2%



                                                                         Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
Nike Inc.
Trend analysis of income statements

Year ended May 31, 1996 as basis for comparison
for the year ended                                  2004/05/31 2003/05/31 2002/05/31         2001/05/31 2000/05/31
Operating revenue                                      189.4%     165.3%     152.9%              146.6%    139.0%
  Cost of sales                                        179.2%     161.6%     153.7%              148.1%    138.3%
Gross margin                                           204.8%     171.0%     151.7%              144.5%    140.1%
Operating expenses
   Administrative expenses                             245.9%     210.7%         191.8%           181.1%         172.6%
   Advertising                                         214.5%     181.6%         160.0%           155.4%         152.2%
   Amortization of identifiable intangibles             55.0%      16.5%          11.9%            11.5%          84.9%
   Other expense, net                                  203.5%     217.7%           8.2%            92.9%          63.2%
Total operating expenses                               230.1%     196.9%         172.8%           166.8%         161.0%
Core operating income (before tax)                     159.9%     124.9%         114.0%           104.7%         102.8%
Tax on operating income
   Tax as reported                                     145.8%     110.7%         100.9%            95.9%          98.3%
   Tax on other operating income                          n/m        n/m            n/m              n/m            n/m
   Tax benefit from net interest expenses              103.0%     119.9%         140.4%           186.0%         130.0%
Total tax on operating income                          144.7%     110.9%         101.9%            98.2%          98.9%
Core operating income (after tax)                      169.4%     133.6%         121.5%           108.8%         105.2%
Other operating income (expense) (net of tax)
   Restructuring charge, net                              n/m        n/m            n/m              n/m            n/m
   Tax on restructuring charge                            n/m        n/m            n/m              n/m            n/m
   Restructuring charge after tax                         n/m        n/m            n/m              n/m            n/m
   Foreign currency translation                       -151.9%    -703.9%           8.3%           226.5%         233.1%
   Adjustment for fair value of hedge derivatives         n/m        n/m            n/m              n/m            n/m
   Loss on option exercise                                n/m        n/m            n/m              n/m            n/m
   Cumulative effect of accounting change                 n/m        n/m            n/m              n/m            n/m
Total other operating income (expense)                -405.4%    1846.6%         379.9%           526.1%         362.9%
Operating income after tax                             188.3%      77.1%         113.0%            95.1%          96.7%

Net financial expense (NFE)
  Interest expense                                     102.0%     108.6%         120.5%           148.6%         113.9%
  Interest income                                       95.0%      87.6%          84.5%            86.3%          84.5%
Net interest expense before tax                        106.8%     123.1%         145.3%           191.5%         134.2%
Tax benefit of debt                                    103.0%     119.9%         140.4%           186.0%         130.0%
Net interest after tax                                 109.3%     125.1%         148.4%           194.9%         136.8%
Preferred dividends                                       n/m        n/m            n/m              n/m            n/m
Net financial expense (NFE)                            109.3%     125.1%         148.4%           194.9%         136.8%




                                                                    Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
NIKE Inc.
Common size analysis of balance sheets


                                                              2004/05/31 2003/05/31 2002/05/31 2001/05/31 2000/05/31
Net operating assets (NOA):
Operating assets
  Cash and equivalents                                             0.9%       0.9%          0.8%          0.9%           0.8%
  Accounts receivable, less allowance for doubtful accounts       31.5%      33.4%         30.5%         29.1%          27.7%
  Inventories                                                     24.3%      24.3%         23.2%         25.6%          25.6%
 Prepaid expenses and other current assets                         5.5%       5.3%          4.5%          3.1%           4.0%
  Property, plant and equipment, net                              23.6%      26.0%         27.3%         29.0%          28.0%
  Goodwill                                                         2.0%       1.1%          3.9%          3.2%           3.5%
  Identifiable intangible assets                                   5.4%       1.9%          3.5%          3.9%           3.8%
  Deferred income taxes and other assets                           6.8%       7.2%          6.3%          5.2%           6.7%
Total operating assets                                           100.0%     100.0%        100.0%        100.0%         100.0%
Operating liabilities
  Accounts payable - non-interest bearing                         33.1%      27.4%         32.1%         40.2%          39.8%
  Accrued liabilities                                             42.3%      52.3%         52.5%         47.3%          51.1%
  Income taxes payable                                             5.4%       6.8%          5.7%          2.2%           0.0%
  Deferred income taxes and other liabilities                     19.2%      13.5%          9.7%         10.2%           9.1%
Total operating liabilities                                      100.0%     100.0%        100.0%        100.0%         100.0%


Net financial assets (obligations) (NFA/NFO):
Financial assets
   Cash equivalent                                                65.7%     100.0%        100.0%        100.0%         100.0%
  Short-term investments                                          34.3%       0.0%          0.0%          0.0%           0.0%
Total financial assets                                           100.0%     100.0%        100.0%        100.0%         100.0%
Financial liabilities
   Current portion of long-term debt                               0.8%      23.3%          4.8%          0.4%           3.3%
   Notes payable                                                  16.6%       8.5%         37.2%         64.4%          61.4%
   Accounts payable - interest bearing                             5.0%       5.6%          3.2%          2.3%           4.0%
   Long-term debt                                                 77.6%      62.5%         54.8%         32.8%          31.3%
   Redeemable Preferred Stock                                      0.0%       0.0%          0.0%          0.0%           0.0%
Total financial liabilities                                      100.0%     100.0%        100.0%        100.0%         100.0%


As percentage of CSE:
Net operating assets (NOA):                                       94.0%     107.5%        116.0%        130.6%         141.2%
Net financial assets (obligations) (NFA/NFO)                       6.0%      -7.5%        -16.0%        -30.6%         -41.2%
Common Shareholders' Equity (CSE)                                100.0%     100.0%        100.0%        100.0%         100.0%




                                                                               Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
Nike Inc.
Trend analysis of balance sheets

Year ended May 31, 1996 as basis for comparison
                                                              2004/05/31   2003/05/31   2002/05/31       2001/05/31      2000/05/31
Net operating assets (NOA):
Operating assets
  Cash and equivalents                                           189.4%       165.3%         152.9%           146.6%         139.0%
  Accounts receivable, less allowance for doubtful accounts      157.5%       154.8%         134.0%           120.4%         116.4%
  Inventories                                                    175.4%       162.7%         147.5%           152.9%         155.3%
 Prepaid expenses and other current assets                       391.7%       352.8%         281.3%           182.6%         240.3%
  Property, plant and equipment, net                             246.6%       251.9%         250.9%           251.6%         246.1%
  Goodwill                                                        51.1%        24.7%          87.7%            67.4%          73.8%
  Identifiable intangible assets                                 174.8%        56.4%          98.3%           104.3%         102.7%
  Deferred income taxes and other assets                         228.5%       226.1%         186.9%           146.1%         190.4%
Total operating assets                                           180.8%       167.7%         159.0%           149.7%         152.1%
Operating liabilities
  Accounts payable - non-interest bearing                        330.8%       240.4%         215.1%           184.5%         222.3%
  Accrued liabilities                                            191.9%       208.0%         159.3%            98.3%         129.5%
  Income taxes payable                                           149.1%       164.8%         104.7%            27.6%           0.0%
  Deferred income taxes and other liabilities                    966.2%       595.8%         327.1%           236.1%         254.8%
Total operating liabilities                                      265.4%       232.9%         177.7%           121.6%         148.2%
Net operating assets (NOA):                                      156.9%       149.3%         153.8%           157.7%         153.1%

Net financial assets (obligations) (NFA/NFO):
Financial assets
   Cash equivalent                                               333.7%       252.7%         228.9%           111.7%           91.1%
  Short-term investments                                            n/m          n/m            n/m              n/m             n/m
Total financial assets                                           508.1%       252.7%         228.9%           111.7%           91.1%
Financial liabilities
   Current portion of long-term debt                              90.4%      2817.4%        757.4%             74.0%         686.2%
   Notes payable                                                  32.8%        16.9%         95.5%            192.2%         207.7%
   Accounts payable - interest bearing                            18.5%        20.9%         15.3%             12.8%          25.2%
   Long-term debt                                               7120.2%      5755.4%       6530.7%           4548.2%        4907.1%
   Redeemable Preferred Stock                                    100.0%       100.0%        100.0%            100.0%         100.0%
Total financial liabilities                                      125.7%       126.1%        163.4%            189.7%         215.1%
Net financial assets (obligations) (NFA/NFO)                     -61.4%        64.3%        131.3%            227.9%         275.7%




                                                                                Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 4: Projection and Valuation

4.1. Valuation essentials


Net income component                    Book value component                   Residual earnings components
                                                                               Residual operating income: OIt -
Operating income (OI)                   Net operating assets (NOA)
                                                                               (kF-1)*NOAt-1
                                                                               Residual net financial expense:
Net financial expense (NFE)             Net financial obligations (NFO)
                                                                               NFEt - (kD-1)NFOt-1
                                        Common stockholders' equity            Residual earnings: Earnt-(kE-
Earnings
                                        (CSE)                                  1)*CSEt-1


                                                                               Present value of expected
Value of operations =                   Net operating assets +
                                                                               residual operating income

                                                                               Present value of expected
Value of common equity =                Book value of common equity +
                                                                               residual operating income

Value of operations =                   Value of common equity +               Value of net financial obligations



Discount rates

                                                   Denoted as                                  Formula
Cost of capital for equity                            kE                                   rf + beta*(rm-rf)
Cost of capital for debt                                 kD                                    NBC
Cost of operations                                       kF                             kE*VE/VF + kD*VD/VF




For Nike in 2004
riskfree rate (T-bill rate)                                           4.50%
Beta                                                                   0.80 (from MSN Moneycentral)
Market risk premium (rm-rf)                                           5.00%
kE                                                                    8.50%
kD                                                                   5.00% (Assumed to be 5% because NBC in year 2004 is abnormal.)
Nike's close price on August 31, 2004                                $75.31
Market value of equity                                           19,814.06
Market value of debt                                               (288.33)
Market value of the firm                                         19,525.73
kF                                                                   8.55%




                                          Financial Statement Analysis and Security Valuation: Roadmap              Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 4: Projection and Valuation

4.2. Simple forecasts and simple valuations


SF1 Forecasts: Forecasts from book values

Applying required rates of returns to the balance sheet items, we can get pro forma future earnings.
SF1 always forecasts future residual earnings for the relevant component will be zero.

                                                        Forecasts for NIKE 2005
Operating                OI1 = kF*NOA0                                   389.23
Financing                NFE1 = kD*NFO0                                       14.42
Earnings                 Earn1 = kE*CSE0                                     403.64

SF1 valuation applies well to assets at fair value, such as financial assets. It does not fit the NIKE case. If all balance
sheet items are at market value, the required rate of return on prior common shareholders' equity forecasts future
comprehensive income.

Using SF1, we have the following relation because all future residual earnings equal zero:
Value of common equity = Book value of common equity




                                                     Financial Statement Analysis and Security Valuation: Roadmap             Stephen H. Penman 2003
SF2 Forecasts: Forecasts from earnings and book values

Forecasting earnings and its components by forecasting that earnings will be the same as in the current year, adjusted
for changes in the balance sheet earning at the required return.


SF2 is equivalent to assuming all future residual earnings are the same as in the current year.


SF2 Valuations of Nike

Nike, Inc.
in millions except for per share data
Required return for operations                                                                  8.55%
Common shareholders' equity, 2004                                                             4,839.8
Core operating income, 2004                                                                     961.3
Net operating assets, 2003                                                                    4,330.3
Net operating assets, 2004                                                                    4,551.5
Core residual operating income, 2004                                                            591.0

SF2 forecast of operating income, 2004                                                          980.2
SF2 forecast of ReOI, 2004                                                                      591.0


Value of common equity
vE = CSE2004 + ReOI2004/kF                                                                   11,750.9
Value per share                                                                                 44.66


Value of operations
vNOA = vE + NFO                                                                              11,462.5
vNOA = NOA + ReOI/kF                                                                         11,462.5
vNOA = OI2004/kF                                                                             11,462.5




                                                    Financial Statement Analysis and Security Valuation: Roadmap         Stephen H. Penman 2003
SF3 Forecasts: Forecasting from accounting rates of return

Forecast of earnings component: Forecast earnings and its components by forecasting that the relevant balance sheet

Operating                OI1 = RNOA0*NOA0
Financing                NFE1 = NBC0*NFO0
Earnings                 Earn1 = ROCE0*CSE0




SF3 Valuations of Nike Inc.

Cost of capital for operations                                                                8.55%
Core RNOA, 2004 (on average NOA)                                                             21.65%
Growth rate for net operating assets                                                           5.1%
Net operating assets, 2004                                                                  4,551.5

SF3 forecast of operating income, 2005                                                        985.3
SF3 forecast of ReOI, 2005                                                                    596.0


Value of common equity
vE = CSE+ ReOI1/(kF-g)                                                                     22,146.7
Value per share                                                                               84.18


Value of operations
vNOA = vE + NFO                                                                            21,858.4
vNOA = NOA + ReOI1/(kF-g)                                                                  21,858.4
vNOA = NOA*(RNOA-g)/(kF-g)                                                                 24,042.1




                                                  Financial Statement Analysis and Security Valuation: Roadmap        Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 4: Projection and Valuation


4.3. Full-information forecasting: Nike Inc.


Forecasts of key income statement ratios

                                           2004A   2005E       2006E         2007E          2008E         2009E    2010E and after
Gross margin                               42.9%   40.0%       40.0%         40.0%          40.0%         40.0%            40.0%
SG&A expense ratio                         30.8%   30.0%       30.0%         30.0%          30.0%         30.0%            30.0%
Tax rate                                   34.8%   35.0%       35.0%         35.0%          35.0%         35.0%            35.0%
Sales growth                               14.5%    9.0%        9.0%          5.0%           5.0%          5.0%             5.0%


Forecasts of turnover

                                           2004A   2005E       2006E         2007E          2008E         2009E    2010E and after
Accounts receivable turnover                5.83      5.8         5.8           5.8            5.8           5.8              5.8
Inventory turnover                          7.78        8           8             8              8             8                 8
PPE turnover                                7.64     7.00        7.00          7.00           7.00          7.00             7.00
Other NOA/Sales                            -6.4%   -6.0%       -6.0%         -6.0%          -6.0%         -6.0%            -6.0%




                                                   Financial Statement Analysis and Security Valuation: Roadmap                      Stephen H. Penman 2003
Pro forma financial statements

                                                2004A         2005E        2006E         2007E          2008E         2009E    2010E and after
Income statement
Sales                                        12,253.1      13,355.9     14,557.9     15,285.8       16,050.1       16,852.6
Cost of sales                                 7,001.4       8,013.5      8,734.7      9,171.5        9,630.1       10,111.6
Gross margin                                  5,251.7       5,342.4      5,823.2      6,114.3        6,420.0        6,741.0
Total operating expenses                      3,776.7       4,006.8      4,367.4      4,585.7        4,815.0        5,055.8
Core operating income before tax              1,475.0       1,335.6      1,455.8      1,528.6        1,605.0        1,685.3
Taxes                                           513.7         467.5        509.5        535.0          561.8          589.8
Core operating income after tax                 961.3         868.1        946.3        993.6        1,043.3        1,095.4
Other income (expense)                           73.4           -            -            -              -              -
Operating income                              1,034.7         868.1        946.3        993.6        1,043.3        1,095.4

Balance sheet
Account receivable                            2,120.2       2,302.7      2,510.0       2,635.5       2,767.3        2,905.6
Inventory                                     1,633.6       1,669.5      1,819.7       1,910.7       2,006.3        2,106.6
Property, plant and equipment                 1,586.9       1,908.0      2,079.7       2,183.7       2,292.9        2,407.5
Other NOA                                      (789.2)       (801.4)      (873.5)       (917.1)       (963.0)      (1,011.2)
Net operating assets (NOA)                    4,551.5       5,078.9      5,535.9       5,812.7       6,103.4        6,408.6

Operating income                              1,034.7         868.1        946.3         993.6       1,043.3        1,095.4
Change in NOA                                   221.2         527.4        457.1         276.8         290.6          305.2
Free cash flow                                  813.5         340.7        489.2         716.8         752.6          790.2

RNOA                                            23.3%         19.1%        18.6%         17.9%          17.9%         17.9%             17.9%
ReOI                                            654.9         478.9        511.9         520.2          546.2         573.5             602.2
Growth in ReOI                                               -26.9%         6.9%          1.6%           5.0%          5.0%              5.0%

Cost of operations                              8.55%
Total PV of ReOI to 2008                      2,056.1
Continuing value                                                                                                   16,953.9
PV of CV                                    11,248.3
NOA as of 2003                               4,551.5
Value of operations                         17,855.9
NFA (NFO)                                      288.3
Option overhang                               (452.0)
Value of common equity                      17,692.2
Number of shares outstanding                   263.1
Value per share                           $    67.25

Nike traded at $75.31 on Aug. 31, 2004. Use your pro forma analysis tool here to find what growth rate and profitability justify that price.



                                                               Financial Statement Analysis and Security Valuation: Roadmap                      Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product

Step 4: Projection and Valuation

4.4. Valuation using the Abnormal Operating Income Growth Model: Nike Inc.

Discount Rates
For Nike in 2004
riskfree rate (T-bill rate)                     4.50%
Beta                                             0.80
Market risk premium (rm-rf)                     5.00%
kE                                              8.49%
kD                                              5.00%
Market value of equity                       17,692.7
Market value of debt                           (288.3)
Market value of the firm                     17,404.3
kF                                              8.55%

In the above calculation of discount rates, we first fix the cost of operations. We then use the equity value implied by this cost of operations to
impute the cost of equity. Recall in the previous worksheets, we used CAPM to get the cost of equity and then computed cost of operations using
market value of equity as the weight for equity. That way we implicitly rely on the assumption that the market price is efficient, or correct, which we
do not want to 'believe' as the ultimate goal of the entire valuation exercise is to derive a 'correct' value for equity. In theory, cost of operations
should be estabished first in comparisons of different firms. We do this here so that the cost of equity we apply in the Abnormal Earnings Growth
valuation exercise is consistent with the residual operating income valuation exercise earlier in this template.


Replica of the Residual Operating Income Valuation Exercise on the 'Full Information Forecasting and Valuation' Worksheet

Forecasts of key income statement ratios
                                                2004A            2005E              2006E           2007E         2008E    2009E     2010E and after
Gross margin                                    42.9%            40.0%              40.0%           40.0%         40.0%    40.0%             40.0%
SG&A expense ratio                              30.8%            30.0%              30.0%           30.0%         30.0%    30.0%             30.0%


                                                   Financial Statement Analysis and Security Valuation: Roadmap                         Stephen H. Penman 2003
Tax rate                             34.8%            35.0%              35.0%           35.0%           35.0%       35.0%              35.0%
Sales growth                         14.5%             9.0%               9.0%            5.0%            5.0%        5.0%               5.0%

Forecasts of turnover
                                     2004A            2005E              2006E           2007E           2008E       2009E     2010E and after
Accounts receivable turnover          5.83               5.8                5.8             5.8             5.8         5.8               5.8
Inventory turnover                    7.78                 8                  8               8               8           8                  8
PPE turnover                          7.64                 7                  7               7               7           7                  7
Other NOA/Sales                      -6.4%            -6.0%              -6.0%           -6.0%           -6.0%       -6.0%             -6.0%


Pro forma financial statements
                                     2004A            2005E              2006E           2007E           2008E       2009E     2010E and after
Income statement
Sales                              12,253.1       13,355.9           14,557.9        15,285.8          16,050.1    16,852.6          17,695.2
Cost of sales                       7,001.4        8,013.5            8,734.7         9,171.5           9,630.1    10,111.6          10,617.1
Gross margin                        5,251.7        5,342.4            5,823.2         6,114.3           6,420.0     6,741.0           7,078.1
Total operating expenses (SG&A)     3,776.7        4,006.8            4,367.4         4,585.7           4,815.0     5,055.8           5,308.6
Core operating income before tax    1,475.0        1,335.6            1,455.8         1,528.6           1,605.0     1,685.3           1,769.5
Taxes                                 513.7          467.5              509.5           535.0             561.8       589.8             619.3
Core operating income after tax       961.3          868.1              946.3           993.6           1,043.3     1,095.4           1,150.2
Other income (expense)                 73.4            -                  -               -                 -           -                 -
Operating income                    1,034.7          868.1              946.3           993.6           1,043.3     1,095.4           1,150.2

Balance sheet
Account receivable                  2,120.2         2,302.7            2,510.0        2,635.5           2,767.3     2,905.6           3,050.9
Inventory                           1,633.6         1,669.5            1,819.7        1,910.7           2,006.3     2,106.6           2,211.9
Property, plant and equipment       1,586.9         1,908.0            2,079.7        2,183.7           2,292.9     2,407.5           2,527.9
Other NOA                            (789.2)         (801.4)            (873.5)        (917.1)           (963.0)   (1,011.2)         (1,061.7)
Net operating assets (NOA)          4,551.5         5,078.9            5,535.9        5,812.7           6,103.4     6,408.6           6,729.0

Operating income                    1,034.7           868.1              946.3           993.6          1,043.3     1,095.4           1,150.2
Change in NOA                         221.2           527.4              457.1           276.8            290.6       305.2             320.4
Free cash flow                        813.5           340.7              489.2           716.8            752.6       790.2             829.8

RNOA                                 23.3%            19.1%              18.6%           17.9%           17.9%       17.9%              17.9%
ReOI                                 654.9            478.9              511.9           520.2           546.2       573.5              602.2



                                        Financial Statement Analysis and Security Valuation: Roadmap                             Stephen H. Penman 2003
Growth in ReOI                                                  -26.9%               6.9%            1.6%            5.0%        5.0%              5.0%

Cost of operations                              8.55%
Total PV of ReOI to 2009                      2,056.1
Continuing value                                                                                                             16,954.5
PV of CV                                    11,248.7
NOA as of 2004                               4,551.5
Value of operations                         17,856.3
NFA (NFO)                                      288.3
Option overhang                               (452.0)
Value of common equity                      17,692.7
Number of shares outstanding                   263.1
Value per share                           $    67.25

Nike traded at $75.31 on Aug. 31, 2004. Use your pro forma analysis tool here to find what growth rate and profitability justify that price.

Comparisons among Residual Oprerating Income Model, Residual Earnings Model, and Abnormal Earnings Growth Valuation Model

                                                2004A            2005E              2006E          2007E            2008E       2009E    2010E and after
OI                                            1,034.7            868.1              946.3          993.6          1,043.3     1,095.4           1,150.2
NFE                                              15.7            (14.4)             (16.1)         (17.5)           (18.4)      (19.3)            (20.3)
CNI                                           1,019.0            882.5              962.4        1,011.1          1,061.7     1,114.8           1,170.5

NOA                                           4,551.5          5,078.9            5,535.9        5,812.7          6,103.4     6,408.6           6,729.0
NFO                                            (288.3)          (321.7)            (350.7)        (368.2)          (386.6)     (406.0)           (426.3)
CSE                                           4,839.8          5,400.6            5,886.7        6,181.0          6,490.0     6,814.5           7,155.3

NFO/NOA                                          -6.3%           -6.3%              -6.3%           -6.3%           -6.3%       -6.3%             -6.3%
NFO/VE                                          -1.63%          -1.63%             -1.63%          -1.63%          -1.63%      -1.63%            -1.63%
NFO/VNOA                                        -1.61%          -1.61%             -1.61%          -1.61%          -1.61%      -1.61%            -1.61%

Growth Rate of NOA                                              11.59%              9.00%           5.00%          5.00%       5.00%              5.00%
Growth Rate of NFO                                              11.59%              9.00%           5.00%          5.00%       5.00%              5.00%
Growth Rate of CSE                                              11.59%              9.00%           5.00%          5.00%       5.00%              5.00%

RNOA                                                            19.07%            18.63%          17.95%          17.95%      17.95%            17.95%
ROCE                                                            18.24%            17.82%          17.18%          17.18%      17.18%            17.18%


                                                   Financial Statement Analysis and Security Valuation: Roadmap                            Stephen H. Penman 2003
NBC                                      5.00%           5.00%              5.00%           5.00%         5.00%   5.00%         5.00%
Cost of Operations                       8.55%           8.55%              8.55%           8.55%         8.55%   8.55%         8.55%
Cost of Equity                           8.49%           8.49%              8.49%           8.49%         8.49%   8.49%         8.49%

Dividends                                207.4           321.8              476.3           716.8         752.6   790.2         829.8
Dividend Payout Ratio                    20.4%           36.5%              49.5%           70.9%         70.9%   70.9%         70.9%

Free Cash Flow                                           340.7              489.2           716.8         752.6   790.2         829.8
Dividends + NFE - Change in NFO                          340.7              489.2           716.8         752.6   790.2         829.8

RE                                                       471.5              503.6           511.1         536.7   563.5      16,935.5
RE Growth Rate                                                               6.8%            1.5%          5.0%    5.0%          5.0%




Number of Periods for Discounting                             1                  2               3           4       5               5

Valuation using RE
PV of RE                              13,291.0           434.6              427.9           400.2         387.3   374.9      11,266.2
Value of Common Equity                18,130.8
Option overhang                         (452.0)
Value of Common Equity - adjusted     17,678.8
Number of Shares Outstanding             263.1
Value Per Share                     $    67.19

Valuation using ReOI
PV of ReOI                            13,304.9           441.2              434.5           406.7         393.4   380.5      11,248.7
Value of Operations                   17,856.3
NFA (NFO)                                288.3
Option overhang                         (452.0)
Value of Common Equity                17,692.7
Number of Shares Outstanding             263.1
Value Per Share                     $    67.25




                                           Financial Statement Analysis and Security Valuation: Roadmap                   Stephen H. Penman 2003
Valuation using Abnormal Earnings Growth
Cum-dividend Earnings                                            900.2              989.7        1,051.6          1,122.5   1,178.7           1,237.6
Earnings Growth Rate                                            -13.4%               9.0%           5.1%             5.0%      5.0%              5.0%
Cum-dividend Earnings Growth Rate                               -11.7%              12.1%           9.3%            11.0%     11.0%             11.0%

Normal Earnings                                                1,105.5              957.5        1,044.1          1,097.0   1,151.8           1,209.4
Abnormal Earnings Growth                                                             32.2            7.5             25.6      26.8              28.2
Abnormal Earnings Growth Rate                                                                     -76.8%           241.8%      5.0%              5.0%

PV of Abnormal Earnings Growth                  657.4               -                29.7              6.4          20.0      19.4              582.1
Value of Common Equity                       18,130.8
Option overhang                                (452.0)
Value of Common Equity - adjusted            17,678.8
Number of shares outstanding                    263.1
Value per share                            $    67.19



The equity values derived using the Residual Earnings Model and the Abnormal Earnings Growth Model are identical, indicating that the two models
are equivalent - they give the same result when applied with consistent assumptions. The results from these two models differ slightly from the
output of the Residual Oprerating Income Model likely due to the imperfect control for leverage. Note that to perfectly reconcile the results of these
two models, we need the discount rates (cost of operations and cost of equity) to fit in the weighting relations consistently over time. That practically
requires the market debt/equity ratio to remain constant over the years. In an attempt to do so we assume no change in the book capital structure
over time, i.e., the book debt/equity ratio remains constant. This control is imperfect, but it is the best we can do. In general these are all simplifying
assumptions such that we do not have to consider the change in cost of equity due to change in leverage (this is a standard practice; refer to Brealey
and Myers (2000)). Dividends in the example are the residuals to satisfy this assumption and the clean surplus relations.




Applying Abnormal Operating Income Growth Model to the full-information forecasting example

                                                 2004A           2005E              2006E          2007E            2008E     2009E   2010E and after
NOA                                            4,551.5         5,078.9            5,535.9        5,812.7          6,103.4   6,408.6          6,729.0
OI                                             1,034.7           868.1              946.3          993.6          1,043.3   1,095.4          1,150.2

Cost of Operations                               8.55%           8.55%              8.55%           8.55%          8.55%     8.55%              8.55%

Free Cash Flow                                                   340.7              489.2           716.8          752.6     790.2              829.8


                                                   Financial Statement Analysis and Security Valuation: Roadmap                          Stephen H. Penman 2003
Cum-FCF Operating Income                                                         975.4        1,035.4          1,104.6   1,159.8       1,217.8
Normal Operating Income                                                          942.4        1,027.2          1,078.5   1,132.5       1,189.1

Abnormal OI Growth                                                                33.0              8.2          26.0      27.3            28.7
Abnormal OI Growth Rate                                                                                                    5.0%            5.0%

Number of Periods to Discount                                       1                 2                3             4         5               5
PV of AOIG                                                                        30.4              7.0          20.3      19.7
PV of Terminal AOIG                                                                                                                      581.5
Sum of PV of AOIG                            658.9
Value of Operations                       17,856.3
NFA (NFO)                                    288.3
Option overhang                             (452.0)
Value of Common Equity                    17,692.7
Number of Shares Outstanding                 263.1
Value of Common Equity Per Share        $    67.25



In the Abnormal Operating Income Growth Model, we focus on operating income and treat free cash flows as cash outflows, parallell to dividends at
the firm level. The rest follows through. Note that this way the final estimate of share value we get is exactly equal to what we get through the
Residual Operating Income Model valuation exercise. That is, the two models are equivalent.




                                                Financial Statement Analysis and Security Valuation: Roadmap                       Stephen H. Penman 2003
Financial Statement Analysis & Security Valuation (Third Edition)
Stephen H. Penman 2006

Roadmap to Developing Your Own Financial Statement Analysis and Valuation Product


Step 5: Bells and Whistles


Steps 1-4 set up a basic valuation tool. You can add additional features:


Quality of earnings analysis (Chapters 15 -19)
Sensitivity analysis (Chapters 14 and 15)
Reverse engineering: Implied growth rate (Chapter 5)
Risk analysis (Chapters 18 and 19)




                                            Financial Statement Analysis and Security Valuation: Roadmap   Stephen H. Penman 2003

				
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Description: Nike's Common Size Income Statement document sample