Nike Inc (NKE)

Short-term

Turnover ratios

Inventory Turnover:
Nike's inventory turnover has fluctuated over the past five years, indicating the company's ability to efficiently manage its inventory. The increase in inventory turnover from 2020 to 2021 followed by a decrease in 2022 suggests a change in inventory management practices. However, the current inventory turnover of 3.42 indicates that Nike is turning over its inventory approximately 3.42 times a year, reflecting efficient inventory management.

Receivables Turnover:
Nike's receivables turnover has shown an increasing trend over the past five years, indicating that the company is collecting its receivables more efficiently. The current receivables turnover of 12.40 implies that Nike is collecting its receivables approximately 12.40 times a year, reflecting strong credit management and timely customer collections.

Payables Turnover:
Nike's payables turnover has also exhibited an increasing trend, indicating an improvement in the management of its payables. The current payables turnover of 10.11 suggests that Nike is paying its suppliers approximately 10.11 times a year, reflecting efficient management of accounts payable.

Working Capital Turnover:
The working capital turnover ratio measures how effectively a company is using its working capital to generate sales. Nike's working capital turnover has fluctuated over the years, and the current ratio of 3.21 implies that for every dollar of working capital invested, Nike generates approximately $3.21 in sales. This indicates that Nike is effectively utilizing its working capital to generate revenue, although there has been a slight decrease from the previous year.

Overall, Nike's activity ratios indicate efficient management of inventory, receivables, payables, and working capital, which is essential for the company's operational efficiency and financial performance.

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Average number of days

To analyze Nike, Inc.'s activity ratios, we can look at the days of inventory on hand (DOH), days of sales outstanding (DSO), and the number of days of payables.

Days of Inventory on Hand (DOH) measures how many days it takes for a company to sell the inventory it currently has on hand. A lower DOH indicates that the company is selling its inventory more quickly. Nike's DOH has fluctuated over the past five years, with the lowest being 94.81 days in 2019 and the highest being 127.07 days in 2020. The decrease in DOH from 2020 to 2021 and the subsequent increase in 2022 suggests that Nike may have improved its inventory management practices in 2021 but then experienced challenges in 2022, leading to an increase in DOH.

Days of Sales Outstanding (DSO) measures how many days it takes for a company to collect its accounts receivable. A lower DSO indicates that the company is collecting cash from sales more quickly. Nike's DSO has also varied over the years, with the lowest being 26.83 days in 2020 and the highest being 39.86 days in 2019. The decrease in DSO from 2019 to 2020 suggests that Nike improved its receivables collection in 2020.

Number of Days of Payables measures the number of days it takes for a company to pay its suppliers. A higher number of days of payables indicates that the company is taking longer to pay its suppliers. Nike's number of days of payables has fluctuated, with the lowest being 38.77 days in 2020 and the highest being 48.58 days in 2022. The decrease in payables days from 2022 to 2021 suggests that Nike may have been more efficient in settling its payables in 2021.

Overall, Nike's activity ratios suggest fluctuations in the management of inventory, accounts receivable, and payables over the years. It is important for investors and analysts to understand the reasons behind these fluctuations and assess Nike's efficiency in managing its working capital and key operating processes.

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See also:

Nike Inc Short-term (Operating) Activity Ratios

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Long-term

The table provides data on Nike, Inc.'s long-term activity ratios, specifically the fixed asset turnover and total asset turnover, for the years ending on May 31, 2019 through May 31, 2023.

1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures a company's ability to generate sales from its investment in fixed assets.
- Nike's fixed asset turnover has shown a generally increasing trend from 7.69 in 2020 to 10.08 in 2023, indicating that the company has been able to utilize its fixed assets more efficiently to generate sales.
- This improvement suggests that Nike has been more effective in generating revenue from its long-term investments in property, plant, and equipment.

2. Total Asset Turnover:
- The total asset turnover ratio measures a company's ability to generate sales from its total assets.
- Nike's total asset turnover ratio decreased from 1.65 in 2019 to 1.16 in 2022 and then increased to 1.36 in 2023.
- The declining trend from 2019 to 2022 indicates that Nike's ability to generate sales from its total assets was decreasing. However, the subsequent increase in 2023 suggests an improvement in the utilization of its total assets to generate sales.
- The total asset turnover ratio can provide insights into how efficiently a company is using its assets to generate sales and is often influenced by changes in a company's operations and business model.

In summary, Nike's long-term activity ratios indicate improving efficiency in the utilization of both fixed assets and total assets to generate sales, as evidenced by the increasing trend in fixed asset turnover and the recent recovery in total asset turnover. This overall improvement suggests an enhancement in Nike's operational effectiveness and asset utilization over the years, which can positively impact the company's long-term financial performance.

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See also:

Nike Inc Long-term (Investment) Activity Ratios