Nike, Inc. Case

        Nike, Inc., a company that has been in business since 1964, is a part of the consumer goods industry, operating in the personal goods industry sector. Nike manufactures textiles of apparel, footwear, and accessories. According to Lutz (2015) Nike, “…controls a shocking 62% of US brand share of sneakers,” (Para. 1). This shows that Nike is the leader in its industry, controlling more than half of the market. Lutz (2015) proclaimed that Nike has 3 major operating risks associated with the company. The three operating risks are consumers no longer wanting to purchase athletic wear, the continued growth of Under Armor, and China no longer being a growth for Nike (Lutz, 2015). Nike depends on the sale of its athletic wear to continue with the growth of the company. If consumers are no longer purchasing the athletic wear Nike will not receive the capital anticipated from that area. This is a risk that Nike hopes to avoid.

Under Armor has emerged as a contender in the market. With its successful marketing strategies, Under Armor is proving to be a competitor that could have a huge impact on Nike’s continued market dominance. Under Armor has emerged in the market due to its endorsement of famous athletes. This is a dynamic marketing strategy for Under Armor to help build its brand. Nike has also endorsed famous athletes to help attract consumers to its brand and this continues to remain positive for Nike. Nike must continue to find ways to remain number one in the market without worrying about the growth of Under Armor. Although Under Armor receives less than a third of the revenue Nike earns, its continued growth shows that it has the potential to pose a threat to Nike in the future (Lutz, 2015).

The third operating risk that Nike faces is the possible disappointment of lacking in athletic wear sales in China. Nike depends on its sales force in the Chinese market. Nike has tapped into global markets and receives profits from companies worldwide. This makes Nike continue to remain number one in its industry. The company believes that they have the potential to earn huge profits in China. If Nike is not successful in the Chinese market the way they intend to be this would have a negative impact on the company’s growth in that country, which poses an operating risk for the company overall.

        Nike uses equity and debt to finance its company. The capital structure is unlevered equity. The company has the leverage needed to make the company look more attractive. Nike has both short-term and long-term debt in the form of bonds and other securities. Stock Analysis on Net (2016) provides the financial information needed to examine and analyze Nike’s ratios for profitability, liquidity, leverage, and solvency. The ratios are calculated to help determine the company’s strengths and weaknesses. In regards to the debt to total capitalization ratio as of May 31, 2015, Nike is operating at a ratio of 0.09 (Stock Analysis on Net, 2016). The total debt was $1,260 million and the Shareholders’ equity was $12,707 million (Stock Analysis on Net, 2016). The total capital totaled $13,967 million (Stock Analysis on Net, 2016). When calculating the debt-to-capitalization ratio $1,260 million/$13,967 million it equals 0.09 (Stock Analysis on Net, 2016). Nike does not have any preferred stock. The company only has common stock.