Question: Compare the total comprehensive income of American Express and Discover Financial Services in 2023. What does this indicate about their overall financial performance?

In 2023, American Express reported a total comprehensive income of $8,512 million, while Discover Financial Services reported a total comprehensive income of $3,054 million. This significant difference indicates that American Express had a much stronger overall financial performance compared to Discover Financial Services. The higher comprehensive income for American Express reflects better profitability, positive foreign currency adjustments, and gains on investment securities, contributing to a more robust financial position. In contrast, Discover's lower comprehensive income suggests challenges in maintaining profitability and managing other comprehensive income components.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA;Item 8.    Financial Statements and Supplementary Data

AMERICAN EXPRESS CO 10-K form for the fiscal year ended 2023-12-31, page 95:
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|    |                                                                      |      |       |      |       |      |       |       |    |       |
|---:|:---------------------------------------------------------------------|:-----|:------|:-----|:------|:-----|:------|:------|:---|:------|
|  1 | Year Ended December 31 (Millions)                                    | 2023 |       | 2022 |       | 2021 |       |       |    |       |
|  2 | Net income                                                           | $    | 8,374 |      |       | $    | 7,514 |       | $  | 8,060 |
|  3 | Other comprehensive income (loss):                                   |      |       |      |       |      |       |       |    |       |
|  4 | Net unrealized debt securities gains (losses), net of tax            |      |       |      | (87)  |      |       | (42)  |    |       |
|  5 | Foreign currency translation adjustments, net of hedges and tax      |      |       |      | (230) |      |       | (163) |    |       |
|  6 | Net unrealized pension and other postretirement benefits, net of tax | 37   |       |      | 52    |      |       | 155   |    |       |
|  7 | Other comprehensive income (loss)                                    | 138  |       |      | (265) |      |       | (50)  |    |       |
|  8 | Comprehensive income                                                 | $    | 8,512 |      |       | $    | 7,249 |       | $  | 8,010 |

See Notes to Consolidated Financial Statements.

95

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 87:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Comprehensive Income

(dollars in millions)
|    |                                                                                |                                  |       |      |       |      |       |       |    |       |
|---:|:----------------------------------------------------------------------------------|:---------------------------------|:------|:-----|:------|:-----|:------|:------|:---|:------|
|  1 |                                                                                | For the Years Ended December 31, |       |      |       |      |       |       |    |       |
|  2 |                                                                                | 2023                             |       | 2022 |       | 2021 |       |       |    |       |
|  3 | Net income                                                                        | $                                | 2,940 |      |       | $    | 4,374 |       | $  | 5,422 |
|  4 | Other comprehensive income (loss), net of tax                                     |                                  |       |      |       |      |       |       |    |       |
|  5 | Unrealized gains (losses) on available-for-sale investment securities, net of tax | 99                               |       |      | (250) |      |       | (170) |    |       |
|  6 | Unrealized gains (losses) on cash flow hedges, net of tax                         | 6                                |       |      | (5)   |      |       | 3     |    |       |
|  7 | Unrealized pension and post-retirement plan gains, net of tax                     | 9                                |       |      | 10    |      |       | 28    |    |       |
|  8 | Other comprehensive income (loss)                                                 | 114                              |       |      | (245) |      |       | (139) |    |       |
|  9 | Comprehensive income                                                              | $                                | 3,054 |      |       | $    | 4,129 |       | $  | 5,283 |

See Notes to the Consolidated Financial Statements.

-87-

AMERICAN EXPRESS CO 10-K form for the fiscal year ended 2023-12-31, page 95:
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31 (Millions)		2023		2022		2021

Net income		$	8,374 			$	7,514 			$	8,060

Other comprehensive income (loss):

Net unrealized debt securities gains (losses), net of tax		 			(87)			(42)

Foreign currency translation adjustments, net of hedges and tax		 			(230)			(163)

Net unrealized pension and other postretirement benefits, net of tax		37 			52 			155

Other comprehensive income (loss)		138 			(265)			(50)

Comprehensive income		$	8,512 			$	7,249 			$	8,010

See Notes to Consolidated Financial Statements.

95

, Discover Financial Services 10-K form for the fiscal year ended 2023-12-31, page 87:
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Comprehensive Income

(dollars in millions)

 	For the Years Ended December 31,

 	2023		2022		2021

Net income	$	2,940 			$	4,374 			$	5,422

Other comprehensive income (loss), net of tax

Unrealized gains (losses) on available-for-sale investment securities, net of tax	99 			(250)			(170)

Unrealized gains (losses) on cash flow hedges, net of tax	6 			(5)			3

Unrealized pension and post-retirement plan gains, net of tax	9 			10 			28

Other comprehensive income (loss)	114 			(245)			(139)

Comprehensive income	$	3,054 			$	4,129 			$	5,283

See Notes to the Consolidated Financial Statements.

-87-

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31 (Millions)		2023		2022		2021

Net income		$	8,374 			$	7,514 			$	8,060

Other comprehensive income (loss):

Net unrealized debt securities gains (losses), net of tax		 			(87)			(42)

Foreign currency translation adjustments, net of hedges and tax		 			(230)			(163)

Net unrealized pension and other postretirement benefits, net of tax		37 			52 			155

Other comprehensive income (loss)		138 			(265)			(50)

Comprehensive income		$	8,512 			$	7,249 			$	8,010

See Notes to Consolidated Financial Statements.

95

,
DISCOVER FINANCIAL SERVICES

Consolidated Statements of Comprehensive Income

(dollars in millions)

 	For the Years Ended December 31,

 	2023		2022		2021

Net income	$	2,940 			$	4,374 			$	5,422

Other comprehensive income (loss), net of tax

Unrealized gains (losses) on available-for-sale investment securities, net of tax	99 			(250)			(170)

Unrealized gains (losses) on cash flow hedges, net of tax	6 			(5)			3

Unrealized pension and post-retirement plan gains, net of tax	9 			10 			28

Other comprehensive income (loss)	114 			(245)			(139)

Comprehensive income	$	3,054 			$	4,129 			$	5,283

See Notes to the Consolidated Financial Statements.

-87-


Question: What does Nike's solvency position look like for fiscal year 2018, and how can it be assessed using Debt-to-Equity and Debt-to-Assets ratios?

Debt-to-Equity Ratio:
Formula: Debt-to-Equity Ratio = Total Debt / Shareholders’ Equity

Data:

Total Debt (Long-term) = $3,468 million
Shareholders' Equity = $9,812 million
Calculation:
Debt-to-Equity Ratio = 3,468 / 9,812 ≈ 0.35

Interpretation:
For every dollar of equity, Nike has $0.35 in long-term debt.

Debt-to-Assets Ratio:
Formula: Debt-to-Assets Ratio = Total Debt / Total Assets

Total Debt (Long-term) = $3,468 million
Total Assets = $22,536 million
Calculation:
Debt-to-Assets Ratio = 3,468 / 22,536 ≈ 0.15

Interpretation:
15% of Nike's assets are financed by debt.

Conclusion:
Nike's solvency position in 2018 appears strong, with a low reliance on debt compared to its equity and assets. This reflects a conservative capital structure and a robust capacity to meet its long-term obligations.

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 46:

NIKE, Inc. Consolidated Balance Sheets

 	 	May 31,

(In millions)	 	2018	 	2017

ASSETS

Current assets:

Cash and equivalents	 	$	4,249		 	$	3,808

Short-term investments	 	996		 	2,371

Accounts receivable, net	 	3,498		 	3,677

Inventories	 	5,261		 	5,055

Prepaid expenses and other current assets	 	1,130		 	1,150

Total current assets	 	15,134		 	16,061

Property, plant and equipment, net	 	4,454		 	3,989

Identifiable intangible assets, net	 	285		 	283

Goodwill	 	154		 	139

Deferred income taxes and other assets	 	2,509		 	2,787

TOTAL ASSETS	 	$	22,536		 	$	23,259

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt	 	$	6		 	$	6

Notes payable	 	336		 	325

Accounts payable	 	2,279		 	2,048

Accrued liabilities	 	3,269		 	3,011

Income taxes payable	 	150		 	84

Total current liabilities	 	6,040		 	5,474

Long-term debt	 	3,468		 	3,471

Deferred income taxes and other liabilities	 	3,216		 	1,907

Commitments and contingencies (Note 15)

Redeemable preferred stock	 	-		 	-

Shareholders' equity:

Common stock at stated value:

Class A convertible - 329 and 329 shares outstanding	 	-		 	-

Class B - 1,272 and 1,314 shares outstanding	 	3		 	3

Capital in excess of stated value	 	6,384		 	5,710

Accumulated other comprehensive loss	 	(92	)	 	(213	)

Retained earnings	 	3,517		 	6,907

Total shareholders' equity	 	9,812		 	12,407

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	 	$	22,536		 	$	23,259

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

46


Question: How can we calculate Nike's Days Payable Outstanding (DPO) for 2018, and what does the result indicate about the company's payment practices?

To calculate Nike's Days Payable Outstanding (DPO) for 2018:

Formula:
DPO = (Average Accounts Payable / Cost of Goods Sold) × 365

Accounts Payable at the end of 2017 = $2,048 million
Accounts Payable at the end of 2018 = $2,279 million
Cost of Goods Sold (COGS) for 2018 = $20,441 million
Step 1: Calculate Average Accounts Payable:
Average Accounts Payable = (Accounts Payable at 2017 + Accounts Payable at 2018) / 2
Average Accounts Payable = ($2,048 million + $2,279 million) / 2 = $2,163.5 million

Step 2: Calculate DPO:
DPO = ($2,163.5 million / $20,441 million) × 365 ≈ 38.6 days

Final Answer:
Nike's Days Payable Outstanding (DPO) for 2018 is approximately 39 days. This indicates that, on average, Nike took about 39 days to pay its suppliers, reflecting its payment practices and efficiency in managing outgoing payments.

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 44:

NIKE, Inc. Consolidated Statements of Income

 	 	Year Ended May 31,

(In millions, except per share data)	 	2018	 	2017	 	2016

Revenues	 	$	36,397		 	$	34,350		 	$	32,376

Cost of sales	 	20,441		 	19,038		 	17,405

Gross profit	 	15,956		 	15,312		 	14,971

Demand creation expense	 	3,577		 	3,341		 	3,278

Operating overhead expense	 	7,934		 	7,222		 	7,191

Total selling and administrative expense	 	11,511		 	10,563		 	10,469

Interest expense (income), net	 	54		 	59		 	19

Other expense (income), net	 	66		 	(196	)	 	(140	)

Income before income taxes	 	4,325		 	4,886		 	4,623

Income tax expense	 	2,392		 	646		 	863

NET INCOME	 	$	1,933		 	$	4,240		 	$	3,760

Earnings per common share:

Basic	 	$	1.19		 	$	2.56		 	$	2.21

Diluted	 	$	1.17		 	$	2.51		 	$	2.16

Dividends declared per common share	 	$	0.78		 	$	0.70		 	$	0.62

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

44

, NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 46:

NIKE, Inc. Consolidated Balance Sheets

 	 	May 31,

(In millions)	 	2018	 	2017

ASSETS

Current assets:

Cash and equivalents	 	$	4,249		 	$	3,808

Short-term investments	 	996		 	2,371

Accounts receivable, net	 	3,498		 	3,677

Inventories	 	5,261		 	5,055

Prepaid expenses and other current assets	 	1,130		 	1,150

Total current assets	 	15,134		 	16,061

Property, plant and equipment, net	 	4,454		 	3,989

Identifiable intangible assets, net	 	285		 	283

Goodwill	 	154		 	139

Deferred income taxes and other assets	 	2,509		 	2,787

TOTAL ASSETS	 	$	22,536		 	$	23,259

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt	 	$	6		 	$	6

Notes payable	 	336		 	325

Accounts payable	 	2,279		 	2,048

Accrued liabilities	 	3,269		 	3,011

Income taxes payable	 	150		 	84

Total current liabilities	 	6,040		 	5,474

Long-term debt	 	3,468		 	3,471

Deferred income taxes and other liabilities	 	3,216		 	1,907

Commitments and contingencies (Note 15)

Redeemable preferred stock	 	-		 	-

Shareholders' equity:

Common stock at stated value:

Class A convertible - 329 and 329 shares outstanding	 	-		 	-

Class B - 1,272 and 1,314 shares outstanding	 	3		 	3

Capital in excess of stated value	 	6,384		 	5,710

Accumulated other comprehensive loss	 	(92	)	 	(213	)

Retained earnings	 	3,517		 	6,907

Total shareholders' equity	 	9,812		 	12,407

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	 	$	22,536		 	$	23,259

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

46

NIKE, Inc. Consolidated Statements of Income

 	 	Year Ended May 31,

(In millions, except per share data)	 	2018	 	2017	 	2016

Revenues	 	$	36,397		 	$	34,350		 	$	32,376

Cost of sales	 	20,441		 	19,038		 	17,405

Gross profit	 	15,956		 	15,312		 	14,971

Demand creation expense	 	3,577		 	3,341		 	3,278

Operating overhead expense	 	7,934		 	7,222		 	7,191

Total selling and administrative expense	 	11,511		 	10,563		 	10,469

Interest expense (income), net	 	54		 	59		 	19

Other expense (income), net	 	66		 	(196	)	 	(140	)

Income before income taxes	 	4,325		 	4,886		 	4,623

Income tax expense	 	2,392		 	646		 	863

NET INCOME	 	$	1,933		 	$	4,240		 	$	3,760

Earnings per common share:

Basic	 	$	1.19		 	$	2.56		 	$	2.21

Diluted	 	$	1.17		 	$	2.51		 	$	2.16

Dividends declared per common share	 	$	0.78		 	$	0.70		 	$	0.62

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

44

,

NIKE, Inc. Consolidated Balance Sheets

 	 	May 31,

(In millions)	 	2018	 	2017

ASSETS

Current assets:

Cash and equivalents	 	$	4,249		 	$	3,808

Short-term investments	 	996		 	2,371

Accounts receivable, net	 	3,498		 	3,677

Inventories	 	5,261		 	5,055

Prepaid expenses and other current assets	 	1,130		 	1,150

Total current assets	 	15,134		 	16,061

Property, plant and equipment, net	 	4,454		 	3,989

Identifiable intangible assets, net	 	285		 	283

Goodwill	 	154		 	139

Deferred income taxes and other assets	 	2,509		 	2,787

TOTAL ASSETS	 	$	22,536		 	$	23,259

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt	 	$	6		 	$	6

Notes payable	 	336		 	325

Accounts payable	 	2,279		 	2,048

Accrued liabilities	 	3,269		 	3,011

Income taxes payable	 	150		 	84

Total current liabilities	 	6,040		 	5,474

Long-term debt	 	3,468		 	3,471

Deferred income taxes and other liabilities	 	3,216		 	1,907

Commitments and contingencies (Note 15)

Redeemable preferred stock	 	-		 	-

Shareholders' equity:

Common stock at stated value:

Class A convertible - 329 and 329 shares outstanding	 	-		 	-

Class B - 1,272 and 1,314 shares outstanding	 	3		 	3

Capital in excess of stated value	 	6,384		 	5,710

Accumulated other comprehensive loss	 	(92	)	 	(213	)

Retained earnings	 	3,517		 	6,907

Total shareholders' equity	 	9,812		 	12,407

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	 	$	22,536		 	$	23,259

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

46


Question: What is Nike's Dividend Payout Ratio for 2018, and what does it indicate about the company's dividend policy?

To calculate Nike's Dividend Payout Ratio for 2018:

Formula:
Dividend Payout Ratio (%) = (Dividend per Share / Earnings per Share (EPS)) × 100

Dividend per Share (2018) = $0.78
Earnings per Share (EPS, 2018) = $1.17
Calculation:
Dividend Payout Ratio (%) = (0.78 / 1.17) × 100 ≈ 66.67%
Nike’s Dividend Payout Ratio for 2018 is approximately 66.7%. This indicates that the company distributed about two-thirds of its earnings to shareholders as dividends, demonstrating a strong commitment to returning value to shareholders.

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 44:

NIKE, Inc. Consolidated Statements of Income

 	 	Year Ended May 31,

(In millions, except per share data)	 	2018	 	2017	 	2016

Revenues	 	$	36,397		 	$	34,350		 	$	32,376

Cost of sales	 	20,441		 	19,038		 	17,405

Gross profit	 	15,956		 	15,312		 	14,971

Demand creation expense	 	3,577		 	3,341		 	3,278

Operating overhead expense	 	7,934		 	7,222		 	7,191

Total selling and administrative expense	 	11,511		 	10,563		 	10,469

Interest expense (income), net	 	54		 	59		 	19

Other expense (income), net	 	66		 	(196	)	 	(140	)

Income before income taxes	 	4,325		 	4,886		 	4,623

Income tax expense	 	2,392		 	646		 	863

NET INCOME	 	$	1,933		 	$	4,240		 	$	3,760

Earnings per common share:

Basic	 	$	1.19		 	$	2.56		 	$	2.21

Diluted	 	$	1.17		 	$	2.51		 	$	2.16

Dividends declared per common share	 	$	0.78		 	$	0.70		 	$	0.62

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

44


Question: What is Nike’s Free Cash Flow (FCF) for 2018, and how does it reflect the company's financial flexibility?

Free Cash Flow = Cash from Operating Activities - Capital Expenditures

Data from 2018 Financial Statements:
Cash from Operating Activities: $4,955 million
Capital Expenditures (CapEx): $1,028 million
Calculation:
FCF = $4,955 - $1,028 = $3,927 million

This figure reflects Nike’s ability to generate cash after covering operational and capital investment needs, showcasing strong financial flexibility.

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 47:

NIKE, Inc. Consolidated Statements of Cash Flows

 	 	Year Ended May 31,

(In millions)	 	2018	 	2017	 	2016

Cash provided by operations:

Net income	 	$	1,933		 	$	4,240		 	$	3,760

Adjustments to reconcile net income to net cash provided by operations:

Depreciation	 	747		 	706		 	649

Deferred income taxes	 	647		 	(273	)	 	(80	)

Stock-based compensation	 	218		 	215		 	236

Amortization and other	 	27		 	10		 	13

Net foreign currency adjustments	 	(99	)	 	(117	)	 	98

Changes in certain working capital components and other assets and liabilities:

Decrease (increase) in accounts receivable	 	187		 	(426	)	 	60

(Increase) in inventories	 	(255	)	 	(231	)	 	(590	)

Decrease (increase) in prepaid expenses and other current and non-current assets	 	35		 	(120	)	 	(161	)

Increase (decrease) in accounts payable, accrued liabilities and other current and non-current liabilities	 	1,515		 	(158	)	 	(586	)

Cash provided by operations	 	4,955		 	3,846		 	3,399

Cash provided (used) by investing activities:

Purchases of short-term investments	 	(4,783	)	 	(5,928	)	 	(5,367	)

Maturities of short-term investments	 	3,613		 	3,623		 	2,924

Sales of short-term investments	 	2,496		 	2,423		 	2,386

Investments in reverse repurchase agreements	 	-		 	-		 	150

Additions to property, plant and equipment	 	(1,028	)	 	(1,105	)	 	(1,143	)

Disposals of property, plant and equipment	 	3		 	13		 	10

Other investing activities	 	(25	)	 	(34	)	 	6

Cash provided (used) by investing activities	 	276		 	(1,008	)	 	(1,034	)

Cash used by financing activities:

Net proceeds from long-term debt issuance	 	-		 	1,482		 	981

Long-term debt payments, including current portion	 	(6	)	 	(44	)	 	(106	)

Increase (decrease) in notes payable	 	13		 	327		 	(67	)

Payments on capital lease and other financing obligations	 	(23	)	 	(17	)	 	(7	)

Proceeds from exercise of stock options and other stock issuances	 	733		 	489		 	507

Repurchase of common stock	 	(4,254	)	 	(3,223	)	 	(3,238	)

Dividends - common and preferred	 	(1,243	)	 	(1,133	)	 	(1,022	)

Tax payments for net share settlement of equity awards	 	(55	)	 	(29	)	 	(22	)

Cash used by financing activities	 	(4,835	)	 	(2,148	)	 	(2,974	)

Effect of exchange rate changes on cash and equivalents	 	45		 	(20	)	 	(105	)

Net increase (decrease) in cash and equivalents	 	441		 	670		 	(714	)

Cash and equivalents, beginning of year	 	3,808		 	3,138		 	3,852

CASH AND EQUIVALENTS, END OF YEAR	 	$	4,249		 	$	3,808		 	$	3,138

Supplemental disclosure of cash flow information:

Cash paid during the year for:

Interest, net of capitalized interest	 	$	125		 	$	98		 	$	70

Income taxes	 	529		 	703		 	748

Non-cash additions to property, plant and equipment	 	294		 	266		 	252

Dividends declared and not paid	 	320		 	300		 	271

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

47


Question: How has Nike's working capital changed from 2017 to 2018, and what implications does this have for operational efficiency?

Working Capital Comparison:
Working Capital 2018:

Total Current Assets: $15,134 million
Total Current Liabilities: $6,040 million
Working Capital = $15,134 - $6,040 = $9,094 million
Working Capital 2017:

Total Current Assets: $16,061 million
Total Current Liabilities: $5,474 million
Working Capital = $16,061 - $5,474 = $10,587 million
Change in Working Capital:
Change = $9,094 - $10,587 = -$1,493 million
Implications:
The decrease in working capital suggests tighter management of current assets and liabilities, possibly to enhance operational efficiency or reflect strategic investment in inventory and accounts payable adjustments

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 46:

NIKE, Inc. Consolidated Balance Sheets

 	 	May 31,

(In millions)	 	2018	 	2017

ASSETS

Current assets:

Cash and equivalents	 	$	4,249		 	$	3,808

Short-term investments	 	996		 	2,371

Accounts receivable, net	 	3,498		 	3,677

Inventories	 	5,261		 	5,055

Prepaid expenses and other current assets	 	1,130		 	1,150

Total current assets	 	15,134		 	16,061

Property, plant and equipment, net	 	4,454		 	3,989

Identifiable intangible assets, net	 	285		 	283

Goodwill	 	154		 	139

Deferred income taxes and other assets	 	2,509		 	2,787

TOTAL ASSETS	 	$	22,536		 	$	23,259

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt	 	$	6		 	$	6

Notes payable	 	336		 	325

Accounts payable	 	2,279		 	2,048

Accrued liabilities	 	3,269		 	3,011

Income taxes payable	 	150		 	84

Total current liabilities	 	6,040		 	5,474

Long-term debt	 	3,468		 	3,471

Deferred income taxes and other liabilities	 	3,216		 	1,907

Commitments and contingencies (Note 15)

Redeemable preferred stock	 	-		 	-

Shareholders' equity:

Common stock at stated value:

Class A convertible - 329 and 329 shares outstanding	 	-		 	-

Class B - 1,272 and 1,314 shares outstanding	 	3		 	3

Capital in excess of stated value	 	6,384		 	5,710

Accumulated other comprehensive loss	 	(92	)	 	(213	)

Retained earnings	 	3,517		 	6,907

Total shareholders' equity	 	9,812		 	12,407

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	 	$	22,536		 	$	23,259

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

46


Question: How did Nike Inc.'s net income in 2018 compare to 2017, and what was its impact on retained earnings?

Net Income 2018: $1,933 million
Net Income 2017: $4,240 million

Formula:
Percentage Change in Net Income = ((Net Income 2018 - Net Income 2017) / Net Income 2017) × 100

Calculation:
Percentage Change = ((1,933 - 4,240) / 4,240) × 100
Percentage Change = (-2,307 / 4,240) × 100 ≈ -54.44%

Impact on Retained Earnings:
Net income directly impacts retained earnings, as it represents the company's profit added to the retained earnings after dividends are paid. Despite a positive net income in 2018, retained earnings declined significantly due to higher dividend payouts ($1,265 million) and share repurchases, coupled with the significant decrease in net income.

Answer:
Net income decreased by approximately 54.44% from 2017 to 2018. This substantial decline negatively impacted retained earnings, which dropped from $6,907 million in 2017 to $3,517 million in 2018, driven by reduced profitability and higher shareholder returns.

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 44:

NIKE, Inc. Consolidated Statements of Income

 	 	Year Ended May 31,

(In millions, except per share data)	 	2018	 	2017	 	2016

Revenues	 	$	36,397		 	$	34,350		 	$	32,376

Cost of sales	 	20,441		 	19,038		 	17,405

Gross profit	 	15,956		 	15,312		 	14,971

Demand creation expense	 	3,577		 	3,341		 	3,278

Operating overhead expense	 	7,934		 	7,222		 	7,191

Total selling and administrative expense	 	11,511		 	10,563		 	10,469

Interest expense (income), net	 	54		 	59		 	19

Other expense (income), net	 	66		 	(196	)	 	(140	)

Income before income taxes	 	4,325		 	4,886		 	4,623

Income tax expense	 	2,392		 	646		 	863

NET INCOME	 	$	1,933		 	$	4,240		 	$	3,760

Earnings per common share:

Basic	 	$	1.19		 	$	2.56		 	$	2.21

Diluted	 	$	1.17		 	$	2.51		 	$	2.16

Dividends declared per common share	 	$	0.78		 	$	0.70		 	$	0.62

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

44

, NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 48:

NIKE, Inc. Consolidated Statements of Shareholders' Equity

 	 	Common Stock	 	Capital inExcessof StatedValue	 	AccumulatedOtherComprehensiveIncome	 	RetainedEarnings	 	Total

 	 	Class A	 	Class B

(In millions, except per share data)	 	Shares	 	Amount	 	Shares	 	Amount

Balance at May 31, 2015	 	355		 	$	-		 	1,357		 	$	3		 	$	4,165		 	$	1,246		 	$	7,293		 	$	12,707

Stock options exercised	 	 	 	 	 	22		 	 	 	680		 	 	 	 	 	680

Conversion to Class B Common Stock	 	(2	)	 	-		 	2		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(55	)	 	 	 	(148	)	 	 	 	(3,090	)	 	(3,238	)

Dividends on common stock ($0.62 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,053	)	 	(1,053	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	3		 	 	 	105		 	 	 	(11	)	 	94

Stock-based compensation	 	 	 	 	 	 	 	 	 	236		 	 	 	 	 	236

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	3,760		 	3,760

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	(928	)	 	 	 	(928	)

Balance at May 31, 2016	 	353		 	$	-		 	1,329		 	$	3		 	$	5,038		 	$	318		 	$	6,899		 	$	12,258

Stock options exercised	 	 	 	 	 	17		 	 	 	525		 	 	 	 	 	525

Conversion to Class B Common Stock	 	(24	)	 	-		 	24		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(60	)	 	 	 	(189	)	 	 	 	(3,060	)	 	(3,249	)

Dividends on common stock ($0.70 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,159	)	 	(1,159	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	4		 	 	 	121		 	 	 	(13	)	 	108

Stock-based compensation	 	 	 	 	 	 	 	 	 	215		 	 	 	 	 	215

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	4,240		 	4,240

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	(531	)	 	 	 	(531	)

Balance at May 31, 2017	 	329		 	$	-		 	1,314		 	$	3		 	$	5,710		 	$	(213	)	 	$	6,907		 	$	12,407

Stock options exercised	 	 	 	 	 	24		 	 	 	600		 	 	 	 	 	600

Conversion to Class B Common Stock	 	-		 	-		 	-		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(70	)	 	 	 	(254	)	 	 	 	(4,013	)	 	(4,267	)

Dividends on common stock ($0.78 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,265	)	 	(1,265	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	4		 	 	 	110		 	 	 	(28	)	 	82

Stock-based compensation	 	 	 	 	 	 	 	 	 	218		 	 	 	 	 	218

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	1,933		 	1,933

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	104		 	 	 	104

Reclassifications to retained earnings in accordance with ASU 2018-02	 	 	 	 	 	 	 	 	 	 	 	17		 	(17	)	 	-

Balance at May 31, 2018	 	329		 	$	-		 	1,272		 	$	3		 	$	6,384		 	$	(92	)	 	$	3,517		 	$	9,812

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

48

NIKE, Inc. Consolidated Statements of Income

 	 	Year Ended May 31,

(In millions, except per share data)	 	2018	 	2017	 	2016

Revenues	 	$	36,397		 	$	34,350		 	$	32,376

Cost of sales	 	20,441		 	19,038		 	17,405

Gross profit	 	15,956		 	15,312		 	14,971

Demand creation expense	 	3,577		 	3,341		 	3,278

Operating overhead expense	 	7,934		 	7,222		 	7,191

Total selling and administrative expense	 	11,511		 	10,563		 	10,469

Interest expense (income), net	 	54		 	59		 	19

Other expense (income), net	 	66		 	(196	)	 	(140	)

Income before income taxes	 	4,325		 	4,886		 	4,623

Income tax expense	 	2,392		 	646		 	863

NET INCOME	 	$	1,933		 	$	4,240		 	$	3,760

Earnings per common share:

Basic	 	$	1.19		 	$	2.56		 	$	2.21

Diluted	 	$	1.17		 	$	2.51		 	$	2.16

Dividends declared per common share	 	$	0.78		 	$	0.70		 	$	0.62

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

44

,

NIKE, Inc. Consolidated Statements of Shareholders' Equity

 	 	Common Stock	 	Capital inExcessof StatedValue	 	AccumulatedOtherComprehensiveIncome	 	RetainedEarnings	 	Total

 	 	Class A	 	Class B

(In millions, except per share data)	 	Shares	 	Amount	 	Shares	 	Amount

Balance at May 31, 2015	 	355		 	$	-		 	1,357		 	$	3		 	$	4,165		 	$	1,246		 	$	7,293		 	$	12,707

Stock options exercised	 	 	 	 	 	22		 	 	 	680		 	 	 	 	 	680

Conversion to Class B Common Stock	 	(2	)	 	-		 	2		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(55	)	 	 	 	(148	)	 	 	 	(3,090	)	 	(3,238	)

Dividends on common stock ($0.62 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,053	)	 	(1,053	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	3		 	 	 	105		 	 	 	(11	)	 	94

Stock-based compensation	 	 	 	 	 	 	 	 	 	236		 	 	 	 	 	236

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	3,760		 	3,760

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	(928	)	 	 	 	(928	)

Balance at May 31, 2016	 	353		 	$	-		 	1,329		 	$	3		 	$	5,038		 	$	318		 	$	6,899		 	$	12,258

Stock options exercised	 	 	 	 	 	17		 	 	 	525		 	 	 	 	 	525

Conversion to Class B Common Stock	 	(24	)	 	-		 	24		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(60	)	 	 	 	(189	)	 	 	 	(3,060	)	 	(3,249	)

Dividends on common stock ($0.70 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,159	)	 	(1,159	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	4		 	 	 	121		 	 	 	(13	)	 	108

Stock-based compensation	 	 	 	 	 	 	 	 	 	215		 	 	 	 	 	215

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	4,240		 	4,240

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	(531	)	 	 	 	(531	)

Balance at May 31, 2017	 	329		 	$	-		 	1,314		 	$	3		 	$	5,710		 	$	(213	)	 	$	6,907		 	$	12,407

Stock options exercised	 	 	 	 	 	24		 	 	 	600		 	 	 	 	 	600

Conversion to Class B Common Stock	 	-		 	-		 	-		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(70	)	 	 	 	(254	)	 	 	 	(4,013	)	 	(4,267	)

Dividends on common stock ($0.78 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,265	)	 	(1,265	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	4		 	 	 	110		 	 	 	(28	)	 	82

Stock-based compensation	 	 	 	 	 	 	 	 	 	218		 	 	 	 	 	218

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	1,933		 	1,933

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	104		 	 	 	104

Reclassifications to retained earnings in accordance with ASU 2018-02	 	 	 	 	 	 	 	 	 	 	 	17		 	(17	)	 	-

Balance at May 31, 2018	 	329		 	$	-		 	1,272		 	$	3		 	$	6,384		 	$	(92	)	 	$	3,517		 	$	9,812

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

48


Question: How does the change in "Capital in Excess of Stated Value" from 2017 to 2018 reflect Nike Inc.'s equity transactions?

Capital in Excess of Stated Value 2018: $6,384 million
Capital in Excess of Stated Value 2017: $5,710 million

Formula:
Percentage Change in Capital in Excess of Stated Value = ((Capital 2018 - Capital 2017) / Capital 2017) × 100

Calculation:
Change: $6,384 million - $5,710 million = $674 million
Percentage Change = ((6,384 - 5,710) / 5,710) × 100
Percentage Change = (674 / 5,710) × 100 ≈ 11.80%

Answer:
The "Capital in Excess of Stated Value" increased by approximately 11.80% from 2017 to 2018. This increase reflects equity transactions such as the issuance of stock to employees through stock-based compensation programs and stock options exercised, which added to the capital base. Despite share repurchases reducing total shareholders' equity, the issuance of new equity for employee incentives contributed positively to this account, indicating a balanced equity transaction strategy by the company

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 48:

NIKE, Inc. Consolidated Statements of Shareholders' Equity

 	 	Common Stock	 	Capital inExcessof StatedValue	 	AccumulatedOtherComprehensiveIncome	 	RetainedEarnings	 	Total

 	 	Class A	 	Class B

(In millions, except per share data)	 	Shares	 	Amount	 	Shares	 	Amount

Balance at May 31, 2015	 	355		 	$	-		 	1,357		 	$	3		 	$	4,165		 	$	1,246		 	$	7,293		 	$	12,707

Stock options exercised	 	 	 	 	 	22		 	 	 	680		 	 	 	 	 	680

Conversion to Class B Common Stock	 	(2	)	 	-		 	2		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(55	)	 	 	 	(148	)	 	 	 	(3,090	)	 	(3,238	)

Dividends on common stock ($0.62 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,053	)	 	(1,053	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	3		 	 	 	105		 	 	 	(11	)	 	94

Stock-based compensation	 	 	 	 	 	 	 	 	 	236		 	 	 	 	 	236

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	3,760		 	3,760

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	(928	)	 	 	 	(928	)

Balance at May 31, 2016	 	353		 	$	-		 	1,329		 	$	3		 	$	5,038		 	$	318		 	$	6,899		 	$	12,258

Stock options exercised	 	 	 	 	 	17		 	 	 	525		 	 	 	 	 	525

Conversion to Class B Common Stock	 	(24	)	 	-		 	24		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(60	)	 	 	 	(189	)	 	 	 	(3,060	)	 	(3,249	)

Dividends on common stock ($0.70 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,159	)	 	(1,159	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	4		 	 	 	121		 	 	 	(13	)	 	108

Stock-based compensation	 	 	 	 	 	 	 	 	 	215		 	 	 	 	 	215

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	4,240		 	4,240

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	(531	)	 	 	 	(531	)

Balance at May 31, 2017	 	329		 	$	-		 	1,314		 	$	3		 	$	5,710		 	$	(213	)	 	$	6,907		 	$	12,407

Stock options exercised	 	 	 	 	 	24		 	 	 	600		 	 	 	 	 	600

Conversion to Class B Common Stock	 	-		 	-		 	-		 	-		 	 	 	 	 	 	 	-

Repurchase of Class B Common Stock	 	 	 	 	 	(70	)	 	 	 	(254	)	 	 	 	(4,013	)	 	(4,267	)

Dividends on common stock ($0.78 per share) and preferred stock ($0.10 per share)	 	 	 	 	 	 	 	 	 	 	 	 	 	(1,265	)	 	(1,265	)

Issuance of shares to employees, net of shares withheld for employee taxes	 	 	 	 	 	4		 	 	 	110		 	 	 	(28	)	 	82

Stock-based compensation	 	 	 	 	 	 	 	 	 	218		 	 	 	 	 	218

Net income	 	 	 	 	 	 	 	 	 	 	 	 	 	1,933		 	1,933

Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	104		 	 	 	104

Reclassifications to retained earnings in accordance with ASU 2018-02	 	 	 	 	 	 	 	 	 	 	 	17		 	(17	)	 	-

Balance at May 31, 2018	 	329		 	$	-		 	1,272		 	$	3		 	$	6,384		 	$	(92	)	 	$	3,517		 	$	9,812

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

48


Question: What is the percentage change in Nike Inc.'s income tax expense from 2017 to 2018, and how did it affect Nike Inc.'s net income?

Income Tax Expense 2018: $2,392 million
Income Tax Expense 2017: $646 million
Net Income 2018: $1,933 million
Net Income 2017: $4,240 million

Formula:
Percentage Change in Income Tax Expense = ((Income Tax Expense 2018 - Income Tax Expense 2017) / Income Tax Expense 2017) × 100

Calculation for Income Tax Expense:
Percentage Change = ((2,392 - 646) / 646) × 100
Percentage Change = (1,746 / 646) × 100 ≈ 270.43%

Effect on Net Income:
Despite a higher income tax expense, Nike’s pre-tax income decreased only slightly from $4,886 million in 2017 to $4,325 million in 2018. However, the significant increase in income tax expense (270.43%) caused net income to drop by 54.44% from $4,240 million in 2017 to $1,933 million in 2018. This steep increase in tax expense was driven by the enactment of the Tax Cuts and Jobs Act, which included a one-time transition tax on foreign earnings.

Answer:
Income tax expense increased by 270.43% from 2017 to 2018, primarily due to the Tax Cuts and Jobs Act. This substantial rise in tax expense significantly impacted net income, resulting in a decrease of 54.44%, even though pre-tax income saw only a modest decline.

ITEM 8. Financial Statements and Supplementary Data

NIKE INC 10-K form for the fiscal year ended 2018-05-31, page 44:

NIKE, Inc. Consolidated Statements of Income

 	 	Year Ended May 31,

(In millions, except per share data)	 	2018	 	2017	 	2016

Revenues	 	$	36,397		 	$	34,350		 	$	32,376

Cost of sales	 	20,441		 	19,038		 	17,405

Gross profit	 	15,956		 	15,312		 	14,971

Demand creation expense	 	3,577		 	3,341		 	3,278

Operating overhead expense	 	7,934		 	7,222		 	7,191

Total selling and administrative expense	 	11,511		 	10,563		 	10,469

Interest expense (income), net	 	54		 	59		 	19

Other expense (income), net	 	66		 	(196	)	 	(140	)

Income before income taxes	 	4,325		 	4,886		 	4,623

Income tax expense	 	2,392		 	646		 	863

NET INCOME	 	$	1,933		 	$	4,240		 	$	3,760

Earnings per common share:

Basic	 	$	1.19		 	$	2.56		 	$	2.21

Diluted	 	$	1.17		 	$	2.51		 	$	2.16

Dividends declared per common share	 	$	0.78		 	$	0.70		 	$	0.62

The accompanying Notes to the Consolidated Financial Statements are an integral part of this statement.

44