Essay on Nike Inc.
Nike Inc. as one of the biggest marketer of footwear all over the world has a decision to expand their products internationally by opening the new stores and departments. It should raise the funds in order to finance the new projects. The financial managers of the Nike Inc. are able to utilize many different sources of money. For instance, the financial managers can utilize the retained earnings. They represent the information on the presence and movement of the amount of retained earnings.
The retained earnings are calculated as the difference between income and expenditure of the company to be determined by the accounting standards. This is a portion of profit, which had not been paid to the shareholders in the form of dividends, and was used to finance the activities of the enterprise.
The financial managers can use retained earnings in order to finance the new projects because they believe that they are the funds, which cost nothing.
Utilizing the retained earnings is very profitable for the company since it should not attract the shareholders or any other persons to be involved in the operational process. Thus, Nike Inc. can use the retained earnings if it does not aim to get current income. However, it is possible to remember that the retained earnings to finance the new project can have a negative impact on the company since it is not able to pay the shareholders salable dividends. In addition to the retained earnings, Nike Inc. is able to use loan stock in order to finance their projects. Loan stock is the second most important form of shares of securities. Loan stock is a long term debt capital, that is, buying loan stock, the investor does not become the owner of the company, and he/she becomes the company’s creditor.
Furthermore, Nike Inc. can utilize banking lending as another source of finance. The company can borrow the funds from the bank. In turn, bank lending is considered to be a method of financing needs on the terms of payment, maturity and repayment. Credit relations can take many different forms. Credit relations can be organized in the form of bank loans, as well as in the form of commercial lending, when the enterprises (a borrower and a lender) execute a promissory note. The company has the right to borrow money, and at the bank, where it opened an account, and in any other bank. This order gives the company a golden opportunity to choose the bank Nike Inc. wants to deal with.
Government assistance is another source of finance the company can utilize. The government can provide the company with funds in the form of cash grants and other different kinds of assistance. Government assistance can be very helpful for the company because the managers will not be able to return the funds they are given. However, it will be very difficult to receive government assistance and any other cash grants as the company should follow the certain criteria.
I would purchase the shares of the Nike Inc., if I had $ 100,000 in my bank account. This is due to the fact that the cost of Nike Inc. share has significantly increased. In 2012, the company’s price of the shares was more than 105. Thus, it is possible to conclude that investing the funds in Nike Inc. is very advantageous to those who invested in its shares.
