1. Assume that Nike decides to build a new warehouse complex at a significant cost, financed with additional project-specific long-term debt. Describe how this project and financing will impact Nike’s financial statements. In your response, focus on the impact on the ratios gross margin, profit margin, ROA, current ratio, and debt-to-equity Second, assume that management is wondering whether to capitalize the interest associated with the warehouse project’s financing. 
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3. Describe how the financial statements will be impacted by the choice to capitalize interest or not. Also describe managements’ incentives to capitalize interest (or not to capitalize).

Answer rating: 100% (QA)

Answer Impact of the Project and Financing on Financial Statements 1 Gross Margin The warehouse project and financing will likely have a positive effect on Nikes gross margin ratio This is because the ... View the full answer