Nike's revenue for the 12 months ending May 31, 2022, which increased by 9.5% from the prior

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Question:

Nike's revenue for the 12 months ending May 31, 2022, which increased by 9.5% from the prior year, was$46.71 billion. Strong demand for Nike products in North America and China was the primary driver of this increase in sales. Nike's gross profit margin for the calendar year that ended on May 31, 2022, was 45.3%, up 0.8% over the prior year. A higher mixture of higher-margin products and lower product costs were the primary drivers of this improvement in the gross profit margin. Nike's operating expenses were$32.07 billionfor the calendar year that concluded on May 31, 2022, a rise. Higher marketing, advertising, and transportation costs drove this increase in operating expenses.

Balance Sheet:

The balance sheet for Nike demonstrates the company's sound financial position. The company's assets outweigh its liabilities, and most of its assets are current ones, like cash and cash equivalents, accounts receivable, and inventories. As a result, Nike has many liquid assets that are simple to convert into cash. The total value of Nike's assets has dramatically risen in recent years. The company's high sales growth, investments in additional stores, and inventory purchases are a few reasons. Accounts payable and accrued obligations are two examples of Nike's current liabilities. This indicates that Nike has many immediate liabilities that must be settled within the upcoming year. Nike, meanwhile, has ample existing assets to cover its current liabilities. Equity in Nike has also grown dramatically during the past few years. This is because of the company's share repurchase program and significant profit growth.

Nike's balance sheet is strong overall. The corporation has substantial equity and assets; its current assets are more than its current liabilities.

Statement of Owner's Equity:

Nike's total liabilities climbed from $25.04 billion in 2020 to $40.32 billion in 2022. Several things contributed to this increase. Debt on long-term obligations rose from $9.406 billion to $14.310 billion. This increase was brought on by Nike's issuing fresh debt to fund share buybacks and growth ambitions. Operating leases' liabilities grew from $2.913 billion to $2.931 billion. The leasing of new retail shops and other operational assets by Nike was the cause of this growth. Other obligations and deferred income taxes rose from $2.684 billion to $2.777 billion. Changes in accounting guidelines and estimations were to blame for this surge.

Equity held by all Nike shareholders fell from $24.973 billion in 2020 to $15.281 billion in 2022. Several reasons contributed to this decline. A $634 million net loss in 2022 as opposed to a $6.046 billion net profit in 2020. A drop from $11.484 billion to $9.965 billion in capital overstated value. Share repurchases and the effects of currency exchange rates were just two factors that contributed to this decline.

Statement of Cash Flow:

According to Nike's cash flow statement, their operating operations produced a sizable cash flow during the fiscal year ending May 31, 2022. However, because of its short-term investments and property, plant, and equipment investments, the company's cash flow from investing activities was negative. Due to the proceeds from its borrowings and stock issuances, Nike's cash flow from financing activities was positive. Nike has a sound financial position and a robust cash flow statement. Investors should watch Nike's cash flow statement to ensure the business is still doing well financially.

Based on the analysis, what is an investment recommendation?